Closing a practice can be just as intense as it is when opening a practice, there are a lot of considerations including legal and regulatory issues to be aware of.
There are many reasons clinicians decide to close their practice.
- Change of practice ownership
- Retirement
- Illness
- It’s just not working out for them
- Moving
- Tired and burned out
- Simply a change of plans for themselves and/or their families.
Closing a practice, regardless of the reason, is far more involved than just pulling the blinds, shutting the door and riding off into the sunset.
It has to start with a plan.
Ideally, that exit plan will begin when you are first starting out. In fact, in the NPBO Practice Startup System, one of the first things I teach is what I call the PPFM Analysis where basically you are taking a look at you – your goals, your family goals, your personal and professional resilience and resources, in addition to the financial, and market analysis you are doing. Within your goals is, you guessed, it…your exit plan.
Just like starting a business and having a plan, you’ll also want a plan to close your business as well. As I alluded to previously, there are a lot of moving parts, so this is not going to be a linear, step by step process.
First, and I think one of the most important things is to research your state rules for practice closure. This is often in the state regulations, and you’ll often find information with the Sectary of state as well. For physicians, often their state medical associations and sometimes boards will have guidance on this issue as well.
For example, the North Caroline Medical Board publishes a document on practice closure as well as the Texas board of medicine.
What about for NPs? I’m not aware of boards of nursing who are involved in NP businesses. Usually their role is limited to the protection of the healthcare consumer. However, it’s always best to check, as things often change.
Your practice specialty may also offer guidance on practice closure, especially about the proper notification for patients.
Corporate Considerations:
- Dissolving the corporation
- Documents that need to be filed.
- Separation agreements between partners may be necessary
- Attorney may be helpful here
- Determine closure dates
Staff
- Tell them first! You want to avoid rumors, panic and a mass exodus. Realize they will be anxious about this.
- Give them 2-3 months
- You may need to be prepared to hire temporary staff
- You’ll want to address compensation issues which may include bonuses, servence pay, etc.
- If possible, you’ll want to stage the departures to help make for a smooth transition.
- Make sure any paperwork is being or has been completed for unemployment with your state office. Your payroll service may be of assistance here.
Patients
- Obviously, this is important. They will have a lot of questions.
- And like staff, and other associates, there will likely be a sense of loss, confusion and grief.
- Notices should go out at least 60-90 days ahead of time. Follow state rules on this.
- Notices:
- Certified Letter with return receipt
- In person notification
- Office Posting/signage
- Website notice
- Newsletter notices
- Newspaper notices
- Notices should include authorization to transfer records to a new provider
- Notices need to be documented in the chart. You may want to include a copy of the return receipt.
- Assist patients in moving forward by having a list of providers that are accepting new patients into their practice.
- Take a look at your scheduling. Refer people looking for a new appointment to another office. If you have complex patients who need a lot of follow up, you may want to get them referred on sooner than later.
Third Party Payers
- Check your contracts. There may be requirements for notification that you will closing your account. They may also have a required process for canceling the contract.
- If you have capitate accounts, be aware of potential issues with mid-month closures and contractual obligations.
- Submit your notice in writing, and make sure you get confirmation in writing as well.
- Be prepared to give them a address, bank accounts, etc. for payments after you close, as well as for potential recoupment they may request (Side Note: If you do not understand ERISA, please watch Don Self on his website or YouTube, or the webinar replay we did on ERISA and how it can potentially prevent recoupment).
Billing, Account Receivable
- It’s important that your billing team work to get the accounts receivable down before you close.
- You may want your billing staff to continue working for a set amount of time after you close to work on collecting outstanding payments.
- If may be necessary to consider a collections agency for those balanced you are unable to collect on. Don’t be surprised if you receive money from the collection agency, even a few years down the line.
Records
- When we talk about records, this goes beyond the medical record.
- Financial records which include business accounts and tax returns, payable invoices, business investments, etc.
- Personnel files including payroll, taxes, workforce training documentation (OSHA, HIPAA), unemployment, worker’s compensation, termination records, and more
- Other practice records including HIPAA and other complaints, contracts and more
- Medical Records of the patient
- There are state and federal regulations regarding how long to keep records and it depends on the type of record as well as the state in which the record is kept. I often see 7 years listed for medical records, but financial, tax and employee records may be longer.
- Who will be the custodian of record? This person will safeguard the records and process request of medical records. This can be a colleague’s office, or a service that manages records. Make sure there is a written agreement specifying length of time records will be held, arranges to transfer records and guaranteed access for the practice in case of a liability claim or other requirement.
- You can act as the custodian of records as well. You’ll need to be able to store the paper or digital records in a safe place that meets HIPAA guidelines. I’ve seen some suggest Dropbox or something similar. Just make sure your data storage plan is HIPAA compliant and not a regular plan.
- You’ll also need a way for records to be requested – usually via fax. You can also use a PO Box to receive mailed requests.
- Your malpractice carrier may also want to be informed of where the records are located.
- It’s also a good suggestion to work with your CPA regarding closing out the practice records when the time is appropriate.
Professional Licensure
- If you are retiring or otherwise unable to work, you may want to find out what type of inactive license you can obtain as it may relieve you of having to complete licensure requirements for renewals.
- If you have a federal DEA license or other state-controlled substance licenses, you’ll want to notify them. If you will not be using your DEA license, you’ll want to notify them and have your number removed from the system to prevent future use.
Other Professional Notifications
- Referring providers, offices, healthcare facilities
- Labs
- Imaging centers
- Social service agencies, home health agencies
Other Notifications
- Vendors who service your office such as medical waste, housekeeping, IT, shredding service
- Pharmaceutical reps
- Phone service
- Mail service
- Subscriptions
Every practice is a bit different and thus it may be that you have requirements I’ve not yet mentioned, so keep that in mind.
Topic Resources
More Resources
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- Ready to start your own practice?
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Your Turn
Have you closed an office? look forward to hearing your thoughts and questions about this episode in the comments below.