Healthcare practices open and close for many reasons and while we receive most questions about getting started in practice, we also receive questions about closing a practice.
In the US, as you may know, most small businesses fail in the first 5 years. However, closing a practice isn’t always about failure.
Life commitments may change; the business owner may move into the season of life where one looks toward retirement. And, of course, everything in between.
When closing a business, several legal obligations must be fulfilled to ensure a smooth process and avoid legal troubles.
However, additional steps are necessary to ensure continuity of care, compliance with medical and privacy laws, and fulfillment of legal and ethical responsibilities when closing a medical practice.
As you will see, there is a long list of things to consider when preparing an office for closing, and different and additional steps may apply if the practice is sold or transferred.
Here are the steps to take when closing a practice:
Patients:
- Inform your patients of the pending practice closure and that they must find a new provider. Depending on state law, notify patients at least 30-90 days in advance. Traditionally, notification has been in writing and sent by certified mail with a return receipt.
- Write a letter and post a notice in your office and on your website; provide your notice well in advance, so patients have as much time as possible. This is particularly important for people with insurance coverage that is not readily accepted.
- Check your state regulations since some states require public notification, such as a notice in a local newspaper, to formally announce the closure of a medical office.
- Arrange for continuity of care and transfer of patients. If possible, compile a list of offices accepting new patients and provide it to your patients to help them find a new provider.
- If possible, provide referrals to other local healthcare providers for ongoing care. Ensure patients have access to their records to transfer their care smoothly.
- Prepare and communicate how emergencies will be handled during the time leading up to the closure. Arrange for emergency coverage or direct patients to appropriate urgent care or emergency services.
- Where possible, provide adequate medication refills so patients will not be left without their medications while searching for a new provider.
- Let your patients know how to obtain their records from your office. Provide instructions on how they can request their medical records. Offer to transfer records directly to a new provider with the patient’s authorization or provide them with copies.
- Depending on state and federal law, you or someone designated “Custodian” of the records must maintain access to medical records for several years. Organize and securely store all patient records. Arrange for long-term storage or transfer of medical records and ensure compliance with all retention laws.
- When it’s time to dispose of records, ensure they are destroyed securely to protect patient confidentiality. Use a secure, HIPAA-compliant shredding service for paper documents and hard drives containing patient files.
Employees:
- If you have employees, notify them about the office closure. Make sure you follow contractual notification requirements, as well as state and federal requirements. Be prepared that some employees may leave before the final closing date.
- Provide final payroll, including any accrued vacation or benefits, and issue any required notices regarding health benefits. Ensure employees know about benefits expiration, such as insurance, vacation, sick time, etc.
- Consider offering letters of recommendation or referrals as appropriate.
Patient Billing and Vendors:
- Notify patients about any outstanding balances and collect them before closure.
- Provide patients with contact information for post-closure inquiries regarding their accounts.
- If someone has overpaid for services, issue refunds promptly.
- Contact insurance companies and other payers you’ve worked with to inform them of the closure. Determine how outstanding billing will be handled and what your responsibilities may be.
- Settle all remaining accounts with vendors, suppliers, and service providers.
- Cancel any service contracts related to the practice, such as software subscriptions and equipment leases.
Malpractice Insurance & Professional License:
- Notify your state licensing board of your upcoming office closure. Also, let them know if you will stop practicing altogether.
- Contact your malpractice insurance to notify them of the practice closure. Maintain tail coverage if necessary and discuss available options so you will be covered for any potential claims related to past care.
- If you’re a prescriber, inform the DEA (Drug Enforcement Administration) of the closure. Arrange for the lawful disposal of any remaining medications, mainly controlled substances, in compliance with DEA regulations.
- Review and adjust other insurance policies as needed. Inform insurance providers of the upcoming closure. Transfer or terminate coverage and discuss any outstanding issues.
Medical Equipment, Furniture, and Supplies:
- Sell (or donate) medical equipment after removing confidential patient data (e.g., imaging or diagnostic tools) if applicable.
- Cancel any equipment leases according to the lease agreement terms.
- Sell or donate practice furniture and supplies.
- Sell or donate practice computers, printers, and scanners after properly removing all patient data.
- If hard drives need to be disposed of, have them shredded by a HIPPA-compliant company.
Taxes and Business Registrations:
- File final state and federal tax reports and returns and submit any outstanding payments. If you have employees, be sure to include employment tax returns.
- Contact the state and local tax and business licensing departments to cancel your licenses and formally close/dissolve your business entity (such as an LLC or corporation) if applicable.
Digital Presence:
- Adjust your website and social media accounts to reflect the changes.
- Update or remove online listings and profiles for the practice and provider.
- Where applicable, transfer or cancel domain names and hosting services.
All Other:
- Close business bank accounts and credit lines.
- Notify lenders if you have outstanding loans.
- Cancel all subscriptions and memberships.
- Notify utility companies and arrange for service termination.
- Review and terminate all contracts (lease, equipment, and services).
- Notify professional associations of practice closure; update or close professional credentials and profiles.
In Conclusion…
This covers the main steps involved when closing a medical practice. Depending on your situation, however, not everything may apply, or additional steps may be required,
But regardless, a medical office must be closed properly to avoid potential legal issues, such as accusations of abandonment, a landlord’s lawsuit for breaking the lease, or continued requests for payment because a lease wasn’t canceled.
Now that you know what you must do, put a plan in place, make a list, and check off the items as you get them done.
Addressing these areas will help ensure a responsible, legally compliant closure that maintains patient trust and continuity of care.
Have you closed a business in the past, and what was your experience? We want to hear from you; please share your experience …
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By Johanna Hofmann, MBA, EAMP. Author of “Smart Business Planning for Clinicians” and regular contributor to the NPBusiness blog.
I am considering "business succession" if possible. ie. be absorbed or merged into another practice
I am currently an out of network provider- solo practice (for about 10 years- the past 3 years out of network) and am considering closing and changing to employee prior to full retirement)
I hoping to find some insight and alternative to "referring client's out and closing" and possibly negotiating my time/clients that would transfer care.