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Healthcare Provider Marketing and Management Arrangements

Healthcare providers interested in entering into marketing or management arrangements with companies must structure these arrangements in such a way that they don’t violate any federal or Florida healthcare laws. Providers should avoid entering into any marketing and management arrangements, which gives the impression that they offered, paid, or solicited cash, or any other type of remuneration in exchange for referring patients to that provider. Failure to do so may result in an Anti-Kickback violation if the arrangement does not fit squarely within an Ant-Kickback Statute Safe Harbor.

Safe harbors that might be available to a healthcare provider, depending on the terms of the marketing or management arrangement, include, but, are not limited to the (1) referral; (2) personal services and management contract; and (3) referral arrangements for specialty services.

Providers may want to consider establishing relationships with lead generation companies for advertising purposes, rather than referral arrangements with marketing companies because they typically face less scrutiny than the latter.

Any payments made to the marketing and management companies must be for fair market value for the services that will be provided. Payments to the management and marketing companies must not fluctuate based upon the expectation or referrals or business that will be paid in whole or in party by a federal healthcare program.Percentage-based arrangements are looked at unfavorably by regulators and face significant scrutiny. Therefore, it is always safer to agree to fixed-fee or flat-fee (non-variable) compensation for management and marketing services.

Many providers believe that if they are not paying the management company directly that they are safe from potential liability. That is simply not true. Especially if the marketing or management company is also the owner of a healthcare clinic that benefits from the arrangement. These types of relationships look highly suspect. Providers must not enter into any contract with a practice management company if that management company receives any financial incentives form the referring provider for increasing outside referrals for designated healthcare services.

This informational article provides a brief overview of factors to consider prior to entering into these types of arrangements. However, there are many additional factors to consider. At Jones Health Law we careful scrutinize all potential marketing and/or marketing arrangements that our clients are contemplating. We counsel our clients on structuring the arrangement in such a way that it fits within an Ant-Kickback Statute Safe Harbor or an exception to the Stark Law (i.e. “Fair market value compensation” or “indirect compensation arrangement”). Further, we analyze whether the proposed arrangement could potentially violate any additional Health Law, business law, or agency rules. Additionally, we will help you draft a marketing and management agreements that best suits your needs.

Negotiating Malpractice Insurance in Physician Employment Contracts

Medical Malpractice Insurance is an essential part of any physician’s practice. According to the American College of Physicians, “Medical Malpractice” insurance is a specialized type of professional liability insurance that covers physician liability arising from disputed services that result in a patient’s injury or death. Injuries may present themselves immediately or at some time in the future. Malpractice insurance requirements will vary depending upon several factors including, but, not limited to how long you have been practicing, the size of your practice, specialty, prior claims filed against you, etc. Many providers receive their malpractice insurance  through their hospital employer while independent physicians must purchase their own. You should carefully examine your insurance policy to determine whether your coverage is for “claims-made” or “occurrence”.

 

Claims-Made

A “Claims-Made” policy protects physicians for treatment that was provided from the first day of coverage through the expiration date. Since coverage ends on the expiration date you much always renew your claims-made policy on the expiration date to continue coverage without any gaps. Each year that a claims-made policy is renewed the retroactive date remains the same. The renewed claims-made policy covers claims that are filed during the policy year for incidents that occurred on or after the retroactive date. This allows for previous years to be covered under the current policy. In short, if you continue to renew a claims-made policy the protections in place will continue for any covered incidents that occur between the retroactive date and the expiration date. Any injuries that occurred prior to the retroactive date or after the policy has expired are not covered, which is why continuously maintaining this type of policy is important.

Claims-made policies allow you to increase your policy limits or add new coverage as needed or when new coverages become available. A claims-made policy allows an insured to transfer their coverage from one insurer to another without purchasing tail coverage, which will be discussed below. This only applies if you have an active claims-made policy that is transferable to another insurer that offers prior acts coverage for this claims-made policy. In this instance, the new insurer will rollover the retroactive date from the previous policy into the new policy. The new policy now covers the same period as the old policy since it includes the retroactive date. Unlike occurrence coverage, claims-made limits do not restore each year. The policy limits remain the same as they were when you initially purchased the policy.

 

Tail Coverage

Claims-made policies don’t cover claims made after the expiration of the policy, so you will have to purchase “Tail” coverage to continue coverage. Tail coverage (aka Extended Reporting Endorsement) is very important if you have been covered under a claims-made policy and are changing insurers, switching employers, or retiring. Tail provides malpractice coverage during the transition for injuries that may have occurred in the past. Tail allows the policy holder to have continuous coverage from the policy’s retroactive date to the policy expiration date. Any claims that are filed during that period are protected. To obtain tail coverage you must pay a one-time fee shortly after cancellation of a policy, but it can be as much as 1.5 to 2 times a typical annual malpractice insurance premium. Again, if you are transferring coverage from one insurer to another insurer tail policy coverage may not be necessary if the new insurer applies a retroactive date to your old policy.

 

Occurrence

Most physicians will opt for occurrence coverage where available. Occurrence policies protect you for treatment rendered during the entirety of the policy period, no matter when the claim is reported. An occurrence policy will still defend you against claims even after the policy has expired. This policy offers permanent coverage for incidents that occur during the policy period. Additionally, occurrence limits “restore” each year so that claims paid for incidents arising from one policy year do not deplete limits available to cover claims from other years. Each year that this type of policy is in effect constitutes a distinct set of limits. The amount of coverage in each year of coverage is aggregated annually to increase the limits.

 

Here are a few questions to Ask yourself

(1) What kind of coverage do I have?

(2) What are the policy limits?

(3) Do I have tail coverage?

(4) What type of incidents does my policy protect me from?

(5) Is this policy transferable?

(6) Will the new insurer retroactively date the new policy?

 

Final Reminders

*When negotiating hospital employment, physicians should ask the hospital to pay for the tail coverage or ask the hospital to allow them to continue their current coverage so that tail coverage is not required.

*Many physicians who are employed by hospitals may be required to obtain tail since most hospitals are self insured and won’t provide the incoming physician with prior acts coverage.

*Purchasing tail coverage may not be a choice. Some hospital bylaws require physicians to maintain malpractice coverage even after they are no longer with that hospital in order to protect from any potential future claims that may arise for any treatment that was provided by the insured while on staff.

*Some hospitals will not grant staff privileges to a physician with any gaps in their malpractice coverage.

*You want to make sure that you policy is always in effect and that it covers all potential claims because legal fees and costs can cost you thousands of dollars. These legal costs are in addition to any settlements that would have to be paid to the injured patient, which can range from a few thousand dollars to millions.

*The claims-made policy is more flexible and more cost effective especially for those who are still in the early years of their practice.

*“Claims-made” to the insurance company after the coverage period ends will not be covered, even if the alleged incident occurred while the policy was in effect. In other words you would personally be on the hook for any damages!

*Occurrence policies are permanent, which means that you don’t have to renew the policy to maintain coverage for any gaps in coverage. You have separate limits each year you were insured so past claims limit your coverage in the years ahead. These types of policies are becoming increasingly difficult to find.

*You should negotiate tail coverage in an employment contract with a new employer.

*Tail Coverage is only necessary when a Claims-Made policy expires and the insured cannot secure “nose” coverage for prior acts from a new insurance carrier.

*Medical Malpractice usually does not cover liability arising from criminal acts or sexual misconduct.

***This blog post does not constitute legal advice and is only intended for educational purposes only. You should consult a licensed attorney in the State of Florida that specializes in healthcare law.***

What Are My Options If I’ve Been Wrongfully Terminated From My Hospital Residency Program?

If you are discharged from a medical residency program it is important to examine the language contained in the hospital policies and procedure manual. In the manual it will explain the procedure for internal disciplinary action taken against hospital staff, which may require a mandatory board hearing depending on the alleged infraction. Prior to the board hearing, a neutral intermediary may be utilized so that direct communication between the hospital and the resident is limited. The disciplinary board may be comprised of a three-person panel where you can choose to present your defense. I would advise against signing any documents presented to you by the hospital after you have received written notice of the disciplinary hearing until you have spoken to an attorney with experience in health and employment law.

What to Look for When Negotiating Physician Employment Agreements

Physicians employed by hospitals, group practices, or any other type of healthcare facility usually enter into the business relationship by signing a Physician Employment Agreement unless the physician is an independent contractor. At Jones Health Law, we instruct all of our physician clients to carefully review their Physician Employment Agreement prior to signing.

 

Many physicians believe that they can’t negotiate the contract. THIS IS NOT TRUE. Every section of the contract can be negotiated by your attorney. If you don’t approve of some of the terms contained therein you have to power to ask your prospective employer to change that provision so that it better suits you and your needs. Of course, the prospective employer may be unwilling to revise some of the terms of the contract, and at that point you have a very important decision to make. You have to decide whether these terms are deal breakers or not. Only you can decide whether you are going to take it or leave it.

 

There’s no secret that there’s a shortage of physicians and it’s even more difficult to find physicians adequately suited and licensed in certain specialties. Use that to your advantage when you enter the negotiation process. Younger physicians may have more difficulty with negotiating contracts but it is not impossible. You want to place yourself in the best situation possible even if it means walking away from a prospective employer.

 

Physicians must realize that while working for a specific healthcare facility may initially be a dream job it can turn into a nightmare later on. Terms of the contract can pose limitations on the physician for several years after their employment with that particular employer has concluded.

 

Some physicians don’t bother to read the contract thoroughly if the financial incentives are very appealing. Yes, making $175,000 is a great salary, but here are a few things to consider that might not make that salary look so good after all:

 

  • Restrictive Period and Geographic Location: Physician Employment Agreements usually have a Covenant not to Compete clause that imposes limitations on certain actions that the physician can or cannot engage in. Many times the time and geographic restrictions are very lengthy and far-reaching. For example, a physician employment agreement may state that “You cannot solicit for current and past referral sources, or own, manage, operate, control or be employed by a medical practice or health care provider for a period of three (3) years within ten (10) miles of any of our office locations.” This becomes problematic if your employer has offices in every county in South Florida.

 

  • Transparency of Care: Many practices require that you follow the Practice Guidelines and Company Policies but don’t specifically identify any actions that can be taken against you or the procedure that follows if any of those guidelines and policies are violated.

 

  • Performance Evaluations: Negative performance evaluations may become a part of your employment record and may be used against you at subsequent PEER Review hearings, during litigation, or future contract negotiations. You want to determine who will be conducting the performance evaluations and whether that party will do so in a neutral and objective manner. This is very important because these evaluations can give rise to “for-cause” termination, which may negate your employer’s requirement to compensate you in accordance with the contract. Also, if you were to fail their performance evaluation you want to determine what its effect is and what recourse would be taken (i.e. mandatory education courses, termination, suspension, etc.)?

 

  • Conflicts, Confidentiality, and Nondisclosure: These paragraphs are usually drafted very broadly and in many cases they are too broad. For example, language in this section may preclude you from engaging in any type of business activity that could potentially interfere with the business of your employer. The employer may require that you obtain express written consent from them prior to engaging in any other type of business activity. This means that if your wife wants to open a dance studio and you want to be a co-owner you would first have to seek approval from your employer. Failure to do so might result in a breach of contract. Typically, the employer grants herself a lot of authority in this section and it will remain that way unless you negotiate a change.

 

  • Covenant not to Solicit Employees of Employer: For example, “You many not directly or indirectly orally or in writing solicit any Employee of Employer to work for another healthcare provider rendering the same or similar services to the services of the Employer.” This is one clause that causes a lot of physicians because they don’t realize that “stealing” an employee from a former employer may be actionable in court. Additionally, this clause as written is broad and means that you cannot place ads in any form of media while looking for employees of your practice if the employees of the employer could potentially see it. If you do so, and the employee is hired by your company you may have to pay the employer thousands of dollars for each violation. The reason for this is because an ad may be viewed as an indirect written solicitation even if the Employee wasn’t targeted specifically.

 

  • Effects of Termination: This is arguably the most costly section of any Physician Employment Agreement. I’ve seen agreements that state if a physician terminates the employment agreement prior to its natural expiration the physician will be responsible for paying to the employer six months of your base salary. In other words, if you resign from your employment and you are earning $150,000 base salary you would have to pay a whopping $75,000 to your employer.

 

  • Continuation of Contract: Many employers require advance notice that you don’t intend to extend the contact for another term period. Some employers require as much as six months written notice before the expiration of the agreement. Failure to do so may be actionable and they might seek damages. I advise my clients to reduce the requirement to three months notice at most because business opportunities may arise within that six month window.

 

  • Employer May Assign Agreement: Businesses are bought and sold all of the time and medical practices are no different. Many agreements state that the employment agreement will belong to the new owner and you are bound by the terms of the agreement during the remaining term period. I tell my physicians to negotiate this clause so that they have the option to terminate this employment agreement without triggering the Effect of Termination clause should the employer choose to assign its interest to a successor.

 

These are just a few of the problematic clauses that I typically encounter in Physician Employment Agreements but this is by no means an exhaustive list. The terms in Employment Agreements vary from one employer to the next. I strongly advise you to contact Jones Health Law so that an experienced healthcare attorney can review the contract and negotiate it on your behalf.

What Are My Options If I’ve Been Wrongfully Terminated from my Hospital Residency Program?

Introduction

The long and arduous road to becoming a doctor is one that only a few people get to experience in their lives. Those few, dream of becoming a doctor at an early age which makes the journey seem that much longer. Your parent or neighbor might have been a doctor and that relationship might have created a desire to pursue the same career path. Maybe you were motivated by a desire to serve your community by providing health services to the poor or disabled. Unfortunately for you, your career as a doctor may come to a screeching halt before you complete your medical residency program. If you are at risk of being unceremoniously discharged from your residency program or have already been discharged there are certain legal considerations that you should examine.

Disciplinary Board

If you are discharged from a medical residency program it is important to examine the language contained in the hospital policies and procedure manual. In the manual it will explain the procedure for internal disciplinary action taken against hospital staff, which may require a mandatory board hearing depending on the alleged infraction. Prior to the board hearing, a neutral intermediary may be utilized so that direct communication between the hospital and the resident is limited. The disciplinary board may be comprised of a three-person panel where you can choose to present your defense. I would advise against signing any documents presented to you by the hospital after you have received written notice of the disciplinary hearing until you have spoken to an attorney with experience in health and employment law. The manual will state how many days the panel has to render its final decision regarding your status in the hospital residency program, and the method by which the panel used to render the final decision. There will also be a procedure for filing a timely appeal should you choose to do so after an unsuccessful initial board hearing.

Suspension, Termination, or Resignation

The panel may recommend suspension or termination from the hospital residency program. The length of suspension will vary depending on the circumstances. A board’s decision to suspend or terminate a resident should be determined objectively but it’s difficult to refute the fact that there is a subjective component. This is why one resident who committed similar bad acts may only be suspended while another resident may be terminated. Hospitals have the authority here to make that determination and unless there is clear employment discrimination a court is unlikely to undermine and overthrow the hospital’s decision.

In some instances, I have witnessed the hospital allow the resident to voluntarily withdraw or resign from the residency program so that it doesn’t diminish their chances of gaining acceptance to another residency program. The thought of starting anew in a different residency program is chilling, but given the circumstances this could be your best option. You must decide whether you want to explain why you resign from the program or you can let your records speak for themselves. If you elect to be terminated from the program and subsequently apply for admission into a different program you will be required to submit your records from your previous residency program. Additionally, the hospital residency program may ask for references where the details of your departure may come to light. Further, the hospital manual should be examined alongside your hospital residency employment contract.

Arbitration, Lawsuit, or Administrative Complaint

Your residency employment contract will contain the terms and conditions of your employment during the residency program. The contract will most likely bind you to a mandatory arbitration in the event that a legal matter arises between you and the hospital. Hospitals prefer arbitration because:

  • They are usually less expensive;
  • Parties can choose the arbitrator:
  • Parties can choose the time and place of the arbitration;
  • The proceedings are held privately behind closed doors; and
  • Its outcome does not become part of the public record.

 

Arbitration is not held in court but in a court-like setting complete with discovery proceedings and an arbitrator acting as a judge. Additionally, the arbitration is resolved much faster since the parties don’t have to wait for availability on the court’s docket, which can take months before you are actually heard by a judge.  Final judgment by an arbitrator is binding and very difficult to successfully appeal.

Depending on the reason why you were fired you may be able to file a complaint with the Accreditation Council for Graduate Medical Education (“ACGME”) which is an organization that in part, helps physicians in graduate medical education receive fair solutions to residency/fellowship education-related concerns and formal complaints. Most residency programs are accredited by the ACGME. The ACGME requires that residents have a right to present their defense before a board or panel. The ACGME’s Resident Services division does not adjudicate disputes between individual persons and residency/fellowship programs or sponsoring institutions. Resident Services does not address issues regarding matters of admission, appointment, contract, credit, discrimination, promotion, or dismissal of faculty members, residents or fellows.

As such, depending on the facts and circumstances I advise residents against filing a lawsuit against the hospital unless you are terminated for an illegal reason. Illegal reasons can include, but are not limited to, discrimination based on race, gender, sexual orientation, country of origin, nationality, or religion. You may make a claim alleging discrimination under Title VII of the Civil Rights Act of 1964 and breach of contract if the facts could support such a claim. In cases where residents have successfully won lawsuits against the hospital for discrimination they introduced ample evidence from which it could be concluded that they were unlawfully discriminated against. Residents may try to obtain evidence of the following:

(a) testimony or affidavit from doctors in a direct supervisory position to attest to the satisfactory nature of your work;

(b) evidence to rebut other supervisor’s negative evaluations of you – the resident;

(c) evidence of other residents with low test scores and unfavorable evaluations who have been allowed to continue in the program; and

(d) evidence that you were able to successfully complete the residency requirements since leaving the hospital.

In some jurisdictions, direct evidence of discrimination is not required. A plaintiff may entitled to rely on circumstantial evidence to convince the trier of fact that an employer’s explanation for his discharge is pretextual and that his discharge was more likely than not motivated by discriminatory intent. However, more of today’s courts are less likely to rule in a resident’s favor unless the resident can show direct evidence of discrimination. In Zaklama, M.D. v. Mt. Sinai Medical Center, 842 F.2d 291, 296 (11th Cir.1988), Dr. Zaklama was able to obtain evidence of a-d above, but it took approximately six years for the case to be fully adjudicated and a lot of money in legal fees.

Regardless of whether you go before a hospital board, arbitration, or file a complaint with the ACGME you will have the opportunity to review your evaluations, personnel file, and credentialing so that you can build your defense.

Conclusion

If you feel that you are at risk of being removed from your Hospital Residency Program and would like to speak to an attorney about your options please contact us immediately. You should explore all of the options available to you because this is your career at stake.  There is typically a very short window to file an appeal so it is imperative that you contact an attorney immediately if you are facing a disciplinary board hearing at your hospital.

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This post was authored by Jamaal R. Jones, Esquire and Matt Lester of Jones Health Law, P.A. for more information contact us at (305) 877-5054; email us at JRJ@JonesHealthLaw.com, or visit our website at www.JonesHealthLaw.com.

It should be noted that I am not your lawyer (unless you have presently retained my services through a retainer agreement). This post is not intended as legal advice, it is purely educational and informational, and no attorney-client relationship shall result after reading it. Please consult your own attorney for legal advice. If you do not have one and would like to retain my legal services please contact me using the information listed above.

All of the information and references made to laws, regulations, and advisory opinions were accurate based on the law as it existed at this time, but laws are constantly evolving. Please contact me to be sure that the law which will govern your business is current. Thank you.

Business and Legal Considerations for Selling my Physician Practice

Business and Legal Considerations for  Selling my Physician Practice

Physicians may be determine that it is in their best interest to sell their medical practice for various personal and business reasons. A few of the reasons may chose to sell are because: (1) they are retiring; (2) relocating to another city/state; (3) maintaining the practice is too much of a burden/stress; (4) they are physically unable to meet the demands; (5) lower reimbursement rates; or (6) someone simply made them an offer that they couldn’t refuse. Regardless of the reason why a physician may choose to sell their practice there are certain business and legal considerations that they should factor into the decision process.

 

Who is Buying Physician Practices?

 

Florida is one of the few states that allows for a non-physician to own a medical practice, excluding optometry, dentistry or chiropractic practices. Large corporations, private equity firms, hospitals, health systems and ambitious physicians looking to expand their practices are all common buyers in today’s market. Due to healthcare reform the value of physician practices are diminishing in many markets.

 

What is the Value of my Physician Practice?

 

Many business owners, including physicians, have an idea in their head of what they THINK that their business is worth. Often there is an emotional component that is factored into what the physician perceives their practice to be worth.  I encourage my physician clients to be realistic with their expectations. Let’s face it, there’s no guarantee that patients will remain with a practice once their beloved physician departs and purchasers are aware that while there is some benefit to buying an existing practice there is also significant risk. For this reason, many purchasers choose to pay the purchase price over several months after closing and hire the prior owner as an independent contractor during the transition. I advise my clients to meet with a healthcare consultant and bankers who work primarily in the medical and dental industry so that they can determine what the fair market value (“FMV”) of their practice is. A FMV is partly based on the tangible assets of a practice and consist of all furniture, fixtures and equipment owned by the practice such as examination tables, desks, chairs, and medical equipment.

 

There are numerous methods and factors to be considered in determining the value of the physician’s practice when preparing to sell. The value of a physician practice fluctuates based on: (a) payer mix; (b) referral sources; and (c) the presence of ancillary services. If a practice has one or more ancillary services that it provides that can dramatically increase the value and eventual purchase price of your practice due to the increased profit margins.

 

The process includes requirements or rules that must be followed in order to legally sell a practice. All legal and business considerations should be addressed to ensure the selling physician receives the best possible price for the sale of their practice. The selling physician must be careful to avoid any actions that can reduce the value of the practice during the sale.

 

Sellers must be careful not to misrepresent terms and conditions of the physician practice because it is highly likely everything will be discovered during the purchasers exclusive due diligence period. The selling process ends with a negotiated agreement with attorneys covering the asset purchase agreement, revised partnership agreement (if applicable) and employment agreements to name a few. During the closing process all agreements will be signed and executed.

 

How do I Structure the Sale of my Physician Practice?

 

The sale of physician practices can be structured in various ways depending on the facts and circumstances specific to that particular practice (i.e. debts, obligations, leases, etc.) A physician has to choose between selling stock in their practice, assets, or in some cases a combination of both.

 

A physician that sells stock in their practice will pay less taxes on the purchase price. However, purchasers are weary of purchasing stock because they assume responsibility for the practice’s liabilities. The trade off with a stock purchase is that the purchaser retains the physician’s payer contracts, tax ID number resulting in a much smoother and faster transaction.

 

In an asset purchase agreement the physician has to be very specific about what is included in the sale (i.e. art and certain furniture isn’t included). In this strategy, the physician-seller positions the sale as an alternative to a startup practice. The value is not as high, but a small amount of intangible value can be justified for:

 

  • Speed when compared to that of than a startup;
  • Less losses than a startup;
  • a trained workforce already in place, telephone number, website, and historical marketing already in place;
  • Medical Equipment and furniture are present;
  • Stronger Patient base and reputation.

 

A transaction involving the value of intangible assets of a practice could trigger violations of various state and federal healthcare laws, including, but, not limited to, the Florida and Federal Anti-kickback Statutes and Stark law. Tangible and intangible assets can all be included in the sale of a physician practice however to avoid anti kickback issues, the final price must not overwhelmingly exceed the FMV of the practice. If the purchase price exceeds the FMV of the physician practice it will be a red flag for regulators. Regulators might interpret the sale to be disguised as an impermissible payment for patient referrals also knows as Patient-Brokering in Florida. You should always consult with a healthcare attorney to conduct an analysis of Stark law and Anti-Kickback Statutes before proceeding with the sale.

 

The sale of a physician practice may include a “competitive auction process”. Smaller physician practices don’t usually go through this auction process, but it is not uncommon for a larger practice with several offices and expensive medical equipment to go up for auction with a minimum reserve that must be met. All parties involved must agree to the terms and a price. A competitive auction includes an invitation of greater than 20 buyers to bid. Buyers in competitive auctions typically have a six-week deadline to submit a letter of intent to purchase at a tentative price pending exclusive due diligence performed by the buyer for 60-120 days.

 

Protecting your Practice

 

Physicians spend a significant amount of money and devote countless hours to building their practice. It’s not always easy to part ways with your practice, but prior to completing the sale you want to make sure that you and your practice are adequately protected. No matter the size of your practice, when you are entertaining offers from potential purchasers a well crafted Non-Disclosure Agreement (“NDA”) should be drafted by a healthcare attorney and signed by those potential purchasers. The NDA ensures that any documents or information that they receive during the negotiation process will be returned, destroyed, and kept confidential or else there will be a lawsuit for resulting damages. Also, the information gathered during the negotiation practice, such as trade secrets can’t then be used to directly compete with you. Once signed the potential purchasers are given access to secure online data rooms, which include financial statements, confidential information memorandum (CIM or pitchbook), and operational statistics.

 

What if you Own the Practice and Real Property?

 

Physicians that also own the practice facility need to prepare for the sale of both their practice and the practice facility. Alternatively, if the physician is interested in keeping the practice facility, he or she can lease the space to the buyer of the practice. In the leasing agreement, the physician may give the buyer and option to purchase the facility in an amount of time specified. If the selling physician wishes to remain employed by the purchasing party, remaining a landlord represents a conflict of interest that needs to be addressed. Therefore, the selling physician should contract for the sale of the practice facility with the buying party or an independent property management business.

 

Conclusion

 

The following is a list of Legal Considerations for sale of physician practice:

  • Beware of Fee Splitting and Kickbacks
  • Structure the Transaction in a legally permissible manner, such that it doesn’t violate any applicable healthcare or business laws.
  • Purchasers must conduct Due Diligence
  • Physicians must protect patient protected health Information (“PHI”)
  • Account for and protect against any Data/Information Breach
  • Resolve any existing contract disputes
  • Determine whether you can assign third party contracts
  • Negotiate the noncompetition clause
  • Negotiate an agreeable indemnification clause
  • Adhere to any termination Provisions
  • Consult a CPA to determine the tax risks
  • Transition the non-physician employees appropriately

 

In addition to these considerations, there are many other factors to consider before deciding to purchase or sell your practice. The sale of a practice can’t be completed over night and could take several months. The purchaser may have to obtain a Healthcare Clinic License and ensure that the transaction doesn’t violate Stark or meets one its exceptions. It’s up to you to determine whether the time is right to sell your practice. No matter the size of your practice you should always consult with an experienced healthcare attorney.

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This post was authored by Jamaal R. Jones, Esquire and Matt Lester of Jones Health Law, P.A. for more information contact us at (305) 877-5054; email us at JRJ@JonesHealthLaw.com, or visit our website at www.JonesHealthLaw.com.

 

It should be noted that I am not your lawyer (unless you have presently retained my services through a retainer agreement). This post is not intended as legal advice, it is purely educational and informational, and no attorney-client relationship shall result after reading it. Please consult your own attorney for legal advice. If you do not have one and would like to retain my legal services please contact me using the information listed above.

 

All of the information and references made to laws, regulations, and advisory opinions were accurate based on the law as it existed at this time, but laws are constantly evolving. Please contact me to be sure that the law which will govern your business is current. Thank you.

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