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Can I Continue to Run a Medical Practice After the Sole Physician’s Death?

Authored by Marcus Leonard and Jamaal R. Jones, Esq.

Authored by Marcus Leonard and Jamaal R. Jones, Esq.

Inevitably, we will all pass away at some point in hopefully the distant future. Some of our deaths will be expected while others will come as a complete shock. Many people formulate a plan for after their passing and make arrangements accordingly for the succession of their personal and business affairs and belongings, while others do not. Occasionally, that deceased person happens to be the only physician in the medical practice. The staff and surviving family members have to quickly determine what their options are and whether they can legally continue to operate the practice without the physician.

Florida does not have the same Corporate Practice of Medicine Prohibitions as other states. In short, this means that you do not have to be a licensed medical doctor or doctor of osteopathy to own a medical practice. Many people erroneously believe that because of this fact they can continue to run the physician’s practice without taking any further action after she passes away. The Florida Health Care Clinic Act (the “Act”) requires that all health care clinics operating in Florida maintain a valid license by the State unless they fall within a statutory exemption. Also, if the health care clinic is cash-pay only and not accepting reimbursement from a commercial payor, Medicare or Medicaid then Florida law allows the business to continue to run without first obtaining the license. According to the Act, a “clinic” is defined as an entity which provides health care services to patients and bills third party payers for reimbursement for providing those health care services. Clinics that are “wholly owned by one or more licensed health care practitioners” are exempt from obtaining a health care clinic license. Thus, if a clinic is owned by a licensed health care practitioner who is supervising the services performed at the clinic and who is legally responsible for the entity’s compliance with all federal and state laws, the clinic falls within one of the exceptions and is exempt from the Act’s licensure requirements. However, in the untimely event that a sole physician/owner passes away, the clinic is no longer afforded exemption from the Act’s licensing requirements and is no longer in compliance with the law.

 

What are my Options?

In this instance, the family members have the following choices: (1) close the practice; (2) sell the practice; or (3) apply for a health care clinic license. If the decision is made to close the practice then you have to make sure that you wind up and dissolve the business accordingly. Alternatively, it can be tricky if the decision is made to sell the practice. Even if you hire another physician to provide treatment to the patients while you try to find a buyer for the practice you will still be violating the Act. As a result, you must not continue to provide health care services until the practice is sold to someone or an entity that qualifies for an exemption under the Act or until you receive a health care clinic license.

This is important because Florida law provides that an insurer is not required to pay for medical treatment that is not lawfully provided. The plain language of the Act makes clear that a claim for reimbursement made by a clinic that is not properly licensed or that is otherwise operating in violation of the Act, constitutes an unlawful charge that is deemed non-compensable and unenforceable.

Filing the application with the Agency for Health Care Administration for a health care clinic license it tedious and must be done carefully or you risk denial. Also, the applicant should not expect to receive the license expeditiously.

 

Penalties

Under the Act, it is considered theft for an entity that does not have a health care clinic license and does not meet the requirements for an exemption to submit a charge for reimbursement. You can be charged with committing a third-degree felony if you operate an unlicensed clinic. Each day that the person violates the act is considered a separate offense. If a physician who is working for a clinic knows or has reasonable cause that the clinic is operating without a license and fails to report the clinic then that physician will be reported to the medical board for failure to report the clinic. There will also be administrative penalties imposed upon those who practice without a license.

 

Conclusion

A clinic is required to register for a license under the Act even if they were previously exempt from licensure requirements prior to the physician’s death unless some other applicable exemption exists. A sole health care provider should create a plan for succession in the event of their death. For example, upon the physician’s death the shares of the practice can “automatically” transfer to another physician of their choosing so that there isn’t a gap in care to patients. This would require careful planning and legal considerations beforehand. Our firm is well equipped with knowledgeable and experienced health law attorneys who can assist you with planning for this difficult event.

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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 contact information listed above.

 

All information and references made to laws, rules, 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.

Closing your Medical Practice? Don’t forget to Wind Up!

You’ve decided that now is the time to close your healthcare entity (i.e. Medical Practice) for any number of reasons. However, you can’t simply close the doors and just walk away. There are a few steps that you need to take in order to comply with Federal and Florida law. One of the requirements is that you “wind up” your limited liability company (“LLC”).

After you’ve dissolved the company the company continues only for the purpose of winding up. During this process the LLC is required to discharge or make provisions for the company’s debts, obligations and other liabilities, as well as, settling and closing the company’s activities and affairs, including distribution of the assets of the LLC.

You may also have to prosecute and defend certain legal actions and proceedings even after dissolution, whether civil, criminal or administrative. The company would have to settle any disputes by mediation or arbitration and transfer title to the company’s real estate and other property.

If the dissolved company has no members (i.e. death of sole shareholder), the legal representative of the last person to have been a member may wind up the activities and affairs of the company. If the legal representative declines to do so, a person may be appointed to do so by the consent of the transferees owning a majority of the rights to receive distributions as transferees at the time the consent is to be effective. Alternatively, a circuit court judge may order judicial supervision of the winding up of a dissolved LLC, including the appointment of one or more people to wind up the company’s activities and affairs. The person appointed by the court may also be designated trustees for or receivers of the company with the authority to take charge of the LLC’s property and to do all other acts that might be done by the LLC which may be necessary for the final settlement of the unfinished activities and affairs of the company. The powers of the trustees or receivers may be continued as long as the court deems necessary.

The dissolved company that has completed winding up may submit a statement of termination to the Department of Business Regulations including: (a) the name of the LLC; (b) the date of filing of its Articles of Organization; (c) the date of filing of its articles of dissolution; (d) the LLC has completed winding up its activities and affairs and has determined that it will file a statement of termination; and (e) other information as determined by the authorized representative.

Finally, the trustees may distribute property of the limited liability company discovered after dissolution, convey real estate and other property and take such other action as may be necessary on behalf of and in the name of the dissolved LLC.

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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 contact information listed above.

 

All information and references made to laws, rules, 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.

Which Business Structure is Best for my Medical Practice?

Which Business Structure is Best for my Medical Practice?

Over the years many providers have come to my office expressing an interest in owning a medical practice, healthcare facility, or healthcare business. During these meetings, it is important to obtain pertinent background information about the healthcare entity followed by a discussion about some of the regulatory and licensing issues that may arise. Equally important is determining how the healthcare entity should be structured for asset protection and tax purposes. A corporate healthcare attorney like myself can determine whether it is best for you to create a corporation, LLC, or an LLP. Admittedly, some of the more complex tax issues should be discussed with an attorney that specializes in tax law. Here is an overview of some of the basic differences between the different business entities.

Sole Proprietorship

An individual who does not create an entity.

  • No taxes are imposed on the entity. Instead, the individual owner reports the income and pays the income taxes.

Professional Corporation (a/k/a “P.A.”):

A corporation in which one or more shareholders must be licensed professionals (or entities that themselves are wholly-owned by licensed professionals). The P.A. can be taxed either as an S Corporation or as a C Corporation.

 

Corporation:

A corporation whose owner is not limited solely to licensed professionals. The corporation can be taxed either as an S Corporation or as a C Corporation.

  • C Corporation: Unless it elects otherwise, a corporation must report its own income and pay its own income taxes, under Subchapter C of the Internal Revenue Code.
    • A C Corporation is also subject to Florida’s state corporate income tax at a rate of 5.5%. Any distributions of its earnings to its shareholders requires the shareholders to recognize dividend income, resulting in a second layer or taxation.
    • Many professional C Corporations attempt to avoid distributing dividends by paying all income as compensation (because although it is still taxable to the recipient employee/shareholder, the C corporation gets a deduction for such compensation, resulting in one-layer of taxation).
    • If a C corporation pays excessive compensation, the IRS may try to treat some of the compensation as a dividend distribution and deny the deduction to the corporation with respect to such imputed dividend.

LLLP

A limited liability limited partnership comprised of at least one general partner and at least one limited partner, which is created by filing a Certificate of Limited Partnership and indicated LLLP status in such certificate. The status provides a general liability shield for all of the general partners.

S Corporation

No tax generally imposed on a corporation that elects to be treated as an “S Corporation” under Subchapter S of the Code. Rather, the tax consequences flow-through to the shareholder(s).

  • Each shareholder reports his or her pro rata share of the tax consequences based on his or her ownership in the S corporation and pays the income tax at his or her effective personal income tax rate.
  • Any distribution to the shareholder(s) is not treated as a dividend, but rather first is a return of basis and then excess is capital gain: provided, however, if the S corporation was formerly a C corporation within the past 10 years and had earnings and profits, then a portion of the distributions of the S corporation could be subject to tax as a dividend (Rather than a return of basis).
  • Shareholder distributions:
    • must be made in the ratio or ownership;
    • can be abused to “save” payroll taxes applicable to compensation; and
    • lack the asset protection potential of compensation payable to the head of a family under Florida law.
    • A P.A. generally should elect to be taxed as an S corporation, preferably from inception.
    • If a corporation has already been taxed as a C corporation, then conversion to S Corporation status must be carefully considered to ensure that the “built-in gains” tax on unrealized receivables can be handled through proper accrual and payment of accounts payable and compensation.

Professional Limited Liability Company (a/k/a “P.L.”)

A limited liability company in which one or more members must be licensed professionals (or entities that themselves are wholly-owned by licensed professionals). The P.L. can be taxed either as a disregarded entity (if there is only one member), as a partnership (if there is more than one member), or an S Corporation (whether it has one or more members.)

LLC

A limited liability company whose ownership is not limited solely to licensed professionals. The LLC can be taxed either as a disregarded entity, a partnership or an S corporation.

General Partnership

An entity that is comprised of two or more general partners. No written document is necessary to create a general partnership.

LLP

A limited liability partnership is comprised of two or more general partners, which registers with the state by filing a Statement of Qualification. The registration provides a general liability shield for all of the partners.

Limited Partnership

An entity comprised of at least one general partner and at least one limited partner, which is created upon the filing of a Certificate of Limited Partnership with the state.

There are many factors to consider when deciding how to structure your medical practice or healthcare entity. You should obtain an in-depth analysis of the various business structures so that you can choose the best one suited for your needs. While it is not impossible to change from one business entity type to another, it is always best to choose the best structure from the very beginning. A capable attorney at Jones Health Law, P.A. would be happy to guide you through this process.

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

The Business of Healthcare: Post-Election

Jamaal R. Jones, Esq. attended a conference hosted by the University of Miami’s Center for Health Sector Management and Policy on March 3, 2017. It was headlined by leaders from across the country.

Panelists shared ideas on how the U.S. health care system will continue to evolve and how the anticipated changes will impact consumers, businesses and government over the next four years and beyond.

Guest speakers participated in several discussions including:

(A) A Conversation on the Election and Global Health Care Issues;

(B) Election Impact on Health Care Sectors;

(C) Health Care Policies Under the Trump Administration;

(D) Election Impact on South Florida Health Care Sectors;

(E) Election Impact on the Business of Healthcare; and

(F) A Conversation with Secretaries of Health and Human Services.

Guest speakers from both sides of the aisle provided their perspective on a range of topics, programs, and laws including, but, not limited to, Medicaid, Block Grants for Medicaid MACRA, PETFAR funding, tax credits for healthcare, the debt ceiling, and Certificate of Need.

Implementing Policies and Procedures into your Medical Practice

As a child, my mother always stressed the importance of being neat and organized. She told me that I should be able to walk into my house in the dark and find anything that I need because I know exactly where it is. At the time, I didn’t know how those values would apply to not only my personal life but also my business life. With that being said, life gets in the way and there are days when my office or my house is in disarray. This reduces my productivity because I have to spend time searching for important documents at my office or my car keys at home.

I place a lot of emphasis on maintaining a neat and organized medical practice for all of my clients because it will make their life easier for numerous reasons. The best way to maintain a neat and organized medical practice is to implement policies and procedures that you and your employees must strictly follow. These policies and procedures can range from physical security of the facility, security of HIPAA protected information, employee time-keeping, janitorial services, medical substances and pharmaceutical drug internal audits, etc.

Everyone on the staff should be held accountable for the tasks that they perform or fail to perform. As the owner of the practice, you should periodically review the procedural tasks to make sure that everyone is performing their duties adequately and on-time. It only takes one missed log entry for a crisis to arise. This brings me to my next point, you should implement a policy where everyone on your staff must sign off on or use a unique identifier and password that only they have. This is important so that you can trace most of the activities that occur in your practice. Providers have to play “big brother” and watch over their practice because as you let things slide so will your staff and certain policies and protocols will be abandoned.

It is not unusual for a provider to contact me after a regulatory authority, such as the Florida Department of Health (“DOH”) or the Centers for Medicare & Medicaid Services (“CMS”) has contacted them about a potential violation within their practice (i.e. billing). Typically, these regulatory bodies make certain requests for documentation in their correspondence. I am often surprised by how unorganized the medical practice’s files are and the lack of adequate policies and procedures within the practice. As I mentioned earlier, I understand that life gets in the way, but being organized and having policies and procedures in place to maintain organization should be a priority. Lack of time will not be a valid excuse for the regulators. In fact, there are several state and federal record-keeping requirements that a medical practice must strictly adhere to or run the risk of receiving fines and penalties. Take one day or weekend and work alongside your staff to clean up those files and perform an audit of your inventory.

The following is a sample of some of the steps that I would take to ensure that my medical practice is neat and organized:

  • Create a formal policy and procedure manual that every employee must sign and adhere to.
  • Document everything and save it on-site as well as off-site on a cloud-based service and limit employee access to those documents.
  • Maintain employee files, including, but not limited to, emergency contacts, termination letters with reason for termination, professional and drivers licenses, periodic drug test results, personal and medical history, progress reports, professional and academic performance evaluations etc.

In the event that you have to self-report or if any state or federal regulatory authorities contacts your practice for a potential violation of a law or rule you should be as prepared as possible. Implement policies and procedures into your medical practice that will protect you and will ensure that your practice runs efficiently and smoothly. A healthcare attorney can assist you in creating a fully functioning policy and procedure manual specific to your practice.

Keys to Successfully Operating a Multi-Disciplinary Medical Practice

Throughout Florida, a healthy number of licensed healthcare practitioners and healthcare entrepreneurs are joining or investing in multi-disciplinary practices for numerous reasons. The primary reason for their foray into this modern approach to the delivery of medicine is usually due to the rising costs of administering treatment. They are attracted to the idea of increasing revenue, minimizing administrative duties, and partnering with like-minded individuals that may grow their individual practice. However, there are several business and legal challenges that members of a multi-disciplinary practice must consider prior to participating in the practice.

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