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You worked hard your entire life to build your medical practice, and now you’re ready to enjoy retirement. Regardless of whether you choose to sell your practice or gradually wind it down over a period of time, you must take certain legal steps before you can leave.
Deciding to Retire & Making a Plan
Once you decide to retire, it’s critical to inform your team of advisors—including your attorney, accountant, insurance agent and financial planner—of your decision. Provide your advisors with as much time as possible in advance of your planned retirement to ensure that each one has sufficient time to take the necessary steps to assist you in closing the practice. If you are selling your practice, it’s best to allow additional time for contract negotiation with the prospective buyer. In addition, you will need to introduce your advisors to each other so they can coordinate efforts. It’s important to delegate one advisor as the “team lead.” This individual should be the one most involved with closing your practice and will usually be an attorney or accountant. This person can help you develop a checklist with corresponding due dates for steps to be completed. These steps and recommendations for timeframes for completion are discussed below.
As part of your decision to retire, you should review your existing service and vendor contracts, including managed care participation agreements, for specific termination and notice requirements. In addition, it’s critical that you review your employees’ employment agreements. Typically, an employment agreement will address the grounds for termination and notification requirements of your intent to terminate. It will set forth the allowable reasons for termination and any restrictions on termination rights. The agreement should also include the proper method to provide notice of termination, such as first-class mail, overnight courier or hand delivery. The amount of advance notice you must give to the employee prior to closing your practice will factor into the timing of your decision. Although the notice provisions set forth the minimum amount of notice you must give, your specific circumstances may necessitate providing more notice to stay on good terms with your current staff by giving them enough time to handle the transition and find new work.
If the employment agreements for your staff do not address some of the terms discussed above, you may want to consider drafting a separation agreement with each employee to be entered into after notification to the employee of your decision to retire. A separation agreement can help provide clarity and avoid unnecessary issues and disputes, and will typically include the following:
- The date that the employment will be terminated as you transition into retirement;
- Any post-termination compensation owed to each employee, including unused vacation days, bonuses or expense reimbursements; and
- Employer obligations, including those associated with retirement plan contributions, health insurance, life insurance and other fringe benefits.
Patient Notification
Timeframe: At least 30 days in advance
The physician–patient relationship is an ongoing responsibility. To avoid claims of patient abandonment and to assure continuity of care, patients should be notified of your decision to retire at least 30 days in advance of the practice closing; however, some states specify the manner and content of this type of patient notification. Further, the timeframe for providing notice depends on the type of practice, the health status of the patients, the availability of other physicians within your specialty to accept new patients and the number of patients involved. The notification letter should clearly state that the practice is closing, along with the effective date of its closure, and that the patient will need to seek medical care from another physician; it should also delineate where medical records will be stored, how copies of medical records can be obtained and how to have medical records transferred to another physician. If you are allowing another physician to assume your practice, but you are not selling, be sure to state this in the notification letter and inform patients that they are not obligated to use the new physician. A copy of this written notice should be placed in each patient’s medical record.
Consider sending letters by certified mail to any higher-risk patients who may be significantly affected by the change and by regular mail to all active patients. Include an authorization for the release of medical records to expedite the process for record transfer to any other provider the patient may see in the future. In addition, consider placing an advertisement in the local newspaper regarding your retirement, and include the same information provided in the notification letter sent to patients.
No new patients should be seen at your practice once your existing patients are notified of your retirement. In addition, you should start referring patients who require continuous care to other providers at least 60 days before closing. You should also start limiting non-emergent visits at this time.
Insurance Notification
Timeframe: In accordance with applicable contractual terms
Even if you completely retire from the practice of medicine, you could be named in a malpractice action resulting from services provided while you were engaged in active practice; therefore, you must notify your insurance carrier that you will be retiring. Under an occurrence policy, you likely only need to notify the carrier of your retirement in writing and request a refund of any unearned premium. If you carry a claims-made policy, you may need to obtain tail coverage. Claims-made policies require that both the incident and the resulting claim occur during the coverage period. Tail coverage provides insurance for claims that are made after you retire for events that occurred while you were engaged in active practice.
Other Notifications
Timeframe: In accordance with applicable contractual terms
You should inform all necessary third parties of your retirement, including but not limited to Medicare/Medicaid and other payers, hospitals at which you have privileges, referral sources, and your state and local medical boards. Review your contracts with each of the above parties to ensure that notice of termination is provided in accordance with the terms of the applicable contract. You should also notify the medical staff committee of any hospitals where you have privileges and the state medical board.
Medical Record Arrangements
Timeframe: At least 30 days in advance
Each state has its own record-retention guidelines that regulate the preservation and maintenance of medical records, including the length of time that medical records must be retained. In addition, some HMO or managed care agreements also include retention requirements. Be sure to provide copies of these agreements to your legal advisor for review.
A written custodial arrangement should be signed by the custodian who agrees to retain and store your records. This can be a physician, non-physician or document-management company. The agreement should state the retention period, describe who can access the records and under what conditions, and require the custodian to comply with state and federal laws governing confidentiality of medical records, access and disclosure.
Closing your practice can be an emotional & time-consuming endeavor.
Financial Matters
Timeframe: After last patient visit
After the last patient visit, you should request final bills from all vendors. If your office space is leased, have your legal advisor review the terms of the lease to confirm how utilities will be handled. Be sure to terminate any credit cards issued in the name of the practice and stop any automatic payments. Once all bills have been paid and all receivables collected, the practice’s bank accounts should be closed.
License Status
Timeframe: After retirement date
States vary on the process required to change your medical license to retirement status, and you will need to confirm the applicable requirements in your state. In addition to retirement status, there may be other options, such as retired and inactive status, retired and active status, or volunteer status.
Final Steps
Once the above steps are completed, your practice’s professional entity should be terminated. Although the process can vary by state, it typically involves filing a dissolution form with the state.
Closing your practice can be an emotional and time-consuming endeavor. Taking these considerations into account should make your transition to retirement a smoother process.
Steven M. Harris, Esq., is a nationally recognized healthcare attorney and a member of the law firm McDonald Hopkins LLC. Contact him via e-mail at [email protected].
