When Mary Alice Fisher, PhD, retired, she didn’t consult a lawyer as she closed her Charlottesville, Virginia, practice. She felt she didn’t need to, since she wasn’t part of a large group practice and didn’t have a lot of “legal entanglements” such as contracts. Even without a lawyer, it is important to make sure you’re on top of federal and state laws regulating practice closures, says Fisher, executive director of a Charlottesville-based organization called the Center for Ethical Practice that provides continuing education workshops and additional resources to psychologists and other mental health professionals.
How can you stay on the right side of the law when you close your practice? Experts advise that you:
- Check your local regulations. Contact your state health department or the licensing body for psychologists in your state and ask for a copy of any regulations pertaining to closing a practice, advises Jeffrey Zimmerman, PhD, co-founder of the Practice Institute, a consulting firm that helps behavioral health practices thrive. Your state psychological association may also be able to provide a copy of these regulations. Zimmerman says these regulations “tend to be fairly readable” and don’t contain a lot of legal jargon. If needed, consult with an attorney who specializes in health care matters in your state.
- Find out what your state says about notifying patients. “Different states may have different requirements about notifying current or former patients,” says Zimmerman, adding that fulfilling that requirement may be as simple as running a notice in your local newspaper for a specified period of time. (See “Shutting down: How to protect your patients when closing your practice” for tips on notifying current patients.) Check state regulations for special circumstances, too, says Marianne O’Leary, PhD, co-chair of the Maryland Psychological Association’s Professional Practice Committee. In some states, you may only need to notify former patients if you plan to destroy or transfer records, not if you plan to maintain records yourself.
- Know how long you must retain records. Similarly, states may differ on record-keeping. Check your state regulations and be attuned to any fine points, such as different requirements for how long you must maintain records for pediatric patients versus adult patients, says O’Leary. There are also federal rules about record retention. Medicare requires five years, except for managed-care patients, whose records must be kept for 10. The Health Insurance Affordability and Portability Act requires practitioners to keep administrative records — such as notices of privacy practices — for six years.
- Check your contracts. If you’ve signed contracts with third-party payers, check what your contracts say about practice closure. While many practitioners have managed-care contracts, a surprising number have not read them and may not be aware of any closing requirements, Fisher has found. Practitioners should also ask insurers to remove them from their provider panels before closing, she adds. Don’t forget to think about other kinds of contracts, such as office space or equipment leases, lines of credit or consulting agreements with schools or businesses, says Zimmerman. If you’re selling your practice or your share of a group practice, he says to ask your accountant about tax implications so you completely understand your options and the tax liability associated with how the equity in the practice is sold or changes hands.
- Maintain malpractice coverage. “When you close your practice, you can buy what’s called a ‘tail’ — a policy that provides coverage for any claims that arise based on events that occurred when the practice was open,” says O’Leary. Your malpractice insurance carrier can also help you think through legal, ethical and risk management issues as you close your practice, adds Fisher.
- Consider keeping your license. Just because you’re closing your practice doesn’t necessarily mean you’re ending all professional activities. You may want to continue providing supervision, for example. You may envision volunteer work, such as disaster relief, that may require a license. Or you may want to keep your license just in case you want to see patients again one day.
This article is the fifth in a series of columns focusing on closing a practice.