Vasilios (“Bill”) J. Kalogredis, partner at Lamb McErlane PC was recently interviewed by Dermatology World in an article titled Closing Time: What to Do when it’s Time to Move Out and Move On’, which discusses best practices when closing a dermatology practice.
In this month’s Answers in Practice column, Dermatology World talks with Vasilios (“Bill”) J. Kalogredis, JD — attorney and partner at Lamb McErlane, PC in West Chester, Pennsylvania — about best practices when closing a dermatology practice.
Written by: Victoria Houghton, assistant managing editor
Dermatology World – July, 2016
Dermatology World: What are some reasons why a physician would close a practice rather than selling it?
Kalogredis: Everybody’s a little different. The reasons for closing could be illness, death, and it could just be that business is not going as well as the doctor was hoping it would. Maybe things have gone downhill a bit because of competition, age, or maybe he or she decides to retire or move somewhere else. For example, I had a client recently who decided to leave the Philadelphia area and move down to Mississippi where he got a really good job. He got tired of the headaches of running a practice, all the reimbursement issues, and dealing with personnel. He was really making very little money for the work he was doing.
Dermatology World: How long before closing should a physician notify their patients?
Kalogredis: With this, I would caution all physicians to make sure that they check the local rules and if their state is unique. Check with your local county and state medical societies and a good local legal counsel to find out. As a general rule, however, the notice should be 30 days at a minimum. You don’t want to be accused of patient abandonment.
Dermatology World: Define patient abandonment.
Kalogredis: Make sure that your area doesn’t have a unique definition, but in general the definition of patient abandonment is relatively standard. It’s basically when you have a patient and you don’t notify him or her that you’re walking away, retiring, or leaving town to give them time to find viable alternatives for care. It’s a malpractice-type claim — especially if you’re in the middle of treatment with a patient — because the patient thought you were their doctor. Now they don’t have a doctor to go to.
Dermatology World: What is the punishment for patient abandonment?
Kalogredis: The general punishment would be a malpractice claim. You may also lose your license. If you’re leaving the state you may not care, but you should care because anything like that would get reported to the National Practitioner Data Bank and could ruin your ability to get another job down the road and get malpractice insurance. It’s a serious matter.
Dermatology World: What obligations do physicians have in terms of finding and/or recommending a new physician to patients?
Kalogredis: Every area may be different but you have to give patients options of where they can go. Otherwise, it’s abandonment. You don’t have to pick the doctor for them. You just have to tell them: “I’m retiring as of this date and here are the names of four doctors in the area that you should feel free to contact, and we’d be happy to work with you to transfer your records.” You’re giving them options.
Dermatology World: How should physicians go about notifying patients?
Kalogredis: Every community is different. The letter is the best and safest way. You can say that absolutely each active patient has been notified in writing by letter of what’s happening. You have a record of that. If it’s a small community and everyone reads the local newspaper, you might put an ad in there as well. Sometimes you have to do both or issue a public notice. Some people have done that in lieu of a letter.
Dermatology World: Does the physician have to notify every patient they’ve ever seen, or is there a time period where a patient is not really considered an active patient anymore?
Kalogredis: It’s not quite black and white. I would suggest that physicians check with their state medical society. They’ll know what their guidelines are and they would have a definition of what they consider an active patient. I also recommend that a physician contemplating something like this communicate with his or her malpractice insurance carrier.
Dermatology World: In addition to informing patients that the practice is closing, what other critical information should be conveyed?
Kalogredis: You should let them know that you’re leaving/moving/retiring, you’re closing down your office, and the date you’re closing. Tell them where they can find their medical records — the specific location and the custodian’s contact information. Tell them that they have the right to go see that physician or that they may designate someone else in writing to have their records transferred to. If you don’t have that person to take over the records, you should say that you’ll be retaining those records and that someone will be manning a specific phone number to help patients with records. Also, give them the names of doctors in the area who they may wish to contact for future care needs. Then it’s up to them at that point.
Dermatology World: What do physicians legally have to do with their patients’ medical records?
Kalogredis: You have to find someone willing to be the custodian of the records. Sometimes you may not be able to sell the practice or merge the practice with someone else, but you may have an arrangement or a custodial agreement drafted where another doctor nearby or a hospital has agreed to retain the records. They don’t own the practice, but the records are now sitting with them. Usually, you don’t have to pay the custodian as a general rule, because for that person it is potential business. However, the patient always has the right to decide if he or she wants to go to that new doctor or designate that their records go somewhere else.
Dermatology World: What if a physician can’t find someone to be the custodian of the records?
Kalogredis: If you don’t find someone to take them, then the doctor who is closing a practice has an obligation to have someone answer the phone when patients call asking for their records and work to get the records to the patient or his or her designee.
Dermatology World: What if you practice in an area where there aren’t many physicians? What can you do with your records?
Kalogredis: That’s a real issue. What we’ve done in some cases is we go to the area hospital. Hopefully, they’ll be willing to be the custodian of the records. If that’s not going to work, then you go and talk to your local medical society or maybe the state medical society and tell them your dilemma and ask them what to do. They may help you out and tell you who you can designate to hold the records.
Dermatology World: In addition to patients, who else should the physician notify about their practice closing?
Kalogredis: Notify all the payers, state boards, and your malpractice carrier. Call your malpractice carrier first and also let them know what’s going on in writing. They will usually help you with area- specific guidelines for closing your practice. Dealing with professional and lay staff can also be tricky. You also have to worry about other liabilities that you might have. There is a whole litany of things. Do you have an office lease? Do you have equipment leases? Do you have loans? These have to be addressed. You can’t just walk away from those items.
Dermatology World: What, if any, obligation does the physician have to employees?
Kalogredis: It depends on what your policies are. Usually you’ll have a personnel policy manual that tells employees what notice and other obligations the practice has in place. In there you should have something in place already about this with your attorney advising you. Some of your staff may need to stick around for a while after you close to do the billing, and help transfer records and other items that have to be cleaned up. Every situation is different. On a practical level, it is helpful to prepare answers to anticipated employees’ questions and concerns once they are notified. A full staff meeting thanking them for their years of service and professionalism will go a long way to ensure a smooth transition.
Dermatology World: What should a physician do with any leftover sample medication?
Kalogredis: There are state and federal rules on medications. It’s different in each area. The important thing is to make sure you contact your state medical society. Your malpractice carrier can help you with this, as well as your attorney.
Dermatology World: Tell me about tail malpractice coverage.
Kalogredis: Assuming you have claims-made coverage — most people tend to — the question is: will there be a tail and if there is, how much will it cost? Generally, the tail should cover everything that has transpired since that policy has been in place. It’s also a one-time payment. If I’ve had claims-made coverage for the last five years, I’m going to ask my malpractice insurance broker how much the tail will cost to cover me for everything I’ve done since I’ve had this coverage. They will give you a price and when that’s paid it will cover you forever. Of course, get written confirmation of that.
Let your malpractice carrier know you’re closing as soon as you know what you’re doing so you can map it out and know how much it’s going to cost. Again, you have to look at your own policy and talk to your broker or malpractice insurance carrier because sometimes if you’ve been with a company for many years and you’re over a certain age and retiring from practice, there’s no tail. With a lot of the policies that my clients have, the tail isn’t required in that situation.
Dermatology World: Overall, what are the top items a physician should have in mind when closing a practice?
Kalogredis: These are the main legal, ethical, and pragmatic aspects. However, physicians need to think in terms of: if they were the patient what would they want? Also, every situation is different and each physician may prefer a different approach. Just make sure you’re doing it legally and ethically.
Vasilios (Bill) J. Kalogredis, JD, is an attorney, head of the Health Law Department, and partner at Lamb McErlane, PC in West Chester, Pennsylvania. Kalogredis has been practicing health law, representing exclusively physicians, dentists, group practices, other health care professionals and health care related entities since 1974. He may be contacted at (610) 701-4402 or BKalogredis@lambmcerlane.com.
The Academy offers more information, guidance and resources on this topic in its Valuing, Selling, and Closing a Dermatology Practice manual available at www.aad.org/store/product/default.aspx?id=8000. This manual covers valuation, negotiation, and tax considerations to make closing or selling your practice easy. Learn more about how you can transition your practice successfully and prepare for the next phase of your life.