Planning For A Medical Practice Breakup
Ending a business relationship is a difficult decision for anyone. For medical professionals, especially doctors, the decision to dissolve medical practice can be a painful experience due to the wide range of issues that are specific to the healthcare industry. For doctors contemplating the breakup of medical practice, is much more complex than what non-healthcare business people face.
Among the challenges faced by owners of medical businesses are the complexities imposed by Federal law. Regulation imposed by federal and state laws may pose significant business risks and adverse legal ramifications where the division of assets in a medical practice is not done properly. For example, how are patient charts assigned or divided? How is patient information shared for marketing or promotional purposes? For doctors planning to divide a medical practice these are but a few of the issues that are imposed by government regulations.
Likewise, the division of business asset can be challenging for doctors who own medical business. As a doctor if you are contemplating leaving your medical practice, it is critically important to make sure that any proposed division of the practice takes into account the division of capital assets of the practice, and has provisions governing divisions of medical equipment leases, practice branding, and electronic health records as well as marketing materials.
In most medical practices expensive medical equipment is leased. The leased property is often difficult to divide. You can’t easily divide a laser between doctors who no longer want to work together. Correspondingly if no one wants the medical device it may be difficult to agree on how the financial obligation should be resolved. This is often the case with older medical devices that are due to be retired in favor of more modern medical equipment.
In addition to medical equipment, the lease for the medical practice is of paramount importance. Most medical practices are located in the building that is exclusively rented to medical practices. As a result of the lease agreements typically are designed to protect the landlord in the event that the medical practice breaks up. In addition to the terms and conditions contained in your lease agreement, whether there is a personal guarantee on the lease in of great importance to determine how the lease will be handled. Doctors should review their personal guarantees carefully to fully understand their potential personal liability.
While a medical practice’s name and brand identity may not be easy to value with precision, the inherent value should be weighed and factored into the division of assets. Just like any business, the reputation of medical practice, the doctors that practice there and the reputation that has developed in the community are important components to the value of the business’s identity. A medical practice’s strong reputation in the community is essential in fostering patient confidence, attracting new patients and retaining patients. If following the breakup the doctors have elected to start practices in the same field and geographic area, the division of such an asset can be a flashpoint for future conflict and may raise difficult business and legal issues.
Finally probably the most difficult part of a medical practice break up is determining the division of patient and patient records. While the patient ultimately has the right to decide who he will see for medical care, the “ownership” of that patient relationship, the patient’s medical records, and how medical practices should communicate with the patient following a practice break up are fraught with challenges.
While the end of a medical business relationship is never as easy or simple as we would like, working with legal counsel is a good way to eliminate a lot of the risk and to make the transition as smooth as possible.