Following up on the October 11 post, the following is a checklist to use as a starting point for dealing with either a practice breakup or a departing physician. The list is not exhaustive, and each practice will have its own special issues to address. Breaking up is definitely not for sissies.
Review of Available Documents:
A. Employment Agreement/Independent Contractor Agreement
B. Office Sharing Agreement
C. Organizational Documents
i. Bylaws/Operating Agreement
D. Shareholder/Member Agreements
E. Buy/Sell or Buy-Out Agreement
F. Employee Manual/Policies and Procedures
G. Office Lease Agreements
H. Bank Loan Agreements
I. Equipment Leases
J. Provider Contracts
K. Hospital Agreements
i. Recruiting Agreements
ii. Provider Services Agreements
L. Business Agreements
i. Billing Company
ii. Advertising Agreements
iv. In-Office Ancillary Services
1. Office lease obligation
a. Is the lease in default?
b. Is the lease personally guaranteed?
c. Assignment/Sublease issues
d. Duty to mitigate
2. Bank loan
a. Is the loan in default?
b. Is the loan personally guaranteed?
c. Is the physician responsible for a portion of any outstanding debt pursuant to a shareholder or other agreement?
3. Medical equipment leases
a. Is any lease in default?
b. Are there any outstanding medical equipment leases which are personally guaranteed?
c. Is the equipment in good condition, or have any value?
d. Does the departing physician need the equipment?
4. Professional liability insurance
a. Is tail coverage necessary?
b. If so, who has to pay for it?
5. Is there a Hospital Recruiting Agreement with an Income Guaranty, Expense or Incremental Cost Reimbursement?
a. Will the departing physician continue to practice within the hospital service area?
b. What are the parties’ continuing obligations?
c. Who keeps the departing physician’s accounts receivable?
d. Retention of items purchased with hospital funds?
6. Non-compete/Damages upon Competition
a. Does the non-compete violate applicable state statutes?
b. Does the non-compete violate common law restrictions on scope, damages, etc.
7. Notice to/Solicitation of Patients
a. What are the applicable provisions of the applicable state’s physician regulatory board?
b. Is there an agreement regarding patients upon termination?
c. Is there a non-solicitation agreement?
d. Duty of Loyalty/Fiduciary Duty of Departing Physician
i. Was the departing physician a director/manager or just an employee?
ii. Did the departing make arrangements to compete prior to departure, and if so, did the departing physician utilize practice resources?
e. Who drafts the Notice to Patients?
i. Who has the list of patients?
ii. Which patients are notified?
iii. Who bears the costs?
8. Non-solicitation of staff
a. Was the departing physician a director/manager or just an employee?
b. Did the departing physician solicit staff members to leave the practice prior to departure in contemplation of competing with the practice, and if so, did such arrangements damage the practice?
9. Confidentiality/Trade Secrets
a. Is there a confidentiality agreement?
b. If so, is it necessary for protection of the practice and is it reasonable in its terms?
c. Is there truly confidential information or trade secrets?
10. Fiduciary Duty/Duty of Loyalty
a. Is there an applicable state statute regarding fiduciary duty?
b. Has the departing physician acted in good faith and in a manner reasonably believed to be in the best interests of the practice
c. Employees owe the employer a duty of loyalty and must not, while employed, act in a manner that is contrary to the employer’s interests.
11. Continuity of Care
a. Is there a coverage issue?
b. Applicable state statutes or regulations of the physician licensing board
12. Medical Records
a. Is there an agreement regarding medical records?
b. Applicable state statutes or regulations of the physician licensing board
13. Provider Issues
a. Is the departing physician credentialed individually?
b. Contact federal/state programs as to change in practice/physician status
c. Contact any managed care organizations as to change in practice /physician status
14. Completion of all outstanding billing
a. Completion of all patient charting
b. Completion of billing records
c. Proration of global billings
15. Collection of Accounts Receivable
a. Is there an agreement regarding accounts receivable?
b. Does the departing physician have any rights in accounts receivable?
c. Does the departing physician have any liability for costs of collection?
16. Distribution of Jointly Held Assets
17. Assets of the Practice
18. Other business ventures
19. Call Coverage
20. Employee Benefits
21. Health Insurance
a. When does coverage terminate?
b. Is the departing physician entitled to an extension of benefits?
22. Life and Disability Insurance
23. Retirement Plan Benefits
24. Paid Time Off and Reimbursement of Business Expenses
25. Notify Referral Sources of Change in Practice
26. Who owns Pager Numbers?
27. Who owns Cell Phone Numbers?
28. Securing Computers and Electronic Data
a. Network user ID to be deleted or disabled
b. Disable or delete Windows login account on personal computer
c. Remove access or delete all passwords
d. Disable or delete e-mail account
e. Disable or delete voice-mail account
29. Return of Personal Property of the Practice
b. Cell phone, PDA or pager
c. Security pass
d. Building and office keys
Healthcare fraud is a multi-billion dollar problem. The Health Care Reform Act adopts a number of so-called “Transparency and Program Integrity Provisions” to help combat this fraud (Title VI, sections 6001-6703). While it is easy to conclude that these provisions are another example of the government’s overreaction to an actual problem, healthcare providers cannot ignore them.
On September 23, CMS published in the Federal Register its proposed rule on “Additional Screening Requirements, Application Fees, Temporary Enrollment Moratoria, Payment Suspensions and Compliance Plans for Providers and Suppliers.” The proposed rule is intended to transition CMS’s antifraud activities from “pay and chase” to fraud prevention. The complete proposal can be found at http://tinyurl.com/24cv3lw. Comments have been solicited and must be received no later than November 16, 2010.
Over the next several posts, we will explore the proposed rule and what it means to healthcare providers.
Whether as a result of retirement, death, disability, or unresolved professional or personal disputes, the breakup of an established physician practice, or the departure of one or more of the physicians in the practice, is a difficult and trying ordeal for everyone concerned.
It is important for the members of the physician practice to understand the financial, ethical, professional and emotional issues that usually come to play in a practice breakup or physician departure. The physicians and their advisors must be sensitive to the conflicting perspectives of the different parties. The best time for the practice to think about and get guidance for the issues that will arise in a practice breakup or the departure of one or more individual physicians is when the practice is organized. Preparing for the possible breakup of a physician practice or how a physician will depart from that practice should occur when the practice comes together.
If the physicians and their advisors did not take the time when they established their practice to address in their organizational documents and other agreements what happens in a practice breakup, or when a physician leaves the practice, then what was already going to be a difficult and trying ordeal will likely become substantially more difficult, more time consuming, and more expensive.
An additional complicating factor is that physicians in a practice will often have become business partners in other ventures. The practice breakup or physician departure will require the parties to decide whether their interests in these other ventures must be separated also.
Of course, even when a practice has in place the types of documents described in this book, not every issue will be covered and often the agreements reached by the parties may have become stale with time. As issues are addressed and resolved, it is incumbent upon the parties and their advisors to document the practice breakup or physician departure with a definitive separation agreement that sets forth their agreements on how to deal with the various issues.
In a subsequent post, I will include a checklist to assist the parties and their advisors in identifying the critical issues to be considered in a practice breakup or physician departure.
For lawyers and other advisors who represent physicians, you may wish to consider buying Representing Physicians Handbook, Second Edition (2009, published by the American Health Lawyers Association). http://www.lexisnexis.com/ahla/ProductDetail.aspx?id=78
Politics is not an exact science.
Politics is the art of the possible.
— Otto von Bismarck
On March 23, and March 30, 2010, the President signed into law what is commonly known as the Health Care Reform Act. It is comprised of the Patient Protection and Affordable Care Act of 2010 (“PPACA”) as amended by the Health Care and Education Reconciliation Act of 2010 (“HERA”).
The consolidated Congressional print of the combined Acts takes up 907 pages.
A headline discussing an AP Poll that came out in late September stated that the health care reform law is making us “muddle-minded.” The poll’s questions included a true-or-false quiz asking whether each of 19 different items was (or was not) included as part of the Health Care Reform. Along with their answer to each of the questions, respondents were also asked how confident they felt in their answers. For the most part, majorities picked the right answers. But a sizable number also got things wrong. And right or wrong, people were unsure of their answers. By the way, I looked at the questions, and I’m not sure I could have answered them correctly.
Lawsuits have been filed challenging the constitutionality of those parts of the law that penalize individuals who fail to purchase health insurance, arguing that the federal government cannot tax or otherwise assess an economic penalty over individuals who refuse to participate in economic activity. In response to the government’s motion to dismiss one lawsuit that was filed in the Northern District of Florida, the federal judge ruled that the lawsuit could proceed. On the other hand, in a case filed in the Eastern District of Michigan, another federal judge ruled that “the Commerce Clause affords Congress broad power to regulate even purely local matters that have substantial economic effects,” finding that “by choosing to forgo insurance plaintiffs are making an economic decision to try to pay for healthcare services later, out of pocket, rather than now through the purchase of insurance, collectively shifting billions of dollars, $43 billion in 2008, onto other market participants.” It is expected that the constitutionality of this provision of the law will ultimately be determined by the U.S. Supreme Court.
In the meantime, regardless of the outcome of the court challenges, the law is likely to have a significant effect on healthcare providers as aspects of the law are implemented.
The Health Care Reform Act is comprehensive and affects, or is slated to affect, nearly all parts of the health care insurance and delivery systems. It includes insurance reforms, tax changes, Medicare and Medicaid coverage and payment changes, and establishes a number of entities to conduct demonstration projects on new ways to deliver health care or train those who participate in the health care delivery system.
Rulemaking is just beginning, and a number or proposed and final regulations have already been promulgated. The Health Care Reform Act is to be implemented over the next five years or more. The following is a list of some of what is scheduled to happen and when:
March 23, 2010 (Upon Enactment) — Fraud and abuse provisions are effective, such as overpayments, anti-kickback statute amendments, false claims act amendments, expanded subpoena authority, and Stark law disclosure requirements relating to the in-office ancillary services exception.
June 23, 2010 (90 Days After Enactment) — Temporary retiree reinsurance program and national high risk insurance programs become effective.
September 23, 2010 (6 Months After Enactment) — Coverage for adult children up to age 26, plans prohibited from rescinding coverage, pre-existing conditions prohibited for children under the age of 19, plans prohibited from rescinding coverage.
2011 — Medicare Advantage payment freezes pending restructuring of rates, and prohibition on physician ownership in hospitals.
2012 — Allow providers organized as accountable care organizations to share in cost savings achieved for the Medicare program; excess readmission provision goes into effect, and drug manufacturers must report information relating to drug samples.
2013 — Drug, device and supply manufacturers must begin disclosing payments to physicians and teaching hospitals, and hospital organizations must conduct community needs assessments.
2014 — No pre-existing condition limitations or annual limits on coverage, and the individual mandate begins, Medicaid expands eligibility, and health insurance exchanges commence.
2015 — Independent payment advisory board established to propose changes in Medicare payments.
The changes occurring and expected in the country’s and in Florida’s healthcare laws are historic and will have long term effects on healthcare providers and the delivery of healthcare services. All healthcare providers need to aware of these laws and regulations and understand how they are changing.
This blog will provide readers with information, insights, and updates on what is happening in the area of health law, not just with the areas of health law reform, but also with the day-to-day legal issues that affect healthcare providers.
I am an attorney in the Healthcare Practice Group of Akerman Senterfitt. I am resident in the firm’s Tampa, Florida office. You can learn more about the firm at www.akerman.com.
I have been a lawyer since 1981, and I have more than 25 years of experience in representing healthcare providers, licensed professionals, and business clients in their transactional, tax, corporate and organizational, and regulatory matters. I have extensive experience in representing physicians and physician groups, including hospital medical staffs and independent practice associations, diagnostic imaging centers, and ambulatory surgery centers. I have assisted healthcare providers and other clients in acquiring, selling, merging, and separating their businesses. I understand and integrate the various legal, regulatory, tax, securities, and business issues that impact transactions in the area of healthcare. Having previously served as in-house counsel for small healthcare providers, I am sensitive to the practical issues that arise in healthcare businesses. I have been recognized by Chambers USA and The Best Lawyers in America as one of the leading healthcare lawyers in Florida.
I look forward to hearing your questions and comments on the issues of health law that are discussed here.