"Medical Records Issues in the Transfer or Closing of a Medical Practice: Address Them Upfront to Avoid Problems Later"

Details regarding how medical records will be handled in the sale or closing of a medical practice are sometimes relegated to general boilerplate provisions and viewed as side issues during the negotiation process. Yet, how the rights and responsibilities of the parties regarding the transfer, retention, maintenance, and accessibility of medical records are (or are not) addressed in the underlying agreement(s) can have far-reaching and longlasting implications.

Transactions involving the transfer of medical records can be triggered by various circumstances, such as the sale or lease of a medical practice, consolidation into a larger group practice, departure of one or more physician owners to a different practice, or the death or retirement of a physician. These transactions are often asset sales, but may also be structured as sales of ownership interests in a medical entity or other arrangements involving health systems or private equity firms. Transfers may occur when a retiring physician refers her patients to another physician to assure the patients have continuity of care. These referral arrangements may or may not be associated with the sale of other assets.

For simplicity, this article uses the terms “seller” to include the physician who departs the practice or the medical practice entity selling the practice, even if there is not a formal sale (e.g., retirement), and “acquirer” to denote the physician or entity that assumes the practice, even if there is not a formal purchase (e.g., a retiring physician’s recommendation to patients on a successor physician).

As of 2015, over 78% of United States office-based physicians had adopted a certified electronic health record (EHR) system. Given the prevalence of EHR systems, the article  focuses primarily on electronic records, though many of the issues discussed can also apply to paper records. In either case—paper or electronic—a multitude of potential issues may arise regarding the handling and accessibility of medical records when a practice is sold, leased or shut down, or when a physician departs, retires, or passes away. Assuring compliance with legal and professional standards requires careful attention, and how the parties divide the responsibilities for the affected medical records may impact the ultimate price paid in the sale of a practice. The division (or absence) of such responsibilities also may impose ongoing costs on one or both parties.

Medical records typically warrant a more customized approach than most other medical practice assets due to the long term implications as well as legal, professional, strategic, and operational issues involved. It is therefore crucial for parties and attorneys involved in the sale or closing of a medical practice to plan ahead for medical record issues, including how the records will be transferred and integrated, how they can be accessed by the parties and by patients, who will be responsible for responding to patient requests, and how the parties will allocate the costs of these arrangements. How these and other relevant issues are addressed will vary depending on a number of factors, including the parties involved, the circumstances, and attention devoted to each issue.

The full article may be found in the American Health Lawyers Association's AHLA Connections.

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