Hot Topic: Closing the Doors

Dismantling a practice with moral—and legal—integrity

By Erinn Morgan
Illustrations by Jon Krause

R. Douglas Hahn, MD, PC, had been working hard for 25 years as an ophthalmologist in solo practice and as the owner of Bridge Street Optical in Milford, N.J. A respected eye surgeon and medical leader in his area, he was ready to retire. Much to his surprise, however, he could not find a buyer interested in taking over his business.

"We began to wonder how to dismantle our practice with integrity if it could not be sold because of today's business climate," he says. "Of course, medical records can be transferred to another MD or OD, but what of optical Rx's and warranties or contact lens prescriptions? We have a faithful patient base and wanted to manage this in the best way."

Is it tough to sell a practice in today's economy? "Yes. Everybody's dancing around the fire, but nobody's jumping in," says Gary Ware, president of Practice Consultants, an optometric consulting firm. "Buyers are afraid. Sellers are afraid. Outside financing is not impossible to get, but it's not easy either. It's just hard." And, say some consultants, it can be even harder for dispensing-only businesses.

Especially in a tough economy, ECPs may have a difficult time finding a buyer. Businesses caught in this unappealing scenario have few choices: either continue to look for a buyer while they conduct business as usual or wind down the operation by selling off the equipment, inventory, and even the patient records.

Here, we cover the things you need to consider when closing your doors, including suggestions on strategies to handle each one.

TRANSFERRING/SELLING MEDICAL RECORDS

Consider your records to be one of your biggest assets. Your patient base, which has likely been nurtured and grown over a number of years, has real value.

"Even if you can't sell, there are a lot of ECPs who would welcome the files," says Jerry Hayes, president of Hayes Consulting. "It's a way to make some revenue and to put your patients in somebody's hands."

The first step to selling or transferring your files is to understand what you have to offer. Hayes suggests packaging your files and marketing to local practitioners by saying, ‘I've been here for 20 years and have 2,000 patients, 500 of whom I've seen in last year and 1,200 in last 24 months.'

"Have someone spend a week counting your files so you can be very specific about what you have," he adds. "Present the package to multiple ODs and focus on the fact that they can take your files and market to that group and expect to get a reasonably good return on those patients because they will need to get eyecare somewhere."

If a package deal for a set amount of money seems daunting to potential buyers, consider marketing a long-term deal. "Make it attractive to your colleagues by saying, ‘You can have all my records now, but for every one of my patients who comes to you, I will be paid $75,'" says Richard Kattouf, president of Kattouf Consulting Services.

"This makes it all very palatable. They don't have to come up with $20,000 or $40,000 all at once, and you get a steady check every quarter or every month."

A private accounting firm should manage this long-term process and assess the buyer's books to make sure everything is on the up and up.

Keep your patients informed about the change by sending out a letter on professional stationery to each patient explaining the file transfer. "Have a head shot of the seller and a head shot of the buyer in the letter because this makes people read it," Kattouf notes. "You also want a statement from the seller giving his blessing and handing off the baton."

If you find your files cannot be sold, experts recommend simply transferring them to your favorite local practitioner.

"The last-ditch effort is to go to the friendliest competitor and say, ‘I'd like to refer all my patients to you,'" says Hayes. "If you don't do this, and you just lock your doors and walk away, at least send a letter to your patients beforehand telling them that they can have their file."

In this case, get a written receipt from each patient who picks up a file. "Most states have a law requiring you to maintain patient records for six years," adds Kattouf.

PATIENT FILES: LEGAL CONSIDERATIONS

It is important to understand the legal issues surrounding the transfer of patient files when selling a practice. "Although HIPAA provides for monetary penalties to be imposed for violations of confidentiality involving records transfers, these violations also form the basis for breaches of professional conduct, which are actionable by state boards of optometry and can result in disciplinary penalties, including suspension and revocation of license," says John Classé, OD, JD, a professor at the University of Alabama at Birmingham School of Optometry.

According to Classé, practitioners are allowed to transfer patient records by sale or other "disposition" to another practitioner as long as that person abides by HIPAA requirements to respect confidentiality. This requirement eliminates the need to personally notify all patients affected by the transfer.

Are there additional legal considerations to think about if you are not transferring the files and just shutting down the practice?

"During the period preceding retirement [or closure] the practitioner should inform in-office patients of the impending practice closure and offer to forward records to a successor provider," says Classé.

Use newspaper ads, newsletters, mail, and on-line notices to inform as many patients as possible of the closing date so records can be transferred. "State laws should also be consulted to ensure compliance. After retirement, records should be maintained for the period required by law (six years minimum)."

What should you do about existing prescriptions and warranties? Since there is usually only a week or two of lag time on most prescription jobs sent out, it should not be too difficult to wrap these up for patients before you close up shop.

Check with your reps to see how the warranty can be honored down the road. "If someone pays for your patient records, then they should have to cover the warranties," says Ware.

CLEANING HOUSE

There is a market for used equipment, office furniture, fixtures, and inventory. "List what you have for sale on the optometric college websites and in your state optometric [or opticianry] society's journal or website," says Kattouf. There are also several companies that buy and sell used equipment.

When it comes to inventory, Ware says that most often ECPs sell their stock for 10 cents on the dollar. If the return hardly seems worth the trouble for inventory, he suggests donating frames to the Lion's Club and taking the tax deduction. Other items that cannot be sold can be donated to your local thrift shop or Salvation Army.

Take extra care, however, when it comes to getting rid of computer equipment. While these items can often be recycled at local computer recycling events, make sure to completely (and permanently) wipe out the hard drives to comply with HIPAA confidentiality laws.

WHAT ABOUT REAL ESTATE?

If you are leasing a space for your business, the timing of closure will be important as you will want to avoid paying the lease until it expires.

"A lot of leases have sublet clauses, so if you can find another renter that is approved by the landlord then you can get yourself off the hook," says Kattouf.

If you own the property and decide to lease it or sell it, be aware that both efforts could take time. Says Kattouf, "The longer it's empty, the more it eats away at your profits." He adds, the commercial rental market is difficult at best right now. EB