Breaking Up is Hard to Do: Dividing Medical Practice Assets

medical-series-11-124837-m.jpg Ending a professional relationship is not easy for anyone. But the demise of a healthcare business relationship among doctors often involves more risks, greater headaches, and more issues to tackle than non-healthcare businesses. Dividing up medical business assets is, for example, much more complex and involved than simply drawing a line down the middle of the office. Federal laws and regulations affecting healthcare providers pose significant business risks and adverse legal ramifications where the division of assets is not done properly. If you and other physician owners are leaving a practice, it is critical to ensure any division of big ticket items — e.g., medical equipment leases, practice branding, and electronic health records – is done in a legally compliant manner.

Most often, medical equipment in physician practices is leased. The leased status creates potential complications if multiple owners want a particular item or if, on the other hand, no one wants the accompanying financial obligations. Whichever side of the coin your practice breakup falls on, medical practice owners should take into account the depreciating value of the equipment when determining the division of assets. Sometimes, outstanding liabilities or personal guarantees that equipment may be subject to are mistakenly overlooked in the process of dividing assets. The division process should begin with an experienced consultant who can aid in the necessary number crunch and ensure fair and balanced allocation of value and financial responsibilities that attend leased equipment assets.

While a practice’s name and brand may not be easy to value with precision, the inherent value should be weighed and factored into the division of assets. As with any business, the reputation of a brand or identity is a key to success. A medical practice’s good reputation carries critical patient confidence, which is a valuable asset for any practitioner. When physicians choose to work in the same field and geographic area, the division of such an asset is problematic and may raise difficult business and legal issues.

Another important part of a medical practice breakup is of course patients and patient records. While a patient ultimately decides who he/she 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 rich with practical and legal difficulties. For example, a practice’s electronic health records software may not be able to separate patient records by individual physicians. In such a case, physicians may have to receive a copy of all the practice’s patient information in order to retrieve their own group’s data. Any movement or changed access to protected health information triggers important considerations and significant risks under HIPAA. The dissolution of a medical practice should be accomplished with an agreement that will is clear and specific about what information and records can be used by any physicians and should include appropriate confidentiality provisions.

Unfortunately, ending a medical business relationship is never as simple as just walking out the door. But there is a correct way to do it, to minimize risks and protect patients. Our business and healthcare law firm represents healthcare providers and professionals in Georgia and South Carolina with regard to business dissolution. Contact us at (404) 685-1662 (Atlanta), (706) 722-7886 (Augusta), or info@ksllawfirm.com to schedule a consultation today.

*Disclaimer: Thoughts shared here do not constitute legal advice.

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