REPRESENTING PHYSICIANS: POTENTIAL PERILS AND PITFALLS: LIFE CYCLE OF A PHYSICIAN PRACTICE. a. The medical practice ( Practice )

REPRESENTING PHYSICIANS: POTENTIAL PERILS AND PITFALLS: LIFE CYCLE OF A PHYSICIAN PRACTICE A. GENERAL CONSIDERATIONS 1. Who is your client? Michael F. Schaff, Esq. Elizabeth A. Kastner, Esq. Kim Harvey Looney, Esq. a. The medical practice ( Practice ) b. The physician being admitted to the Practice c. A younger owner Fellowship resident d. An older owner Experienced physician 2. What are your client s goals? a. Advise each owner to have his or her own counsel, accountant and other necessary professional(s) b. Who are the physician s and the Practice s professionals? i. Accountant i Attorney Outside practice management consultants 3. Who can employ a physician? a. Corporate Practice of Medicine Doctrine i. Regulates employment of physicians in some states Unlicensed individuals or entities are prohibited from practicing medicine or employing healthcare professionals

b. Current State Laws i. Physicians cannot be employed by unlicensed entities, general business corporations, or general business limited liability companies (LLCs). Many states allow physicians to form a professional corporation or LLC. B. FUNDAMENTALS/BASIC ISSUES IN PHYSICIAN EMPLOYMENT CONTRACTS 1. The client interview (basic issues). a. What are your client s goals? i. Partnership? Retirement? b. Who is the adverse party and their professionals? C. ANATOMY OF A PHYSICIAN PRACTICE EMPLOYMENT AGREEMENT FOCUS ON BUSINESS/PRACTICAL SOLUTIONS 1. The Parties. a. Employer Name and Address b. Employee Name and Address c. Effective Date 2. Whereas Clause. 3. Term. a. Not required b. Sets the background or stage for the Employment Agreement c. Legally not considered part of the Employment Agreement unless incorporated by reference d. Should set forth legal consideration between the parties a. Commencement date 2

4. Duties. b. Conditions precedent? i.e. receipt of state license or receiving hospital privileges c. Termination date d. Renewal terms e. Evergreen clause (automatic renewal) a. Time commitment i. Full time i iv. Part time Work schedule Night, weekend and holiday call schedule b. Locations c. Compliance with ethical standards of medical profession d. Time commitment for administrative matters e. Compliance with other documents of the Practice, including: i. Ownership agreement i iv. Bylaws, Rules and Regulations of the Practice Bylaws, Rules and Regulations of the hospital(s) or other facilities where Physician is on staff Practice compliance plans and HIPAA f. Ability to work outside Practice during normal hours (moonlighting?) Practice may want to restrict since it may affect Practice s ability to meet group practice definition under Stark Law (75% test). g. Income/revenue generated from sources outside practice: Define outside sources, i.e., expert testimony, lectures, and medical director fees. h. Required licenses, hospital privileges and board certification 3

i. Requirement For Continuing Education j. Billing issues i. Fee schedules i iv. Assignment of fees Completion of medical records and reports Responsibility for accuracy in billing 5. Compensation. a. Overview: What does the Practice wish to reward? b. Be careful that compensation paid to physicians is not structured in such a manner as to violate federal or state physician self-referral prohibition or anti-kickback/fraud and abuse laws or regulations. A sound understanding these laws is essential. c. Compliance with federal physician self-referral prohibition statute (so called Stark Law ) in establishing a physician s compensation must be ensured. Is the Practice structured as a group practice? 42 C.F.R. 411.352. If so, consideration must be given to requirements for a group practice and in-office ancillary services exception when structuring physician compensation arrangements. i. In order to fall within the employee exception to the Stark Law, the following criteria must be satisfied: The employment is for identifiable services. The amount of remuneration under the employment is: Consistent with the fair market value of services; and Not determined in a manner that takes into account, directly or indirectly, the volume or value of referrals by the referring physician. The remuneration is provided under an agreement that would be commercially reasonable if no referrals were made to the employer. 42 C.F.R. 411.357(c). 4

Although not required by the employee exception, it would be advisable to memorialize all employment relations by written agreement. d. Under the Federal Anti-Kickback Statute, there is a safe harbor for certain payments made to a bona fide employee by an employer. 42 C.F.R 1001.952(i). Toward this end, remuneration does not include compensation received by an employee (defined in 26 U.S.C. 3121(d)(2)) who has a bona fide employment relationship with the employer. e. In addition to federal and state physician self-referral prohibition and anti-kickback statute, structuring physician compensation requires an understanding of Medicare reimbursement rates and IRS Unreasonable Compensation Issues f. Equal compensation: i. Advantages: Appears fair Recognizes team commitment Fosters group incentives Disadvantages: Disincentive to individual efforts Leaves unclear what behavior/effort is important Problem if perception of equal work is not maintained g. Revenue-based productivity/formulas: i. Advantages: At first blush appears fair Rewards individual effort Disadvantages: Encourages cherry picking procedures, payors, etc. In a capitated environment wrong rewards 5

Doesn t reward non-patient activity & ignores marketing efforts Favors individual efforts over group efforts Assumes each physician s resource utilization is identical i Issues: How is production measured? (charges, collections or another measure?) How is overhead allocated? Watch Stark Law compliance h. Combination of equal and productivity Can combine the advantages of equal and productivity methods to avoid many of the disadvantages i. Point system (or relative value method) determined by Board or Compensation Committee i. Advantages: Assess actual efforts Will focus on efforts or behaviors to be rewarded Disadvantages: Set up is difficult, must negotiate each activity s value Relatively inflexible, so discourages efforts which were not identified in advance unless there is a discretionary component of the compensation that is not based solely on points, a black box component i Issues: Some points should be left unallocated to reward unanticipated activity Do you measure efforts or do you just measure results? j. Fixed base periodic salary plus bonus 6

i. Advantages: Combines some advantages of equal and productivity methods, and avoids many of the disadvantages Disadvantages: Only rewards patient activity, unless black box component i Issues: How are base salaries set and revised? How is productivity measured? How is overhead allocated? How do fixed costs fit into fixed base salary component? k. Severance/deferred compensation on termination l. Disability compensation i. Definition of disability i Offset for disability insurance payments Accrual of time off during disability? 6. Benefits. a. It s not all about the money b. Medical school graduates are putting more importance on lifestyle issues, flexibility and being part of a team (collegiality). If predicted physician shortages do materialize, these physicians will able to bargain for more than big paychecks. c. Many new doctors will gladly trade $ for more free time, less administrative burdens and greater work/life balance d. Vacation/sick days e. Seminars, conventions, and continuing medical education f. Expense reimbursement 7

i. Automobile payments, gas, tolls & parking i iv. Cell phone Beeper Dues & staff fees (hospital, MCOs, IPAs, societies) v. Moving expenses vi. v vi ix. Maternity leave Subscriptions and journals Pension plan 401(k) x. Entertainment xi. Other fringe benefits g. Disability insurance h. Health (medical, dental, eyeglasses) insurance i. Malpractice insurance i. Occurrence policy Claims-made policy (need for tail) 7. Termination. a. Mutual agreement b. Death c. Disability define d. Cause define e. Without cause 8

8. Restrictive covenants. a. Prohibited activities i. Post-employment practice of medicine as well as solicitation of: Patients Employees Referral sources Conflicting economic interests Medical directorships with competitors Investments in competing facilities Moonlighting b. Enforceability varies from jurisdiction to jurisdiction i. Most states technically enforce restrictive covenants, but some have specific prohibitions against such limitations. Even where they are enforceable, courts are often reluctant to stop a physician from serving patients in another setting. c. Most common standard: a three-pronged test of reasonableness i. Restrictive covenant must be necessary to protect a legitimate business interest of the employer. Patient lists Ongoing patient relationships Restrictive covenant must not impose an undue hardship on the employee. Geographical restrictions must be reasonable Dependent upon area of practice and relevant competitive market Not beyond area from which employer s patients are drawn or territory over which employer s practice extends 9

No larger than necessary to protect employer s practice Duration of any post-employment restraint must be reasonable No longer than necessary to protect employer s practice Long enough for employer to hire and train replacement Long enough for employer to demonstrate effectiveness to patients Longer restriction permissible in medical specialties where number of contacts between patient and doctor are infrequent Scope of restricted activities must be reasonable Restriction must relate to interest sought to be protected Restricting use of patient lists Restricting solicitation of current patients of the employer Patient relationships developed by the employee in prior employment may not be subject to restriction Restrictive covenant should not prohibit the employee/ member from non-competitive areas or fields of practice (e.g. from pursuing activities not engaged in by the employer) Summary. Cannot deprive an employee/member from earning a living in his/her profession Mere adverse financial consequences or personal hardship imposed as a result of a restrictive covenant do not rise to level of undue hardship 10

i Restrictive covenant must not be injurious to the public at large. Right of public to consult physician or health care professional of choice Cannot prohibit patients from independently seeking out employee s services Cannot restrict so as to cause a shortage of medical professionals in either a particular area of specialty or geographic region d. Hospital practice concerns i. Hospitals have unique interests in protecting their inpatient and outpatient programs from physician competition, but be aware of thinly disguised efforts to ensure that the doctor continues to refer patients i Some hospitals are beginning to impose economic conflict of interest policies on their medical staff members. While these have generally been upheld, they have been the subject of numerous legal challenges. In the context of hospital supported physician recruitment, be aware of the Stark prohibitions on practice restrictions which unreasonably restrict a recruited physician s ability to practice medicine in the geographic area served by the hospital. See 42 CFR 411.357(e)(4)(vi). For example, CMS has indicated that a liquidated damage clause which requires a significant or unreasonable payment by the physician leaving a practice under a recruitment arrangement could violate the Stark ban on unreasonable practice restrictions under the recruitment exception. (See preamble discussion in the Stark Phase III Regulations 72 Fed. Reg. 51012, 51053-51054 (Sept. 5, 2007). e. Liquidated damages vs. injunctive relief i. Although remedies are also a matter of state law in restrictive covenant litigation, recognize that courts favor financial solutions over practice restrictions in most cases. 11

9. Patient records and files. a. Ownership of patient records by employer b. Right to copies of patient records and charts (during and after employment) i. HIPAA and State laws Costs 10. Ownership opportunity. a. When will employee be eligible to be an owner? i. Firm offer Nonbinding intent 11. Representations and warranties of the employee. a. Qualifications i. Duly licensed DEA registration b. No restrictions c. No physical or mental disability d. Malpractice coverage for past acts e. No healthcare entity financial relationship or investment f. Provider status never removed from provider panel of MCO or payor for cause g. No pending or threatened malpractice or patient-related litigation h. No pending or threatened investigations or proceedings i. Not convicted of healthcare violation j. Never excluded from Medicare or Medicaid k. Board certification l. Duty to update 12

12. Miscellaneous provisions. a. Choice of law/venue/waiver of jury trial b. Arbitration/mediation c. Confidentiality of practice information d. Return of company property (laptop, medical records, pager) D. BUY-IN TO A MEDICAL PRACTICE 1. The buy-in and anatomy of a purchase or subscription agreement. a. Due Diligence. The Practice must be reviewed from a legal and financial perspective. In connection therewith, consider the following: i. Type of entity General Partnership Unlimited liability Pass-through taxation Professional Corporation C Corporation Limited liability Possible double taxation S Corporation Limited liability Pass-through taxation Limited Liability Company Limited liability Pass-through taxation Governance Documents Corporation 13

Stockholder Agreement (a/k/a Buy-Sell Agreement) Bylaws Employment Agreement Deferred Compensation Agreement Limited Liability Company Operating Agreement (incorporates provisions of Stockholder Agreement, Bylaws, Employment Agreement and Deferred Compensation Agreement Partnership Partnership Agreement (incorporates provisions of Stockholder Agreement, Bylaws, Employment Agreement and Deferred Compensation Agreement) i Documents, agreements and contracts relating to the Practice should be reviewed Certificate of Incorporation / formation Bylaws Operating / Stockholder / Partnership Agreement Organizational minutes Tax returns Payor agreements Hospital agreements Property leases and subleases Equipment leases Employment, consulting, management and other service agreements (owners and non-owners) Agreements with respect to shared facilities and function Purchase and supply contracts 14

Business and operating Licenses Lines of credit Loan and credit agreements, mortgages, promissory notes, security agreements and other evidences of indebtedness Accounts payable Deferred compensation agreements Policies and procedures, including employment manuals and compliance plans Employee benefits agreements 401(k) plan and other pension plans Health, accident, life and disability insurance policies iv. Related Party Transactions Are there any arrangements between an owner and the Practice? Are they at fair market value? Real estate (the medical office) Equipment Employment of relatives Loans from / to related parties 2. The subscription/purchase agreement. a. The subscription agreement is the document that governing when a physician buys, and the Practice sells, an ownership interest of the Practice b. When an existing owner of the Practice sells an ownership interest to a physician (as opposed to the physician buying the interest from the Practice), this is typically referred to as a purchase agreement c. In a corporation, a physician subscribes to/purchases, shares or stock. In an LLC, a physician subscribes to/purchases, membership interests or units. 15

E. OWNERSHIP AGREEMENTS. 1. Major Issues a. Control / decision making b. Transferability of ownership c. Other i. Compensation i Restrictive covenant Dissolution 2. Control / Decision making a. Voting among owners i. One vote per share / membership unit i One vote per owner (regardless of ownership percentage) Classes of owners having different votes b. Directors / Managers i. Number Voting One director / manager, one vote Weighted voting for specific directors / managers Classes of directors / managers i Manner of Election Regular voting Cumulative voting c. Officers i. Title President 16

Vice-President Secretary Treasurer i Authority of duties and responsibilities Limitation on duties and responsibilities d. Committees Committees are optional i. Committee authority and responsibility i iv. List of prohibited activities and list of activities requiring additional director / manager or owner approval Executive Committee or Management Committee The Executive Committee / Management Committee shall be empowered to make all decisions on behalf of the Board and the Practice and to conduct the day-to-day management of the Practice s business Compensation Committee - The Compensation Committee shall be empowered to make all decisions pertaining to the amounts and implementation of physician compensation by the Practice including: Determining total compensation paid and awarded to physician employees of the Practice, including base salary, bonus and perquisites Determining protocol and formulae for calculation of physician compensation and bonus Consideration of physician productivity, business development, corporate management responsibility, research, teaching and charitable work and other criteria in the determination of physician compensation and bonus Determining protocols for reimbursement of travel, entertainment and other expenses incurred Determining physician employee benefit plans and perquisites 17

v. Other committees Quality Control Committee Nominating Committee Business Development Committee Auditing Committee Contract Negotiating Committee e. Owner protective issues - protect minority owners from actions of majority i. Protective mechanisms (may be different for different issues): Right to purchase additional interests to avoid dilution Majority approval of owners Supermajority approval of owners (66%, 75%, other) Unanimous approval by owners Major Decisions: Practice of any new owners or the issuance of any additional shares of stock / membership units of the Practice Determining the number of shares / units to be transferred to a new owner and the cost of such shares / units The sale, lease, encumbrance, or other disposition of all or substantially all of the Practice s assets or the decision to cease, terminate, dissolve, or liquidate the Practice or the Practice s business activities The amendment or modification of the Certificate of Incorporation/formation or Bylaws of the Practice The termination, amendment, or modification of any of the terms and provisions of the Shareholders / Operating / Partnership Agreement The amendment or modification of any owner s Employment Agreement or Deferred Compensation Agreement with the Practice 18

The purchase, acquisition, combination or other affiliation by or of the Practice with any medical practice or business entity The establishment or modification of any employee retirement plan or benefit program of any nature maintained by or on behalf of the Practice The creation, incurrence, or assumption of any indebtedness for borrowed money, or any indebtedness which constitutes the deferred purchase price of any property or assets in an amount exceeding a specified dollar amount The authorization of any borrowing or other obligation which requires the personal guarantees of the owners of the Practice The establishment or change in the criteria of the allocation of the compensation available to be paid to the owners The reduction in the amount or scope of coverage of any insurance policy maintained by the Practice The addition of a new medical office utilized by the Practice The hiring, firing, and discipline of and compensation and fringe benefits offered to physician employees of the Practice Hospital and payor contract negotiation and execution Check signing in amounts in excess of $ Capital calls Related party transactions f. Owner protective issues - Protect founding owners from actions of majority i. Protective mechanisms Majority approval of owners and founding owners on all decisions 19

Veto right on Major Decisions (See list of major decisions above) 3. Transferability of Ownership a. Generally i. Is sale / assignment / transfer of an owner s interest permitted or prohibited? Right of first refusal on sale of ownership interest Note: Owners must be licensed professionals i Option to redeem / repurchase b. Triggers for repurchase obligation i. Attempted voluntary transfer Death i Disability. What is the definition of Disability? Consider coordinating this with the disability insurance policies. Owners specify definition - the inability of an owner to satisfactorily perform his or her regular employment duties during any period of ( ) days out of ( ) continuous days or if the Practice determines that such disability will continue for such period. Any Disability occurring within ( ) days of a previous disability will be considered a continuation of, and continuous with, the first disability Board to determine Insurance policy definition iv. Termination of employment for Cause (the definition in the Stockholders Agreement must mirror the definition in the Employment Agreement) v. Termination of employment by the Practice for non-cause reasons vi. v Voluntary termination (retirement or withdrawal) Bankruptcy 20

vi Involuntary lifetime disposition c. Valuation of ownership interests i. Certificate of agreed value Valuation formula Book value Multiple of corporate earnings Multiple of compensation Other i iv. Appraisal method Different valuations may apply for different termination reasons v. Allocation of buy-out amount Purchase of ownership interest vs deferred compensation De minimis price (book value) with balance as deferred compensation Tax treatment Deferred compensation d. Insurance funding of death and disability buy-outs i. Costs of policies; who bears cost? i iv. Tax issues Redemption vs. cross purchase (alternative minimum tax concerns) Disability buy-out insurance Definition of disability Waiting period Payment terms 21

v. Distinguish disability income insurance e. Payment terms and security i. Entire buy-out amount upon purchase or option to pay in installments Terms of promissory note Interest rate Payment period Events of default i Security Pledge of ownership interest Personal guaranty Security interest or lien on assets Other f. Voting rights upon triggering event i. Proxy to other owners upon triggering event Automatic resignation from manager, director, officer and trustee positions 4. Employment and compensation of owners. In a corporation, the employment and compensation related provisions are usually set forth in an employment agreement. In a limited liability company, the employment and compensation related provisions are usually set forth in the Operating Agreement. a. Discretion of the Practice in compensation matters - should it be limited? (who makes decisions) i. Board of Directors / Managers i Executive or Management Committee Compensation Committee 22

iv. Recusal of affected owners (you don t vote on your own compensation) b. Duties of owner c. Termination of employment i. Voluntary withdrawal / retirement by an owner - on at least ( ) days advance written notice to the Practice i iv. Termination by the Practice without cause - on at least ( ) days advance written notice to the owner Termination by the Practice for cause Disability Definition of disability Owners specify definition Board to determine Insurance policy definition Waiting period Benefits during disability (salary, etc.) Disability Income insurance Death 5. Restrictive covenant and confidentiality during and after employment a. Similar to restrictive covenants in the non-owner employment context, the enforceability of these provisions is mostly a function of state law. See above. b. Geographic restrictions c. Term (months / years) of restrictions d. Enforceability e. Precise restrictions i. Services 23

i iv. Solicitation of patients / providers Solicitation of employees Solicitation of referral sources v. Opening office vi. v Use of name in advertising Hospitals 6. Dissolution provisions / breakup a. Application of restrictive covenant b. Retention of locations, phone numbers, employees c. Allocation of continuing buyout obligations of past owners d. Provisions for debts of the Practice F. PRACTICE CLOSURE/DISSOLUTION 1. General Considerations. When a practice ceases operations, there are numerous business and legal issues to consider. a. Formal legal dissolution of Practice b. Steps to shut down business c. Post-closure considerations 2. Practice Dissolution. Below is a summary of typical steps involved in a Practice dissolution. Dissolution is governed largely by State laws and regulations. a. Plan of Liquidation. In contemplation of the dissolution of the Practice, a plan of liquidation may be prepared to set forth the steps to be taken for the Practice s complete dissolution and liquidation and the winding up of its affairs. The plan should not provide for the distribution of assets to the shareholders/members of the Practice without first making adequate provisions for the payment and/or satisfaction of all known obligations of, and claims against, the Practice. b. Corporate Resolutions. Need to check both state law and Practice governing documents to determine required vote/action to dissolve. 24

For example, state law may only require 2/3 shareholder vote, but Practice governing documents may require a higher percentage. c. Notice Filings. Upon the adoption of the above corporate resolutions, a certificate of Dissolution form may need to be filed with the Secretary of State. The Certificate may need to be accompanied by certificates and/or releases from various governmental agencies which evidence that the Practice has paid any specified taxes or contributions due and owing, such as: i. Department of Taxation i iv. Department of Job & Family Services/Medicaid Bureau of Workers Compensation County Treasurer of each county in which the Practice has taxable personal property d. Post-Dissolution Events. Below are typical post-dissolution actions: i. Newspaper publication of the Practice s dissolution. i Notice of dissolution to known creditors Notice of dissolution to the IRS 3. Practice Closure -- Other Considerations. In addition to the formal dissolution, there are other steps to take (see attached sample closure checklist), including: a. Records storage and retention b. Termination of payer contracts (Medicare by filing 855B; Medicaid-state specific; commercial per terms of payer contract) c. Patient notification (follow state and/or AMA ethical guidelines for patient notice upon practice closure/termination of physicianpatient relationship) G. PHYSICIAN-HOSPITAL INTEGRATION MODELS 1. What is Driving Integration? a. Declining reimbursement and increasing costs b. Desire to gain greater negotiating leverage with payers 25

c. Health care payment reforms such as shared savings, payment for quality and bundled payments d. Focus on reducing costs, increasing efficiency and improving quality of care e. For physicians: i. Uncertainty and fear of being left out of integrated or accountable care networks i Costs of necessary technology and need for capital to fund debts, new equipment, etc. Lifestyle considerations f. Physician workforce shortages coming g. Change from volume focused reimbursement to value focused reimbursement 2. How do you Create a Sustainable Relationship? a. Shared governance b. Aligned compensation goals 3. Barriers to Physician-Hospital Integration a. Physicians have to trust hospitals b. Physicians desire to maintain autonomy c. Physicians desire to be heard and to have governance power H. TYPES OF INTEGRATED MODELS 1. Hospital (or hospital subsidiary) Employment of Physicians 2. Accountable Care Organizations/Physician Hospital Organizations 3. Clinical Integration 4. Foundation Model 5. Professional Services Agreements/Physician Enterprise Model 6. Co-Management Arrangements 26

7. Equity and Non-Equity Joint Ventures 8. Gainsharing 9. Independent Practice Associations (IPAs) 10. Medical Directorships 11. Call Coverage Arrangements I. PRIMARY LAWS THAT AFFECT INTEGRATED MODELS 1. Federal Anti-Kickback Statute 2. Stark Law 3. Tax-Exemption Laws 4. State AKS Laws 5. State Mini-Stark Laws 6. State Fee-Splitting 7. State Corporate Practice of Medicine Laws 8. Medicare Reassignment Rules 9. Medicare Anti-Markup Rules 10. IRS Requirements for Bond-Financed Hospital Facilities END OF OUTLINE 27

Exhibit A Sample Planning Checklist for Closure of Practice Below is an outline of steps that would need to be taken to close Practice: Patient notification. If the physicians will still be available to see their existing patients at their new practice location, then (unless State Law has a different requirement) all patients treated by the physicians within the past three (3) years should be notified at least thirty (30) days in advance of Practice s closure and move to a new practice location. This notice should include the physicians new practice contact information. If, on the other hand, the physicians will not see their current patients once they start their new practice (i.e., the physicians will be terminating the physicianpatient relationship), then need to follow applicable State requirements (if any), and if no State requirements, follow AMA and State ethical guidelines for termination of physician-patient relationship. Medical and Administrative Records storage. Safe and secure storage and handling of all patient and administrative (e.g. employee) records must be ensured. Where and how will these records be stored? Terminate Medicare/Medicaid provider agreements and other commercial payer contracts. Practice will need to terminate it Medicare Part B billing number by voluntarily terminating its enrollment and completing certain sections of CMS form 855B. State Medicaid will also need to be notified of Practice s closure. All commercial payers contracts will also need to be reviewed to determine termination rights and procedure. Terminate or transfer service contracts. Each contract in which Practice provides services (e.g. hospital contract) and each contract in which Practice receives any items or services (e.g. medical supply vendor contracts, janitorial services contract) will need to be reviewed to determine Practice s right to terminate the contract. Terminate or transfer governmental permits, certifications, registrations. All federal, state or local permits, certifications or registrations (e.g., infectious waste, Bureau of Workers Compensation) held in the name of Practice will need to be reviewed to determine requirements upon Practice s closure. Equipment and Furniture. The contract for each piece of equipment or furniture leased by Practice will need to be reviewed to determine Practice s right to terminate the lease. For equipment and furniture owned by Practice, arrangements will be need to be made to sell or otherwise dispose of the equipment and furniture. 28

Building Lease. The terms of Practice s building lease will need to be reviewed to determine Practice s right to terminate the lease. Drug Disposal. Disposal of any drugs maintained by Practice must be appropriately handled. Local DEA and State Pharmacy Board may need to be contacted to determine process for disposal. In addition, Practice should be sure to destroy all prescription pads after the last patient is seen at its office. Professional Liability Coverage. Practice s professional liability coverage carrier could be contacted to determine what needs to be done regarding tail coverage. State Medical Board. The State Medical Board should be contacted to notify them of the closure of Practice and change in practice location of each Practice physician. Billing and Collection. Arrangements will need to be made for billing and collection services to continue after practice closure for at least 90 days. For example, to the extent billing and collection services are currently done by Practice employees, arrangements will need to be made for such employees to continue such services on a contracted basis after closure or, alternatively, Practice will need to hire an outside company to perform post-termination billing and collection. Pay Creditors; Dissolve Practice. Subsequent to the practice closure, Practice will need to take corporate action and file documents with the Secretary of State and governmental agencies (such as the Department of Taxation) providing notice of its dissolution. This action can only be taken after Practice determines, and takes action to resolve, any outstanding corporate debts. Also, any bank lines of credits in the name of Practice (including ones that are personally guaranteed by any Practice physicians) must be addressed before the company can dissolve. Non-Physician Personnel. Determine if any non-physician employees or independent contractors of Practice have a written contract with Practice. If so, the contract must be reviewed to determine Practice s right to terminate the contract. Arrangements must also be made to terminate the employment of Practice s at-will employees. Benefits due any such employees at termination of employment should be timely paid. 29