The Biggest Legal Mistakes Chiropractors Make When Selling Their Chiropractic Practice

Each year chiropractors make the decision to finally leave practice.  And while their focus is naturally on the future, there are a few details that must be taken care of in the present before that future transition can be realized. If not, these serious mistakes can cause significant financial damage that can follow them for years to come.

If you are thinking about selling your chiropractic practice or some type of transition, make sure you handle these details before heading off to the beach, into retirement or out of practice:

Mistake 1        Abandoning Patients

Once a chiropractor has established a physician-patient relationship, the chiropractor must not “abandon” the patient. Abandonment can become a problem when a DC closes a practice and it’s one that doctor’s rarely consider (primarily because they’ve never done it before). If a chiropractor closes their chiropractic practice without prior notice to patients, they can be charged with patient abandonment, which can have some hefty consequences.  Legally, abandonment is typically defined as “the unilateral severance of the professional relationship…without reasonable notice at a time when there is still the necessity of continuing medical attention” [Lee v Dewbre, 362 SW2d 900, 902 (Tex. Civ. App.‑Amarillo 1962, no writ)]. To prove abandonment, a physician must fail to provide “an adequate medical attendant” and also fail to give adequate notice. At this point, the chiropractor could be charged with negligence by their patients.

  • Action Step     Fortunately, avoiding patient abandonment is not difficult. Chiropractors should give the entire active patient load reasonable notice before closing the office doors and leaving the area.

In addition, DC’s should check the laws of their particular state to see if any specific types of notices or additional notifications are required. Texas, for example, has a rule requiring physicians to post a sign in their offices, publish a notice in two newspapers, send letters to all patients seen within the last two years, and furnish evidence thereof to the medical board.

Mistake 2        Lease Assumptions

Many chiropractors make the mistake of assuming that the lease of their space will transfer smoothly and seamlessly to the buyer of their practice.  Certainly, this can be the case and it does happen some of the time.  After all, a landlord is typically most concerned that the space be occupied by a paying tenant — and the buyer of your practice certainly would be one.  However, landlords may also be concerned with other items in respect to their space and your buyer.  For example, if your current rent is below market-average, a landlord may want to increase it for your buyer and not have them simply assume the same lease terms that you have.  Additionally, the building owner or management company may want to run a credit check or verify your buyer’s financial ability to be the new tenant prior to approving the lease transfer.  Finally, there are some who simply don’t want to let you out of the lease – even if you are selling the business – and want you to personally guarantee that the lease will be paid or they want you to remain on the lease. Obviously, any or all of these scenarios can quickly jeopardize or even kill your chiropractic practice sale.

  • Action Step     Don’t assume that your landlord, management company or building owner will joyfully let you out of your lease contract or assign over the lease to your buyer. Instead, you should examine the lease prior to speaking to the landlord to see if there are any clauses that prohibit you from assigning the lease or giving notice to leave. If your lease appears to be non-favorable, it’s best to contact with a commercial real estate agent, attorney or transition consultant to discuss these issues before they squash your sale!

Mistake 3        Violating Noncompete Clauses

A non-competition clause (also called a “covenant not to compete”) prohibits the departing chiropractor from competing with either an existing practice or the purchaser of a practice, for a specific time and in a specific area. DC’s who don’t go until “full” retirement often overlook these clauses when they leave their former practice and take on part-time or vacation doctor work. Consequently, they also sometimes find themselves on the receiving end of injunctions and lawsuits.

  • Action Step     Carefully write and adhere to all non-compete clauses and have them reviewed by a local attorney. Just as you want a non-compete clause to protect your interests, so does your buyer.

Mistake 4        Malpractice Messes

Chiropractors don’t often think about their malpractice coverage (that’s a good thing) and so, leaving practice you may forget about it and continue to pay for it when the coverage may no longer be necessary (bad thing) or worse, you may believe you are covered when you are not (really bad thing).

  • Action Step     Before you leave practice, be sure to inform your malpractice carrier of the fact that you are retiring and how the cancellation of your malpractice policy needs to be handled.  There are generally two types of coverage: claims made and occurrence.  Occurrence coverage is the most comprehensive form of coverage (and also the more expensive). Upon cancellation, occurrence coverage continues to provide coverage for future claims based on conduct that took place during that policy term. On the other hand, Claims made policies provide coverage only so long as the insured continues to pay premiums for the initial policy and any subsequent renewals. If one is insured by a claims-made policy for five years and stops paying premiums, coverage ceases for any cases that the company did not accept during the policy term. The bad news is that means that you could in retirement and get sued and you could have no coverage in effect. To lock in coverage forever under an Occurrence policy, you must purchase what is known as “tail coverage” – which will then protect you while you are retired.

Mistake 5        Medical Records Storage Slips

When a chiropractor relocates or retires, it’s tempting to leave the records with another chiropractor under some kind of informal agreement or to just assume that they will handle the records appropriately. Unfortunately, a lack of careful preparation in this regard can cause your transition plans to backfire bigtime if the new chiropractor discards the records, gets tired of storing the records or closes his or her practice and access cannot be gained to your records.  As you can imagine, if you have no written agreement in place, you could be left liable for their bad behavior.

  • Action Step     You should have a contract that clearly delineates responsibilities to store records (including protection from destruction), release them in response to subpoenas, retain them for required periods, and provide access in case there is a need to respond to a suit, audit, complaint, or so forth. That way, if anything happens to those records, it is no longer your responsibility, but theirs.

MORE THOUGHTS ON THE MATTER…

Unfortunately, there are many more bad mistakes chiropractors can make when deciding to transition their chiropractic practice – and most of these can be prevented long before you ever leave.

In fact, one of the biggest goofs you can make is to navigate your sale without any guidance. (Technically, not a legal mistake, but it can certainly lead to all 5 of these and more).  Likely, you’ve never done this before and unlike the other mistakes you’ve made in your life, there’s little room to recover from this one!  In short, get help.  And sooner, is much better than later.

If you are looking to transition or retire, consider our upcoming webinar:  Sell, Switch or Slow Down: How to Maximize the Value of Your Chiropractic Practice Sale or Transition and Minimize Costly Mistakes so that you can not only avoid mistakes, but maximize the value of your chiropractic practice on your way out!

 

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