Selling a Medical Practice (How Sellers can Minimize their Liability)
Do you own and operate a medical practice in California? If you are considering selling your professional practice, it is imperative that you know how to effectively navigate the transaction. Minimizing your liability risk—both before and after the sale of the medical practice—is crucial. In this article, our Fremont lawyer for selling a medical practice provides an overview of strategies sellers can use to minimize their risk of liability with selling a medical practice in California.
How to Minimize Your Liability Risk When Selling a Medical Practice in California
1. Clearly and Accurately Disclose the Financials of the Medical Practice
It is crucial that sellers clearly and accurately disclose the financial position of the medical practice to prospective buyers. If material misrepresentations are made regarding key financial matters, a seller could potentially face liability. Financial transparency is important.
2. Send Timely Notice of the Sale to Active Patients
Active patients should be informed about the sale well in advance to ensure continuity of care. As the seller, you should provide clear communication about how the transition will affect their treatment and how they can access their medical records. Failure to notify patients in a timely manner could result in a liability risk.
3. Obtain Patient Consent Before Transferring Any Records
TheHealth Insurance Portability and Accountability Act (HIPAA) protects the sensitive medical records of patients. You cannot lawfully transfer medical records to another party—even a buyer of your medical practice—without patient consent. Get clear, explicit consent from patients.
4. Disclose Any Known Legal or Regulatory Issues
Sellers need to be prepared to disclose known issues. Indeed, full disclosure of any ongoing or past legal or regulatory issues is crucial to protect yourself against future claims. Buyers have a right to know about malpractice lawsuits, compliance violations, or outstanding investigations.
5. Use a Comprehensive, Professionally Reviewed Purchase Agreement
A detailed and legally sound purchase agreement protects both parties and minimizes misunderstandings. You should ensure the agreement outlines the terms of the sale, responsibilities for liabilities, and any contingencies. The contract should be drafted by a lawyer who has the experience needed to represent the seller of a medical practice in California.
6. Notify the California Medical Board of the Change in Ownership
The California Medical Board must be notified of the sale to comply with state regulations. As the seller, you should be sure to submit all necessary documentation to avoid penalties or delays in the ownership transfer.
7. Review Medical Malpractice Insurance to Confirm Adequate Coverage
Finally, sellers should review their medical malpractice insurance policy to confirm that it provides adequate coverage through and after the sale. You may want to consider purchasing tail coverage to protect against claims arising from events that occurred before the transfer of ownership.
Get Help From a California Business Lawyer for Selling a Medical Practice
Lynnette Ariathurai is a California business lawyer with the skills, knowledge, and experience to help business owners minimize liability in the sale of a medical practice. Contact us today for a completely confidential, no obligation consultation. We represent clients throughout the region, including in Fremont, Newark, Hayward, East Bay, Milpitas, Union City, San Leandro, San Jose, and Santa Clara.