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Due Diligence Essentials: Legal Checklist for Selling a Plastic Surgery Practice

Due Diligence Essentials: Legal Checklist for Selling a Plastic Surgery Practice

Due Diligence Essentials: Legal Checklist for Selling a Plastic Surgery Practice

Introduction

Selling a plastic surgery practice is a multifaceted endeavor that involves various legal intricacies. One of the most critical phases in this process is due diligence. Due diligence is the comprehensive examination of all aspects of your practice to ensure a smooth and legally sound transition. In this blog post, we’ll provide you with a legal checklist of essential due diligence items when selling your plastic surgery practice to help you navigate this complex journey.

Verify Regulatory Compliance

Compliance with healthcare regulations is paramount when selling a plastic surgery practice. Failing to adhere to these regulations can lead to legal issues and jeopardize the sale. Here are some key regulatory aspects to verify:

Licensing and Credentialing: Ensure that both you, as the seller, and the buyer, if applicable, possess the necessary licenses and credentials to practice plastic surgery in your state.

HIPAA Compliance: Review your practice’s compliance with the Health Insurance Portability and Accountability Act (HIPAA) regulations, particularly concerning patient data security and privacy.

Stark Law and Anti-Kickback Statute: Ensure that any financial arrangements related to the sale, such as compensation agreements, do not violate federal laws prohibiting improper financial relationships and referrals.

Corporate Practice of Medicine Doctrine: Some states restrict the corporate practice of medicine, which may impact the structure of the sale transaction. Verify compliance with your state’s laws in this regard.

Engage a healthcare attorney to conduct a thorough regulatory compliance assessment and address any identified issues before proceeding with the sale.

Review Legal Documents and Agreements

A crucial part of due diligence is the review of all legal documents and agreements associated with your plastic surgery practice. This includes but is not limited to:

Lease Agreements: If you lease practice space, review your lease agreement to assess whether it allows for lease assignment or transfer to the buyer. If not, negotiate lease terms with your landlord.

Employment Agreements: Examine employment agreements for any non-compete clauses or restrictions that may affect the sale, especially if your staff includes healthcare professionals.

Vendor Contracts: Review contracts with vendors and suppliers to determine which agreements are transferable to the buyer.

Insurance Policies: Assess your malpractice insurance policy, including any tail coverage options and their impact on the sale.

Patient Consent Forms: Ensure that all patient consent forms, medical records release forms, and related documents are up to date and compliant with relevant regulations.

A thorough review of these legal documents will help identify any contractual obligations or potential issues that need to be addressed during the sale.

Evaluate the Financial Health of Your Practice

An in-depth examination of your practice’s financial health is essential for both you as the seller and the prospective buyer. Key financial due diligence items include:

Financial Statements: Review your practice’s financial statements, including income statements, balance sheets, and cash flow statements, for the past several years.

Tax Returns: Examine your tax returns and ensure they accurately reflect your practice’s financial history.

Accounts Receivable: Assess your accounts receivable, including the aging of outstanding invoices, to understand the status of unpaid bills.

Billing and Coding Practices: Verify that your billing and coding practices are compliant with industry standards and regulations to avoid potential issues with payers.

Fee Schedules: Evaluate your fee schedules to ensure they align with industry norms and are consistent with your specialty.

It’s crucial to provide transparent and accurate financial information to the buyer during the due diligence process to build trust and facilitate a successful transaction.

Review Employee and Staff Matters

Employee and staff matters can have a significant impact on the sale of your plastic surgery practice. Key considerations include:

Employee Agreements: Review employment agreements to assess the terms and conditions for staff members, including compensation, benefits, and non-compete clauses.

Employee Handbooks: Ensure that your employee handbook is up to date and compliant with labor laws and regulations.

Transition Plan: Develop a transition plan for your staff, addressing their roles and responsibilities during the sale process and after the transition to the new owner.

Communication: Communicate openly and transparently with your staff about the sale to minimize disruption and maintain a positive work environment.

Addressing employee and staff matters proactively will help ensure a smooth transition for both your team and the buyer.

Evaluate Patient Records and Transition of Care

The management of patient records and the transition of care to the new owner are critical aspects of selling a plastic surgery practice. Here’s what to consider:

Patient Records: Ensure that all patient records are complete, accurate, and compliant with HIPAA regulations. Determine how patient records will be transferred to the buyer and establish a clear process for record management.

Patient Notification: Develop a plan for notifying patients about the practice sale, providing them with clear and transparent communication about the transition of care and their rights to choose their healthcare provider.

Continuity of Care: Plan for the seamless continuation of patient care during the transition. Consider how appointments, follow-up care, and emergency situations will be managed.

Provider-Patient Relationships: Address how the buyer will handle relationships with patients who may have a preference for the selling practitioner. This may involve introducing patients to the new provider or respecting patient choices.

Working closely with legal counsel experienced in healthcare transactions will help you navigate patient record management and ensure compliance with patient privacy and healthcare laws.

Conclusion

Due diligence is a critical phase when selling a plastic surgery practice, as it enables both the seller and the buyer to assess the practice thoroughly and address any legal, financial, or operational issues. By following this legal checklist for due diligence, you can navigate the complexities of the process with confidence and ensure a smooth and legally sound transition. Engaging experienced legal counsel with expertise in healthcare practice sales is essential to protect your interests and ensure compliance with all relevant laws and regulations. With proper due diligence, you can maximize the value of your practice and facilitate a successful transition for all parties involved.

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