Practice Break-Ups/Ownership of Patient Records
Journal of the Michigan Dental Association (July 2018)
QUESTION: I have practiced with a partner for several years. We are the only shareholders in a professional corporation. We never put in place employment agreements, a shareholder agreement, or any other contracts between us or the PC. We recently have had disagreements regarding the operating of the practice. My partner has now notified me that he is going to break off on his own. He has set up a new practice a mile away, has notified patients that their records will be transferred to this new location and that he will continue treating them there. Can my partner just pick up and leave, taking the dental records and patients with him?
ANSWER: The absence of employment agreements and a shareholder agreement dictating the rights and duties of the shareholders and the PC make this a difficult situation. An employment agreement would contain termination provisions including a requirement that your partner give you a certain amount of written notice in advance of the termination of employment. An employment agreement and /or a shareholder agreement would typically also contain a covenant not to compete making clear whether and when your partner can set up a competing practice. An issue you have not mentioned (and one that will come up sooner or later) is what your partner is due for the stock in the PC, what the PC's obligation is to repurchase it, the price, how the price is to be paid, etc. These buy-sell terms would have also been addressed in a shareholder agreement. The absence of these necessary contracts mean that your partner is free to leave without notice and that the two of you will likely be disputing each other's actions going forward without any reasonable means (that these contracts would have provided) of resolving these issues.
Unlike the issues described above, the ownership of patient records is set forth in the law. The PC is the legal owner of the paper or other electronic media on which any patient’s records are stored. As the owner of the records, the PC is the only one that may legally transfer the records. Absent the agreement of the PC (subject to the right of the patients themselves to obtain these records – which will be discussed below) your partner cannot legally remove these records (physically or electronically).
What most often happens in these situations is that the departing dentist will notify the patients of the move or the patients will inquire where the departing dentist is now practicing. In either event, if a patient desires to continue treating with the departing dentist, that patient must request a copy of his/her records. Upon such a request both Michigan and Federal law would require the PC to make available a copy of the record if the patient is willing to pay a fee for the production of the copy. The fee that the PC may charge for producing the copy of the patient’s records is dictated by Michigan’s Medical Record Access Act. This link will take you to a listing of the current fees.
Providing for an orderly procedure at the outset of the relationship in an employment agreement is the only way to ensure the proper continuity of care for patients. This will also limit to the extent possible costly litigation to resolve disputes and claims between you and your partner(s).
About Daniel Schulte ...
Daniel J. Schulte has more than 20 years experience representing small business owners in all aspects of transactional, operational and regulatory legal matters. A Certified Public Accountant as well as an attorney, Dan is the firm's managing partner and chair of the Health Care Practice Group.
He regularly advises and counsels concerning the formation of business entities, the preparation and review of business and corporate contracts, the purchase and sale of ownership interests in businesses and/or their assets, and the purchase, sale and leasing of real estate. A significant component of Dan’s practice involves representing healthcare professionals in state regulatory matters, including disciplinary and other licensing disputes with the State of Michigan, and federal regulatory matters including fraud and abuse issues. He also counsels on the anti-kickback and Stark laws, preparation of compliance programs, and responding to and negotiating settlements in connection with government enforcement actions.
Dan is well-known for his knowledge and experience in the area of association law, and is primarily responsible for the firm’s representation of the Michigan State Medical Society the Michigan Dental Association and the Michigan Osteopathic Association. His work related to association law includes the drafting and review of new legislation and the preparation of Amicus Curiae Briefs for filing in Michigan’s Supreme Court and Court of Appeals on a variety of topics affecting health care professionals practicing in Michigan.
Dan writes articles and presents frequently before legal, medical and business groups on a variety of topics, including HIPAA, the HITECH Act, the Stark Law, the fraud and abuse laws, health care compliance plans, business succession planning, asset protection, and estate and tax planning.
He is ranked among The Best Lawyers in America®, and has been named a “Michigan Super Lawyer” by Thomson Reuters.
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