Risk Management Checklist When Preparing to Close a Psychiatric Practice

Senior Risk Management Consultant, Risk Management Group
AWAC Services Company, a member company of Allied World


Preparing to close a practice due to planned retirement or personal reasons, such as illness, joining another practice or starting employment at another facility can be stressful. Regardless of the reason to close a practice, there are legally required business practices and risk management strategies to consider.

Closing a Practice Checklist

Packing officeStart by creating an office practice checklist to make sure you cover the legal, insurance and business practice considerations needed to close a business. The checklist should provide the needed tasks, date each item is completed and any other relevant information, such as key contacts.

Staff Notification

  • Notify staff as soon as possible and review the plans for closure as the staff will be instrumental in working with patients during the transition.
  • Consult an attorney to ensure obligations to staff are met, such as payroll and employee benefit plans, continuing employee health insurance coverage and compensating staff for unused employee benefits such as vacation and/or sick time.

Patient Notification

  • Once plans are finalized for closing the practice, start informing your active patients of the plan and timeframe during their appointments so you can respond to their concerns and questions.
  • Send a notification letter to patients – allow a minimum of 30-day notice for continuity of care, if possible. For planned closings such as retirement, ideally provide patients with a 90-day notification of office closure.
  • Check your state regulations regarding patient notification of the office closure, such as sending letters to patients previously seen in the practice for a defined timeframe prior to closure, such as the last two years and/or posting the office closure in the newspaper.
  • Include in the notification letter:
    • Date of closure
    • Referral options (preferably three, such as the patient’s health insurer, county mental health department or local clinic)
    • Encouragement that the patients find a new provider as soon as possible as it may be difficult to find a provider in some locations and they may need to be placed on a waiting list
    • Details on how to obtain a copy of the medical records or have them transferred to the new psychiatrist. Include the deadline to request a copy of their record that is several weeks prior to your actual closure date and inform patients of the length of time records will be retained prior to destruction.
    • A HIPAA-compliant medical record release authorization form for patients to obtain/transfer their records
  • Send the notification letter via certified mail, return-receipt requested in addition to regular mail or hand the letter to the patient at the time of appointment. Retain a copy of the notification letter in the patient’s record and document if the letter was provided directly to the patient.
  • Once the proper consent is received, make a copy of the patient’s medical record and send to the individual/provider designated on the record release form.
    • You may charge reasonable fees for copying and mailing the record; however, there may be specific amounts designated by statute in your state. It is important to check your state’s requirements.
  • Provide a prescription for an appropriate supply of medication prior to the office closure; the prescription is generally for 30 days and should be no more than 90 days, depending on your state regulations.
  • Cancel any standing appointments scheduled after the date of office closure with documentation of patient notification of the cancellation.

Notification to Other Parties

  • Your insurance broker to let them know your plans and ensure the necessary steps for continued insurance coverage after you retire or change practices
  • Payors including commercial health insurance companies, Medicare and Medicaid
  • State and federal regulators (e.g., DEA, state licensing board)
  • Medical professional insurance carrier or insurance broker
  • Other insurance carriers (e.g., general liability/business owner’s, worker’s compensation, disability, cyber, property) or insurance broker
  • Vendors and contracted service providers
  • Landlord; be sure to check and follow the time frame for notification in the lease agreement
  • Professional associations (e.g., APA/AACAP and state district branch)
  • Utilities
  • Hospital and clinic affiliations
  • Referral sources
  • Magazine and other subscription cancellations
  • The local post office and delivery services of change of address

Consult Legal Counsel and an Accountant Related to:

  • Dissolution/sale of business activities
  • Tracking and filing tax information
  • Retention of business/tax records that are required by state and federal law
  • Creation of a plan for tracking outstanding accounts receivables
  • Paying all outstanding bills (e.g., rent, utilities, staff payroll)
  • Naming an Administrator to oversee practice information in the event of death/disability

Other Considerations

  • Select a date well in advance of the office closure to stop accepting new patients.
  • If you are leaving a practice or another psychiatrist is assuming your practice, it is important to involve your attorney in the contract discussions. Be certain that you will have access to your patients’ medical records should you later be named in a claim or lawsuit after you leave the practice/retire.
  • If the patient has not identified a new provider, call the patient and send a written reminder to him regarding the importance of ongoing care and treatment and the time frame for notifying you of the new provider. Maintain a copy of this correspondence in the patient’s medical record.
  • Set up a medical record retention and destruction plan pursuant to state and federal regulations:
    • Retain medical records in a safe, fireproof, secure environment for the length of time required by your state regulations
    • Properly destroy medical records and other sensitive information in a HIPAA-compliant manner or obtain a business associate agreement for vendors retained to maintain or destroy records
    • Create a log listing all destroyed records that includes patient’s name, treatment date range, date of record destruction, manner of record destruction. Maintain the log in a HIPAA compliant manner (e.g., locked cabinet or encrypted computer)
    • Create a diary system for the future destruction of retained medical records after the statutory retention period
  • Establish a process for the sale/removal of all office equipment and supplies, including wiping all equipment, such as computers, copiers, etc., of HIPAA sensitive information.
  • Ensure proper destruction of prescription pads and unused medications.
  • Update office email, voicemail, practice portal, and the practice website with an office closure message and where to direct patients to obtain a copy of their medical records.
While the above list may not be exhaustive of all considerations related to closing a practice, it is a useful guide. Your insurance broker and insurance carrier, especially through their risk management department, has resources to assist you as well. Risk management can provide assistance when encountering specific patient and office practice-related situations that arise when closing a practice, such as terminating a patient from practice, records requests and retention, HIPAA related questions and documentation. The American Psychiatric Association’s website (https://www.psychiatry.org/) and/or the American Academy of Child and Adolescent Psychiatry website (https://www.aacap.org/) also have a list of resources you may find helpful when preparing to close your office practice.

About the Author

Allison Funicelli, MPA, CCLA, ARM, CPHRM, FASHRM provides risk management consulting services to Allied World’s medical professional liability policyholders and insured psychiatrists, psychologists, and psychiatric nurse practitioners and physician assistants. She works directly with policyholders to develop individualized action plans to mitigate potential loss based on their unique exposures and risk management needs. Additionally, Allison assists these clients with ongoing medical educational programs as well as policy and procedure review and development.