Q&A: You’re Selling Your Practice — What About the Medical Records?

Q:  I am selling my practice; do I have any obligations with regard to my patient’s medical records?

A:  Likely yes. In Pennsylvania, New Jersey, New York and many other states, physicians have medical record retention obligations. In addition, most states require that physicians provide patients with access to copies of their medical records. These obligations do not disappear upon the sale of a practice.

Q. Well the asset purchase agreement says that the buyer is purchasing the medical records, doesn’t that mean that my obligations end when the sale closes?

A. No. Although most asset purchase agreements specifically provide for the sale of the medical records as an asset, and often even attach a value to the medical records, selling the records does not relieve the Seller from his or her retention and corresponding obligations.*

Q. I really do not want to pay to store my former patients’ medical records or otherwise comply with any other obligations imposed by the law with regard to the records. How can I transfer these obligations to the buyer?

A. You can contract with the buyer to take on your legal obligations as to your patients’ medical records. This is done either through a stand-alone medical records custody agreement or by adding a custodianship provision in the asset purchase agreement (“Medical Records Custody Agreement”). With a Medical Records Custody Agreement in place, even if one of your former patients does not become a patient of the buyer, the buyer will have to store and maintain the patient’s records in accordance with the applicable laws and, if required by law or by the Medical Records Custody Agreement, provide the former patient with access to his or her medical records. The Medical Records Custody Agreement should also require that the buyer provides you with access to the records after the sale in the event that you need them in connection with an audit, investigation or litigation.

Q. Do I have to pay the buyer to provide this custodianship service?

A. Typically no payment is exchanged for custodianship services; the value of the services is rolled-up into the value of the asset purchase. If the parties are considering contracting for ongoing payments for the custodianship services, it would be important to consider any state or federal fraud and abuse laws that might be implicated by such payments.

Q. Sounds good, but what about HIPAA?

A. The Medical Records Custody Agreement should provide that the buyer agrees to comply with all applicable HIPAA provisions. Although the buyer will have access to all patient records as of the closing of the sale, the buyer and the buyer’s employees should not access the records unless your former patient becomes a patient of the buyer. Finally, by agreeing to act as your medical records custodian, the buyer is providing you a service, and since the service involves the use or disclosure or protected health information on your behalf, the buyer is your business associate. Therefore, the parties should enter into a Business Associate Agreement.

*This post does not address the selling of medical records. Any questions about selling medical records should be discussed with a qualified health care attorney.