New York Medical Practice Formation Lawyers

New York Healthcare Practice Formation

Physicians who are considering setting up a new practice should be prepared for months of careful planning. A healthcare practice is a very specific type of business which, in addition to regular business laws, is also subject to the myriad laws and regulations that govern medical services. In today’s environment of ever more stringent regulation and enforcement, it pays to put serious thought into your practice’s set up so as to avoid many types of problems down the line.

Choice of Entity

The first step is choosing the type of entity that is best for your practice. Many of the subsequent steps in the process will depend on this choice. In New York, there are several options available for medical practices: a general partnership, a professional limited liability partnership (LLP), a professional limited liability company (LLC), a professional service corporation (PC), or a sole proprietorship. Each of these entities can only be owned by a New York licensed physician; non-physicians may not be co-owners.

Liability

No matter which entity they operate under, physicians are always personally liable for wrongful or neglectful acts they commit themselves. Physicians are also liable for the wrongful act or negligence of someone under their direct supervision. However, there are other instances when the choice of entity does make a difference in terms of liability. In the event of wrongful act by another provider in the practice or a situation that gives rise to general liability for the business (for example, an accident on the premises), a corporate or limited liability entity will provide a shield from personal liability, while a general partnership of sole proprietorship generally will not.

Each type of entity is set up through a specific process and must comply with the laws that govern it. The entity also determines the form of organization, as well as how it will be taxed. The advice of an experienced healthcare attorney can be valuable at this stage to assist the physician in receiving and weighing all the necessary information before deciding which choice is best suited for a particular practice.

Governing Agreements

Once the entity is chosen, it is time to draw up the governing agreement that will contain several key provisions that will determine how the practice is run. These provisions will address the control and management of the practice, the allocation of profits and losses, restrictions on transfers of interest in the entity, rules governing circumstances under which a physician may choose or be required to leave the practice, and provisions dealing with professional activities that are not related to the practice (i.e. moonlighting)

In drafting the agreement, it is important to bear in mind the many laws, rules, and regulations that govern physician conduct. Typically, relevant laws include those pertaining to the unauthorized practice of medicine and governing instances of wrongdoing by a physician.

Contracts

Another part of the process of setting up a practice involves contracting with other physicians and managed care, hiring employees, and renting a space. For a healthcare practice, these steps also include ensuring that none of these contracts violate laws and regulations governing physician conduct.

When employing or contracting with a physician or other healthcare provider, it is important to provide for all necessary disclosures, including changes in credentialing, inquiries by government or professional bodies, and any circumstances that would affect the provider’s ability to perform their duties. If the practice fails to make a reasonable efforts to guard against these eventualities, its’ employee’s or contractor’s actions may result in inquiries, allegations, and prosecution for the entity.

Leases and office-sharing arrangements are another potentially perilous area. Some types of leases may violate federal and state fraud and abuse laws, if they are not carefully drafted. Any lease or arrangement whose provisions make payment amounts dependent on revenues, actual use, or frequency should be regarded with extreme caution, as should periodic access leases and part-time contractual agreements. These are considered especially vulnerable to abuse and most are prohibited. Fraud and abuse law violations are enforced stringently, and even allegations that are eventually disproved can cause significant damage to a practice.

As with any other business, the initial steps of forming a healthcare practice include choosing an appropriate type of entity for the business; drawing up provisions that address ownership, control, and distribution of profits and losses; and entering into necessary contracts in order to hire employees, rent office space, and obtain supplies and equipment. In addition, the strict regulation of physician conduct gives rise to additional concerns. Optimally, a healthcare practice should be set up in a way that minimizes the chances of running afoul of laws and regulations. To ensure that your practice’s formation complies with all applicable laws, consult an experienced healthcare attorney. With years of experience advising and representing physicians, our firm is available to provide the assistance you need at any stage of the formation process.