Healthcare Facility Closure: Expert Defense for Your Regulatory Risk

A healthcare facility that intends to close must notify the applicable state health department and any state licensing boards that issued the facility's operational licenses, submit the required applications or notifications to the Centers for Medicare and Medicaid Services if the facility participates in Medicare or Medicaid, notify the DEA and surrender any controlled substance registrations, and comply with any facility-specific closure requirements imposed by the facility's certificate of need or other regulatory approvals. Most states require healthcare facilities to provide notice of closure at least thirty to ninety days before the anticipated closure date, and a facility that closes without providing the required notice may be subject to regulatory penalties, loss of participation in federally funded healthcare programs, and civil liability.

Healthcare and life sciences and licensing counsel can advise on the specific regulatory approval and licensing termination process requirements and develop the regulatory approval, license termination, and closure notification strategy.

A healthcare facility that is closing has an obligation to facilitate the transfer of its active patients to other healthcare providers and to ensure that each patient's care continues without interruption, and a facility that fails to satisfy this obligation may be found to have abandoned its patients and may face both professional disciplinary consequences and civil liability for any patient harm that results from the failure to arrange a timely and effective transfer of care. The facility should notify each active patient in writing of the closure, provide the patient with a sufficient period of time to arrange for alternative care, offer to transfer the patient's medical records to the successor provider, and provide the patient with a list of alternative healthcare providers in the area who are accepting new patients.

Healthcare practice management and healthcare management solutions counsel can advise on the specific patient transfer and continuity of care coordination obligations and develop the patient transfer protocol and continuity of care compliance strategy.

Patient abandonment is a form of medical negligence that occurs when a healthcare provider unilaterally terminates the physician-patient or facility-patient relationship without providing the patient with reasonable notice and a sufficient opportunity to arrange for alternative care, and a healthcare facility that closes without providing adequate notice to its patients and without facilitating the transfer of their care to other providers may be held liable for any harm that results from the interruption in care. The risk of patient abandonment claims is greatest for facilities that are managing patients with serious or chronic medical conditions who are dependent on the facility for regular monitoring and treatment.

Medical malpractice and medical malpractice insurance defense counsel can advise on the specific patient abandonment and medical liability exposure risks and develop the patient abandonment defense and medical liability risk management strategy.

Healthcare facilities that fail to satisfy the notice, patient transfer, medical record, and licensing requirements applicable to their closure are subject to a range of regulatory penalties, including civil monetary penalties imposed by the state health department or CMS, exclusion from participation in Medicare and Medicaid, loss of accreditation, and referral to the appropriate professional licensing board for investigation and potential disciplinary action. A healthcare facility that closes without satisfying its CMS disenrollment obligations may also face liability for overpayments made by Medicare or Medicaid for services rendered after the facility's effective date of closure.

Administrative cases and regulatory risk management counsel can advise on the specific regulatory penalty and non-compliance risk exposure and develop the regulatory penalty defense and healthcare compliance enforcement response strategy.

State laws and professional licensing board regulations typically require a healthcare facility that is closing to provide each active patient with written notice of the closure at least thirty to ninety days before the anticipated closing date, and this notice must inform the patient of the closure date, explain how the patient can obtain a copy of her medical records, and provide information about alternative healthcare providers who are available to assume the patient's care. The medical records of patients treated at the closing facility must be retained in accordance with both federal law, which requires a minimum retention period of seven years for records of Medicare patients, and applicable state law, which may impose longer retention periods, and the facility must make arrangements for the secure storage and continued accessibility of these records after the closure date.

Data privacy and medical malpractice complaint counsel can advise on the specific patient notification and medical record handling requirements and develop the patient notification and medical record retention and transfer compliance strategy.

Regulatory compliance and regulatory solutions counsel can advise on the specific healthcare facility closure regulatory compliance framework and develop the comprehensive closure compliance, documentation, and liability defense strategy.

A healthcare facility that is closing and employs one hundred or more employees is subject to the federal WARN Act's sixty-day advance notice requirement if it is conducting a plant closing or mass layoff, and facilities that operate in states that have enacted mini-WARN laws with lower employee thresholds or longer notice periods must also satisfy those state-specific requirements. The facility must also review all of its vendor, supplier, and real property contracts to identify early termination rights, notice requirements, and liquidated damages provisions, and must coordinate with its professional liability insurer to ensure that its malpractice coverage continues to cover claims arising from services rendered at the facility after the closure date.

Employment litigation and consulting and employee benefits counsel can advise on the specific staff termination, contract termination, and insurance continuation obligations and develop the staff termination compliance and contract termination management strategy.

A healthcare facility that is planning to close should maintain a comprehensive written record of every regulatory step it takes throughout the closure process, including the dates on which notices were sent to regulatory authorities and patients, the methods used to send those notices, the responses received from regulatory authorities, and the arrangements made for the transfer of patient care and the storage of medical records, because this documentation will be essential to defending against any regulatory or civil claims that may arise after the closure.

Corporate dissolution and liquidation and healthcare fraud counsel can advise on the specific regulatory communication and documentation management requirements and develop the regulatory communication and closure documentation strategy.

The risk of litigation and regulatory enforcement arising from a healthcare facility closure can be significantly reduced by retaining experienced legal counsel to guide the closure process from its earliest stages, because counsel can identify and address potential compliance deficiencies before they become regulatory violations, advise on the scope of the facility's obligations to its patients, staff, and creditors, and ensure that all required notices are sent to the appropriate regulatory authorities in the required format and within the required timeframes. A facility that has complied with all applicable regulatory requirements and has documentation to demonstrate that compliance is in a much stronger position to defend against patient abandonment claims, regulatory penalties, and other adverse legal consequences.

Contract termination and wrongful termination counsel can advise on the specific litigation and enforcement action exposure reduction requirements and develop the closure litigation defense and regulatory enforcement response strategy.