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Legalities in Healthcare Practice: Have You Lawyered Up?

Starting your own healthcare practice may be exciting and stressful in equal measure – not least because of the numerous legal issues you should consider. In addition to the standard liability concerns any business owner must contend with, healthcare practice managers may likely face problems that are unique to the medical field.

To protect yourself and your business, you should not overlook the many legalities in healthcare. Here are some of the considerations.

7 Legal Considerations When Starting a Healthcare Practice
The following is a non-exhaustive list of some of the legalities in healthcare practice that you would have to consider as a manager and business owner. However, keep in mind that this is for informational purposes only and does not constitute legal advice. To ensure that you are fully up to date on all the legal and regulatory requirements, you should contact a specialist healthcare attorney.

1. Entity Type
Choosing a legal entity is one of the first steps in the formation of any business. The entity type may impact a wide range of liability and tax-related issues, as well as how you manage your practice day to day. You can generally choose between:
  • Limited liability company (LLC)
  • Professional limited liability company (PLLC)
  • Limited liability partnership (LLP)
  • C or S corporation
  • Professional corporation (PA)
All entity types have their pros and cons, and the rules for business formation may differ across states. Therefore, be sure to consult with an attorney who knows the regulations in your jurisdiction.

2. Licensing, Insurance, Tax, and DEA Registration 
As a professional service provider, you would likely have to take out a professional license for both yourself and your business. If you are prescribing medication, you must also register with the Drug Enforcement Administration (DEA). 

Furthermore, you should decide early on what types of private and public health insurance your practice will accept. Whether you choose to work with Medicaid, Medicare, and/or private insurers, you may have to meet certain eligibility requirements before you can submit any claims.

You must also apply for a Federal Employer Identification Number (FEIN) with the IRS and obtain a business tax receipt from your county.

3. HR and Employment Issues
If you do not plan to work entirely on your own, be sure to address any potential employment issues when hiring both medical and general staff. Examples include non-compete and confidentiality requirements, wrongful termination, harassment, and discrimination. To help you avoid missing anything, you should have a professional healthcare attorney draft and negotiate your employment agreements.

4. Contracts and Leases
Many healthcare practices choose to rent rather than buy their medical equipment, and leasing agreements for tools such as scanners and MRI machines seem to be gaining in popularity in the industry. However, an expensive lease may require you to negotiate and review the agreement and carefully peruse any supporting documents, which could be challenging for a non-lawyer.

Renting the premises of your healthcare practice often comes with its own set of pitfalls as well. Some landlords, for instance, may try to work in provisions such as personal guarantees that would make you personally responsible for the rent if your business defaults on the payments.

5. Medical Malpractice 
Even when a medical malpractice claim does not result in a penalty, you are still likely to dedicate substantial amounts of time, money, and other resources to preparing your defense.

A way to help avoid all that is to team up with the right people – assuming you will not be working on your own. Before hiring someone, ensure that they have the experience and credentials required for the job. Do not skip on the background checks, either. These could tell you whether the person in question has been the subject of a medical malpractice claim in the past. 

Finally, consider taking out a professional liability insurance policy as a minimum. To help protect your practice against a wider range of claims, you may also want to upgrade to comprehensive small business insurance coverage for healthcare practices. 

6. Confidentiality and Data Protection
All businesses have a responsibility to protect the personal information of their customers. This obligation may be even more critical in the medical industry, as healthcare practices hold uniquely sensitive data about their patients. 

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) requires all healthcare practices to implement certain measures to protect their patients’ records. Nowadays, this obligation appears to be even greater than when HIPAA first came into effect. With practices storing more data online and the widespread use of smart medical equipment, patient information is becoming potentially more vulnerable to cyberattacks. 

To ensure you are HIPAA compliant, invest in high-quality IT security systems and regularly update your medical software. It is also a good idea to hire a dedicated IT team, whether in-house or as external consultants.

7. False Claims
Finally, healthcare practices may be held accountable under the False Claims Act for making untrue claims for Medicaid and Medicare payments. Note that this is in addition to and independent of the patients’ personal liability. 

That means you have a duty to ensure all claims you make are legitimate and to report any mistakes right away, no matter how minor they might seem. 

You should also keep in mind that the False Claims Act covers situations where pharmaceutical companies use incentives like money, dinners, or travel to encourage healthcare practices to overuse their products. In that sense, accepting gifts from a supplier may be a potential liability. 

Do You Find All the Legalities in Healthcare Practice Overwhelming?
That’s understandable. From contractual disputes with vendors and lawsuits from patients to making sure you comply with all county, state, and federal regulations, there are many legal issues that you may face when starting a healthcare business. 

Fortunately, you have two tools at your disposal to help you ensure that your practice is fully compliant and protect yourself from liability: consulting with a specialist healthcare practice attorney and taking out professional liability and business owners’ insurance.

Get your malpractice insurance today.
This publication is intended to inform Affinity Insurance Services, Inc., customers of potential liability in their practice. This information is provided for general informational purposes only and is not intended to provide individualized guidance. All descriptions, summaries or highlights of coverage are for general informational purposes only and do not amend, alter or modify the actual terms or conditions of any insurance policy. Coverage is governed only by the terms and conditions of the relevant policy. Any references to non-Aon, AIS, NSO, HPSO websites are provided solely for convenience, and Aon, AIS, NSO and HPSO disclaims any responsibility with respect to such websites. This information is not intended to offer legal advice or to establish appropriate or acceptable standards of professional conduct. Readers should consult with a lawyer if they have specific concerns. Neither Affinity Insurance Services, Inc., HPSO, nor CNA assumes any liability for how this information is applied in practice or for the accuracy of this information.

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