Planning for Physician Retirement

When it comes to physician retirement, you can never start planning too soon. From your office to your medical records, there are many things to consider. In fact, some experts recommend making preparations at least five years out, especially when it comes to medical office leases. 
 
“You can plan your retirement around the expiration of your current lease with whoever owns the building,” says Michael Saghy, senior vice president and market investment director with Pittsburgh, Pa.-based PNC Wealth Management. If you’re a solo practitioner with a lease, you should have already negotiated a lease termination provision in the event of retirement.
 
If you own the building your practice is located in, Saghy advises that you examine the opportunities for that building post-retirement. Consider what you can lease your former office for to another entity that might want to rent the facility and provide you with cash flow.
 
An outright sale of the facility is another option. Then you would have to decide what your lifestyle is going to be based on your retirement income versus what your lifetime earnings were. Can you live comfortably with your retirement income plus the profit from the sale of your building?
 
If you are part of a group practice and you are leasing, you typically don’t need to worry about a lease.“If it’s a group practice, there is usually enough critical mass in number of physicians that the tenant doesn’t have to vacate space when one doctor retires, becomes disabled, or dies,” says Gray Tuttle, a certified healthcare business consultant and principal of Lansing, Mich.-based Rehmann Healthcare Management Advisors.
 
Review your contractual obligations
 
In addition to your lease, Saghy says to review the actual business entity that you are a part of prior to retirement, such as a sole proprietorship; general partnership; limited partnership; C-corporation; S-corporation; or a limited liability company.
 
“The earlier this entity analysis is performed, the better,” he says. “Any analysis for medical practices should also involve review of buy-sell agreements, funding arrangements, valuation issues, and insurance analysis of all partners and/or equity owners.”
 
These are all vital parts to consider when contemplating an individual retirement within a medical practice where the potential retiree is an equity partner or owner of the practice.
 
“An analysis of the entity may actually lead to a recommendation to potentially restructure the entity for a more beneficial separation for all parties involved, both the retiree and the remaining physicians,” he says. “The earlier this determination is made, the better the retirement will progress for the medical practice.”
 
Protection against lawsuits
 
One common mistake that physicians overlook is protection against lawsuits, both during their career and in retirement. 
 
“The current litigious society within the United States leads many patients to sue their physicians, even after the retirement of the physician in question,” says Saghy. “Lawsuits are often generated by forces beyond the control of a physician such as a natural disaster or an injury to a patient.” 
 
An Asset Protection Trust may be one way to help safeguard the assets against any unforeseen lawsuit, which could potentially harm/decimate one’s retirement assets.
 
“In addition to asset protection, your funds may also have the potential to grow for multiple generations if a Dynasty Trust provision is incorporated into the Asset Protection Trust document,” says Saghy. “A discussion with your personal legal counsel should be initiated to review the potential establishment of a Delaware Asset Protection Trust. It’s not 100 percent for everyone, but we do recommend getting this before retirement—the assets have to protected for the wealth and well-being of your family.”
 
Your responsibility to your patients
 
After giving sufficient notice of your retirement to your landlord and the other members of your practice, it becomes a matter of logistical issues for you and the practice. First, you need to gradually decrease the retiring physician’s schedule and at the same time begin ramping up the physician who is going to take that slot.
 
“The key communication that comes out of this is that to the patients,” says Tuttle. “And if it’s a referral-dependent practice or a sub-specialty practice that relies upon physician referrals that keep the appointment book full, you need to determine how to communicate that to the referral physician community.”
 
Tuttle advises giving notice to your patients and referring physicians about six months from the planned retirement. Assurance has to be given to patients and referring physicians that they will be well taken care of when the physician retires and present an plan on how to do that—even if it’s simply providing the name of the physician who will take the slot and explain that patients may be seen by the retiring physician as near to the end of his or her service as possible.
 
“In referral-dependent practices, you may want to put that doctor out in front of the referring doctors well in advance by making the rounds or having an open house,” says Tuttle.
 
Handing medical records
 
In a solo practice, a huge challenge is the custody of medical records and how you deal with that can make the early days of retirement comfortable or an absolute headache. “We’ve had physicians retire and these medical records are the bane of their retirement,” says Tuttle.
 
If you have a solo practice, you have legal obligations to be custodian of medical records. In most states, the statutes of limitations are two to three years. So you have to maintain records for medical and/or legal purposes for at least that period of time. If you’re a pediatrician, you have to typically maintain those records until the age of 21 ½. That’s for pure medical/legal reasons for medical malpractice or billing issues.