Last Updated on: 13th October 2023, 01:54 pm

New York Medical Practice Formation Lawyers: A Helpful Guide for Physicians

Starting a medical practice in New York can be an exciting yet daunting process. With careful planning and guidance from experienced healthcare lawyers, physicians can ensure their practice is set up properly to comply with all legal and regulatory requirements in the state. 

Choosing the Right Entity

The first major decision physicians face when starting a medical practice in New York is choosing the right business entity structure. There are several options to consider:

General Partnership

A general partnership is one of the simplest entities to establish. Partners share equally in the management of the practice and personal liability for any debts or malpractice claims. However, partners are also personally liable for the actions of the other partners. This exposes each partner to greater liability risk.

Professional Limited Liability Partnership (PLLP)

A PLLP provides limited liability protection to partners for the actions of other partners. Partners are not personally responsible for malpractice claims against other partners or employees of the practice. However, partners remain personally liable for their own actions. The PLLP structure is commonly used by larger physician group practices in New York.

Professional Limited Liability Company (PLLC)

The PLLC entity provides the most liability protection to physician owners. As with a PLLP, they are shielded from personal liability for the actions of other owners and employees. In addition, physician owners are not personally liable for their own malpractice claims. These are solely the responsibility of the PLLC entity.

Professional Corporation (PC)

A PC limits owner liability similar to a PLLC. However, PCs have more complex regulations and corporate formalities to comply with. For example, they must be owned exclusively by licensed physicians and have certain provisions in their organizational documents. PCs also face some tax disadvantages compared to other entities.

Sole Proprietorship

Operating as a sole proprietorship avoids the need to create a formal business entity. However, the physician owner retains full personal liability for all practice debts, claims, and liabilities. For this reason, sole proprietorships carry the most risk and are uncommon for medical practices.

Drafting Organizational Documents

Once the entity choice is made, the next step is drafting organizational documents like the operating agreement, partnership agreement, or corporate bylaws. These documents establish the “ground rules” for operating and managing the medical practice.Key provisions should address:

• Ownership percentages
• Distribution of profits/losses
• Member voting rights
• Transferability of ownership interests
• Rules for members joining/departing
• Parameters around outside “moonlighting” activities

Healthcare lawyers can ensure the entity’s organizational documents comply with New York’s laws and regulations for medical practices. This includes rules on fee splitting, referral arrangements, and scope of practice.

Obtaining Business Licenses and Tax Registrations

Before the practice opens, physicians must obtain all necessary business licenses and tax registrations. Exact requirements vary by location and entity type. Common registrations include:

• New York State Sales Tax ID
• Employer Identification Number (EIN) from the IRS
• Business license from local county/city
• DEA and controlled substance licenses

Failure to obtain proper licenses can lead to penalties or delays in practice operations. Lawyers can provide guidance on license/permit requirements to ensure full legal compliance.

Vetting Business Partners and Staff

Bringing on physician partners, allied health staff, and other employees requires careful vetting. Healthcare lawyers can advise on best practices for:

• Conducting background checks
• Obtaining necessary disclosures/credentials
• Drafting employment contracts
• Structuring independent contractor relationships

Thorough vetting helps avoid situations where staff conduct jeopardizes the practice’s operations or reputation. Legal counsel can also ensure employment policies and contracts comply with New York labor laws.

Reviewing Managed Care and Vendor Contracts

Before signing contracts with payers, vendors, and landlords, it helps to have an attorney review the terms. They can flag provisions that are problematic or put the practice at risk. This includes identifying:

• Unreasonable restrictions on care decisions
• Burdensome reporting requirements
• Unfavorable fee schedules or payment terms
• Excessive penalties or unfavorable termination clauses

With an attorney’s guidance, physicians can negotiate more favorable contract terms and avoid potential disputes.

Selecting Malpractice Insurance

Malpractice insurance is a necessity to protect physicians’ personal assets from liability claims. Healthcare lawyers can provide input on:

• Recommended minimum policy limits
• Claims-made vs. occurrence coverage
• Pros/cons of tail coverage
• Add-on coverages like cyber liability

They can also review policy wording to ensure adequate protections are in place.

Developing Policies and Procedures

Well-drafted policies and procedures are the backbone of a compliant practice. Healthcare counsel can provide templates and guidance on developing policies for:

• HIPAA privacy and security
• Prescription handling
• Infection control
• Documentation protocols
• HR and employment
• Workplace conduct

Customizing policies to the practice’s specific operations is key.

Experienced counsel helps maximize deal value and ensure the merger is structured optimally from a legal perspective.Forming and operating a medical practice in New York requires navigating a web of complex healthcare laws and regulations. Partnering with experienced healthcare lawyers simplifies the process so physicians can focus on providing excellent patient care. They offer invaluable guidance on choosing the right entity, drafting organizational documents, obtaining licenses, vetting staff, negotiating contracts, maintaining compliance, and handling transactions like mergers. With proper legal guidance from the start, physicians can avoid missteps and have confidence their practice is set up for long-term success.