Understanding the often complex issue of who owns patient records on the purchase or sale of a medical business can be a complex process with adverse outcomes if managed incorrectly.
It is important to determine what health records, if any, the business owns and whether you have any obligations with regards to notifying patients about the transfer of ownership of the health records.
Who actually owns patient records in a medical business?
Generally, the general practitioner, specialist or allied health professional who creates a patient record will own it. However, this ownership can be altered through the commercial arrangement between the medical professional and the medical business at which they practise.
Medical professionals who act as independent contractors will generally own the health records which they create, whereas an employed medical professional will not. This is because the employment arrangement between an employed medical professional and the medical business employing them will generally provide that ownership, and any intellectual property within a health record, will vest within the medical business.
To add to the complexity of the issue of ownership, medical professionals who act as independent contractors will generally agree to store their health records either electronically or physically at the medical business at which they practise. This means that while a medical business may store a large number of health records, it may not actually own all of those records.
For example, a medical business which retains a combination of employed and contracted medical professionals will store a mixture of health records, some owned by the business and some owned by the contracted medical professionals.
Do I have to notify patients about a transfer of ownership?
If a medical business owns health records then, on the sale of that business, a transfer of ownership will occur. In New South Wales, Victoria and the Australian Capital Territory, the owner of a medical business must notify patients if health records will be moved or transferred to a new owner.
In particular, medical businesses must notify individuals who have received a service from them of the sale, transfer or closure of the business, and the manner in which the business proposes to deal with the health records as a result.
These notice obligations can be substantial, including obligations such as:
- placing a written notice in clear view of patients in the practice or business;
- notifying each patient directly and in writing; and
- publishing a notice in a local newspaper including, if a significant proportion of patients have a first language other than English, in such non-English language newspapers that circulate locally.
By contrast, South Australia doesn’t have such notice obligations. Therefore, if you are selling or buying a medical business in South Australia, you are not required to notify patients regarding the treatment of their health records or whether a change in ownership will occur.
A professional diagnosis will avoid the pain of getting it wrong.
The best way to ensure compliance and avoid complications is to seek professional legal advice prior to entering into an agreement for the purchase or sale of a medical business. Kain C+C Lawyers is a legal consultancy company specialising in complex transactions and can provide expert advice on such matters.
Written by Sarah Chia and Nicola Pearce.
Part of Kain’s specialist M&A team, Sarah Chia’s expertise lies in advising on business and company acquisitions and divestments.