Belly-up: What happens when a consolidators left with a defunct practice?

Getty ImagesPicture this: A successful entrepreneur veterinarian opens a practice and over several years it grows at a healthy clip to the point where it employs four DVMs. Then the founder quietly sells the whole operation to a big veterinary practice “consolidator,” which is MBA-speak for a corporate practice group with non-veterinarian owners.

Not long after the sale, the founder and former owner is indicted on serious vice charges and the story hits the national news. Clients begin abandoning ship, followed by employees (including doctors) and the hospital eventually has to close its doors.

This scenario played out in real life about eight years ago near my veterinary clinics in upstate New York. Sure, businesses go under all the time. So what's the big deal here?

Say a furniture store goes belly-up. It holds a liquidation sale, fires the employees, sells the building and move on. A veterinary clinic isn't so simple. Consider the plight of the last employed DVM to walk out the door. He or she is charged with much more responsibility than the last guy to abandon the furniture outlet. The veterinarian can't just shut off the lights and head to the next job-not without some possibly serious potential legal repercussions.

Let's take it step by step.

Medical records

When a solo practitioner dies unexpectedly, his or her personal representative (executor, trustee, etc.) is responsible for wrapping up his affairs. Ordinarily that involves going in to the clinic, contacting the clients and determining where they would like their medical records and financial information sent. The clients may opt to take possession of their records personally, since they may contain comments and account numbers they never intended to share with anyone other than the late doctor.

However, with the defunct corporate veterinary practice, the consolidator will want to hold on to those “clients” until it puts together or buys out another practice in order to maximize the pecuniary value of those records.

Can it legally do this? What does the state practice act say? In most states where non-DVM clinic ownership is still technically illegal, veterinary practices operate under a sort of “management arrangement” where the corporation makes profit while the veterinarians practice medicine “independently.”

But what happens when there are no more practitioners and the medical records are sitting in the dark, cold building owned and managed by PetAmigos Inc.? Does the state of Old Jersey permit the management company to own, possess, sell or transact business with those files? What about West Dakota?

Ongoing medical protocols

Let's assume for the moment that state law permits PetAmigos Inc. to own the veterinary medical records long enough to open a new location and hire new doctors. (Not an easy or rapid undertaking, even without the cloud of disgrace that led to the closure of the first clinic.)

The day after that last veterinarian cleans out her desk, the calls will start coming in:

“Can I lower Sophie's steroid dose? I can't take the peeing.”

“I'm on vacation in Florida with Bella and I forgot our phenobarbital. Can you get us a prescription?”

“Bowzer ate another one of those house plants that poisoned him last month!” What was the name of that fern and what did poison control say to do back then?” (Good luck with that one, Mr. Wharton MBA sent in by PetAmigos to inventory the scalpel blades and logo cozies.)

The short-term answer is that the consolidator would probably bring in a temporary DVM who works directly for the company to manage these questions. But when and if it does, what's the liability of the last doctor who left the practice-the only veterinarian with whom the owners of Sophie, Bella and Bowzer actually had anything approaching a veterinarian-client-patient relationship?

Remember how important that relationship seems to be with American Veterinary Medical Association, the U.S. Drug Enforcement Administration (DEA) and state veterinary boards? Does the need for that relationship evaporate when a corporate hospital ceases operation?

Controlled substances

Smart, well-run corporate practice chains probably have employed licensed veterinarians who legally order and own the narcotics and other controlled substances that are present on the premises of their clinics. So when one of them fails and has to close, that DVM can simply take possession of these products and legally transfer them to another physical site for which he obtains a DEA permit.

But what about the veterinary corporate “consolidators” who haven't thought of this yet and who've convinced staff doctors to order controlled supplies in their name while the corporation pays the bill? I know this happens because I have seen it multiple times.

In fact, I recently had a client veterinarian call me because he was in exactly this position. He told me that all of the narcotics, antibiotics, steroids and hormones were ordered legally, by him, but that his last day would be “tomorrow.” He was afraid of what would happen if he walked away with fentanyl and ketamine ordered under his DEA registration number sitting on the shelf.

This got me thinking …

If he leaves all those meds behind and one of the receptionists or Wharton MBAs winds up overdosing, he's almost certainly screwed.

If he takes the drugs with him, he may be guilty of grand larceny. Again, he's almost certainly potentially screwed. Remember, he ordered the drugs but did not pay for them.

And, oh yeah-if he walks away from those narcotics and one of the MBAs takes them back to corporate HQ in the next state over? It's entirely possible that the corporate employee would be committing a federal crime. Screwed.

If you're a veterinarian at a corporate clinic

The law regarding the issues raised here is amorphous and unfolding gradually. The smart advice, until things are more settled, is to at least know who's who in the veterinary business that hires you.

I suggest that if a veterinarian takes a position with a multi-practice corporate clinic, she should request the identity of the doctor or doctors with final responsibility for the medical decision-making at the practice. This is especially important if it's a “consolidated” clinic organized and operated under a pair of legal entities-one legally owned by a licensed veterinarian and another (the “management company”) owned by non-veterinarians.

Employed veterinarians need this information so that if serious problems develop, there's at least one individual who possesses a legal state license to practice veterinary medicine with whom they can discuss medical records and ongoing medical cases when and if they leave the practice. This way, if somebody drops the ball with respect to control of medical records or ongoing case management, the departing doctor has the name and contact info of an actual DVM to whom they can refer confused and disgruntled clients.

Above all, no veterinarian who works for a corporate “roll-up” or consolidated practice group should order pharmaceuticals in his or her own name. If a corporate practice has the legal authority to run a veterinary hospital, it should also have some legal way to obtain medicines and narcotics for its employed doctors to use. Employed doctor salaries are not high enough to justify bearing the potential liability of putting their own name on those orders.

Christopher J. Allen, DVM, JD, is president of the Associates in Veterinary Law PC, which provides legal and consulting services exclusively to veterinarians. He can be reached via e-mail at info@veterinarylaw.com.