Planning Practice Transitions

1. Planning Practice Transitions Gerald P. Koocher, Ph.D., ABPP

2. Starting a career Beginning a practice Growing a practice Relocation Retirement Sale of a practice Abrupt closure Disaster (e.g., fire, flood, hurricane) Fired! Quit! Prosecuted! Disabled! Died! Transition? What Transition?

3. Steps to Coping With Acute Transition Problems • Develop a professional contact database of “emergency consultants”: law, ethics, referrals, and emergency backup. • Keep the list in more than one location. • Keep a list of client contact information accessible in confidential duplicate form away from your office.

4. Steps to Coping With Acute Transition Problems • Maintain secure case and financial records using electronic, magnetic, or optical storage with frequent backup of files. • Scan critical documents you do not think you need to retain in paper form. • Store copies of any records you are responsible form securely in more than one site.

5. Long-Term Planning • When entering or joining a practice, discuss and clarifying mutual responsibilities in anticipation of future departure. • Document mutual agreements in writing. • In anticipation of any transition, confirm that your professional liability insurance covers both “prior acts” (i.e., “nose coverage”) and “incurred but not reported” or trailing claims (i.e., “tail coverage”).

6. Long-Term PlanningRelocation • Assure your professional mobility by banking your credentials (e.g., proof of internship and references from elderly former supervisors).

7. Long-Term PlanningRelocation • Allow a minimum of six months to secure practice licenses in new jurisdictions. • If planning move from one U.S. state or Canadian province to another, consider obtaining a Certificate of Professional Qualification (CPQ) from the Association of State and Provincial Psychology Boards (ASPPB).

8. Long-Term PlanningPractice Closure • Make explicit arrangements in your will or estate plan for the management or administrative services necessary to close your practice, including records administration. • Whenever possible, notify active or recent clients that your practice will close, inform them of case record availability plans, and offer to assist in making referrals or arranging continuity of care as needed.

9. Sale of a Practice • When a practitioner has taken pains to build a practice, and then decides to retire or relocate, the idea of recouping some revenue by selling becomes attractive. • The typical psychological practice has little concrete value apart from tangible property (e.g., office equipment and real estate).

10. Selling a Practice • The most significant intangible value of a practice grows from its reputation or so-called goodwill. • Other value factors are trade names, established client base, client lists and records, location, established contracts, amount of competition, and uniqueness of service. • Unlike most medical, dental, or legal practices, a psychologist’s client relationships tend to involve idiosyncratic factors (e.g., emotion, transference, or similar affectively driven reasons).

11. Covering Your Tail (and Nose)Professional Liability Coverage Professional liability insurance should be an important part of practice initiation and termination planning. • Occurrence policies (tail included) • Claims made policies - some policies offer automatic tails for disabled people • Company safety rating

12. Financial Security IssuesDisability Insurance The risk of becoming disabled for more than three months is 50% greater than the risk of death between the ages of 25 and 65. Most people have a degree of denial when told this fact.

13. Factors to Consider • How much coverage - replace 60% of annual income (tax-free income replaces 85-90% of spendable income) • Protect your insurability whenever possible with policy purchase options and inflation- indexed coverage. • Include coverage for office overhead expenses.

14. Questions to Ask About Disability Insurance Policies • Own occupation - are benefits payable if you cannot perform the duties of your own “occupation”? • Choice of waiting periods - 30, 90, 180 days before receiving payments? • Are you eligible if you work only 20 hours per week? • Are there survivor benefits if you die while disabled?

15. Questions to Ask About Disability Insurance Policies • Insurability options: Can you increase your coverage as your income increases without an additional medical exam? • Are there cost of living increases? • Do you receive residual or partial benefits as you return to work? • Is there rehabilitation assistance? • Are there any waivers of premiums?

16. What About Social Security? SSDI - Social Security Disability Income • Social Security regulations define “disability” as the inability to engage in any substantial work activity (currently defined as dollar amount at no more than $500 per month) due to a medical or physical impairment expected to last for at lease 12 months or result in death.

17. Pre-existing condition within 6 months (or 12 for mental conditions) Resulting from alcohol or drug abuse limited Mental illness limited Rehabilitation requirement War Uncomplicated pregnancy Self-inflicted injuries Drugs not prescribed Active participation in riot Acquired while committing indictable offense Common Disability Policy Coverage Exclusions

18. Long-Term Care Insurance Yes, you need to consider this, but are you ready? It requires overcoming denial about future need.

19. Life Insurance How much do you really need? This is a function of your circumstances and life stage.