United States: Unclaimed Property And Record Management

As healthcare providers and entities merge, consolidate or close their doors, record management and unclaimed property obligations are among the concerns that must be addressed.

In our experience, many healthcare providers engage in a mild to severe form of hoarding, addressing unclaimed property and record management matters on a regular basis will make the merger, consolidation or practice closure process much easier.

Unclaimed Property

Unclaimed or abandoned property refers to money or property held by the healthcare provider or entity that has generated no activity or had no contact with the owner of the money or property for one year or longer. Common forms of unclaimed property for health care providers include uncashed payroll checks, patient refunds and overpayments, and insurance payments or refunds. State laws require businesses to perform due diligence regarding unclaimed property. Businesses must contact the presumed owner of the unclaimed property and if the owner fails to step forward, the business must turn the unclaimed property over to the state each year.

Unclaimed property is often overlooked or deposited in the provider or healthcare entity's bank accounts and only comes to the forefront when entities merge, are acquired, stop doing business or when the state exercises its unclaimed or abandoned property audit rights. States have audit rights pertaining to unclaimed or abandoned property and there can be stiff penalties for failing to relinquish unclaimed property. As states look for additional revenue, expect unclaimed property to be increasingly on the radar.

Healthcare providers should routinely examine their books and records and identify unclaimed or abandoned property. Once the unclaimed or abandoned property is identified, the provider should consult legal counsel and follow the state law requirements with regard to the unclaimed or abandoned property. Unclaimed or abandoned property does not belong to the healthcare provider or business and must be returned to the rightful owner or relinquished to the state.

Record Management

Every business needs a records management process. At a minimum, the process should: identify the records to be maintained; specify who is responsible for management of the records; clarify the record retention schedule; address record storage; and address records disposal. Record management should be part of everyday life for healthcare providers and entities. When providers and entities, merge, consolidate or close, record management becomes a front and center concern, particularly if records have not been consistently managed previously.

An interesting related question was recently posted on the American Association of Healthcare Lawyers list serve regarding the liability and responsibility of a business associate (BA) to a patient and/or other third parties as it relates to access to electronic patient records when a covered entity is no longer in existence. The post queried 1) whether the BA was required to keep the records in accordance with the state statute of limitations; 2) whether the BA agreement controlled; and 3) what would happen if the BA was the only entity still in existence with access to the PHI.

My initial thought is that the business associated agreement (BAA) contract terminates when the BA is no longer performing services for or on behalf of the covered entity, so when the covered entity closes, the BA automatically terminates. Standard BAA language generally states, "Upon termination of this Agreement for any reason, business associate shall return to covered entity [or, if agreed to by covered entity, destroy] all protected health information received from covered entity, or created, maintained, or received by business associate on behalf of covered entity, that the business associate still maintains in any form. Business associate shall retain no copies of the protected health information."

Make sure if you are a BA that the covered entity agrees in the BAA to the destruction of all protected health information received by the covered entity if the covered entity ceases to do business for any reason.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.

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