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Medical Practice Breakups: Are Patient Records Trade Secrets?


Some of the most acrimonious business “breakups” are ones involving medical practices. When a physician separates from his or her former practice, there is a natural tendency to want to migrate the patients to the new practice. That raises the question: Are patient records “trade secrets” in such a manner that the existing practice can prevent the departing doctor from taking the records?

The answer is “yes,” assuming that the existing practice took reasonable steps to protect the patient records and keep them confidential. Because physicians have ethical obligations to avoid “patient abandonment,” the patients must be given notice of where their medical records are being stored and where the departing physician is going. The patients have the right to choose their doctors. There is no ownership of the patient.

Patient Records as Trade Secrets

Under the California version of the Uniform Trade Secret Act, a trade secret is defined as

“information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” See Cal. Civ.Code § 3426.1(d).

Patient records are clearly “compilations” generally containing patient addresses, medical diagnoses and treatment histories, patient insurance information, and similar data, all of which are valuable in the commercial operation of a medical practice AND all of which are generally incapable of being replicated via information found in the public domain. As such, the patient records are “trade secrets” as used by the UTSA. See, e.g., Morlife, Inc., v. Perry, 56 Cal.App.4th 1514 (1997).

What Not to do

In practice, this means that the outgoing physician should NOT take the medical records or copies of the medical records. Indeed, the departing physician should not even take a patient list of names and addresses.

Medical Ethics and Notice to Patients

However, as noted, physicians have obligations to not commit “patient abandonment” and, while the existing medical practice may own the patient records, no one “owns” the patients. This was well-discussed in the case of Jones v. Fakehany, 261 Cal. App. 2d 298 (2nd Dist. 1968) where the court stated:

“The patient may not properly be regarded as the subject of ‘ownership’ and his right to seek and obtain treatment from a licensed physician of his own choice may not be denied him in order to protect the ‘property rights’ of any competing physician or clinic.”

Joint Notice Should be Sent

The California Medical Board (“CMB”), a state government agency which licenses and disciplines physicians, has prepared a guide called “Closing Your Medical Practice.” It is just as applicable when a physician is departing from one practice to join a new practice. See here.

The CMB expresses five concerns for patients:

  • Making the transition smooth
  • Reducing the liability of “patient abandonment”
  • Minimizing the disruption in continuity of care
  • Informing the patient of the location of records
  • Facilitating patient choice

As such, the CMB states that it is the “the responsibility of all physicians and other parties who may be involved to exercise “due care” to ensure that patients are given sufficient advance notice of the change. Specifically, the CMB states:

“This [notice] is best done by letter to patients by the physician explaining the change, including the final date of practice. (The California Medical Association (CMA) recommends, if possible, that letters be sent by certified mail, return receipt requested, and that a copy of the letter with the return receipt be kept. To inform inactive patients or those who have moved away, the CMA also recommends placing an advertisement in a local newspaper.)

Patients be advised as to where their medical records will be stored including how they may access them. To facilitate the transfer of medical records to the new treating physician, an authorization form should be included in the letter.”

Patient Records, Patient Requests, and Patient Authorizations

As for the medical records, it is for the patient to request that those records be transferred. The best practice is to have the patients sign a written authorization form, in which the patient authorizes the release of his or her medical records to the departing doctor.

Contact San Diego Corporation Law Today

If you would like more information about moving from one medical practice to another or winding up or selling a medical practice, contact attorney Michael Leonard, Esq., of San Diego Corporate Law. Mr. Leonard and his dedicated staff provide a fully array of legal services for all health care providers and professionals. This includes physicians, nurses, dentists, psychologists, psychiatrists and any other health care provider. Mr. Leonard and his team can set up your medical corporation and provide legal guidance and advice with respect to sales, mergers, and acquisitions. Mr. Leonard can be reached at (858) 483-9200 or via email.

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