The past few months have probably been a blur. If you worked with a broker, they more than likely handled a lot of the negotiations, paperwork and were great at saying “Don’t worry, we’ll handle it”, “Sign Here”, “Send me this document” etc. But what happens after you sign on the dotted line and your pharmacy or your files officially become someone else’s property? What additional items do you need to complete to tie up all the loose ends? And, most importantly, what is the broker you just paid 8-15% of the sales price of your business, going to do to help you?
Unfortunately, in a lot of cases, owners are left to fend for themselves and navigate another complex process, often without the help of their broker. How do you close out your files, which suppliers or vendors need notified, do you need to change payment contacts for your reimbursements, are their actions to take with your NCPDP, NPI, PTAN, etc.? And, in most cases, the answers are yes.
Let’s take a look at 3 scenarios that could play out:
Option #1: You sold your pharmacy as a Stock Sale
This is, by far, the easiest option as you don’t really need to do anything after the sale other than sign on the line, collect your money, go on vacation, and enjoy whatever your next chapter is in life. Now, granted, you are going to need to hand over the keys, passwords, and all the account information needed to keep the business moving smoothly. Hopefully, your Broker has helped gather this information before the final sale date. Depending on the terms, there could be additional items that need to be taken care of such as work restrictions or requirements, availability to help sign certain documents or provide account information, and Accounts Receivable and Accounts Payable.
Option #2: You sold your pharmacy as an Asset Sale
This is going to take some work. It will be similar to the process outlined below for the chain pharmacy. With an asset sale, the new owner may want to stay and operate in those four walls or may want only files and/or inventory. Generally, a sale to a chain will be an acquisition of files and inventory. If the new owner plans to operate in that space, they will need a signed Power of Attorney from you so they can continue to operate under your numbers until new ones are issued. They may choose to keep the DBA and some of the employees or they may choose to start from scratch. The rest of the processes will look similar to those we’re about to describe.
Option #3: You sold your pharmacy to a chain
They purchased your files and possibly all, or some, of your inventory. A lot of owners think when they sell out and close their physical location, it’s all over after the signing. You sign the bill of sale, money gets transferred, and, if you worked with a broker, they get paid and walk away. Some brokers may give you a checklist with a few items to do but there’s a lot more that needs to happen and, if you aren’t aware of these additional items and don’t completed them in a certain way, you could lose thousands of dollars.
Realistically, it’s going to take between 30-60 days just to figure out accounts receivable and accounts payable, and notices addressed with all parties. When you factor in taxes, post signing, the time frame may extend an additional 3-11 months depending on what time of year the Bill of Sale was signed. Keep in mind that audits can happen at any time post closure and they probably will, thanks to the PBM! Make sure you retain files or have access to them via the new owner. We’ll chat about that in a later section.
Cash on the Horizon
Don’t make the mistake of sending notices too soon or closing accounts before your moneys owed have been received. Make sure entities like Medicare, Medicaid, and 3rd parties know if you have a new account to deposit money into or have a new address to send payments to. Be sure to keep your accounts open, along with your NCPDP and NPI number. If you are advised to turn it off, it may cut off cash flow for reimbursements. If the payment isn’t accepted at the financial institute or the mailing address on file, it’s rejected and returned to sender and you’ll lose out on all that cash and all subsequent reimbursements. If you have patient accounts, send final invoices to individual accounts as soon as possible. If they are not paid within 30 or 60 days, consider collections or go to the magistrate.
Be sure to keep enough cash on hand to help pay your staff for the additional days they may work to help close out the pharmacy.
Some entities will be notified of the closing before signing and others will be notified after signing.
- Lease Space: Prior to closing, notify the landlord that you will be moving out. Offer to pay for or negotiate an early termination.
- Vendors and Utility companies: Prior to closing, notify all of the anticipated closure.
- Accountant and Taxes: Start working with your accountant right away. You may want them to start handling the billing, post signing, but you’ll also want them to start preparing your taxes early so things don’t get dragged out for months post-closing, especially if you close in either of the first three quarters of the year. Keep at least 35% of your sale price to cover taxes.
- State Board and DEA: Usually, you’ve already sent a preparatory letter letting these entities know that the sale will happen on, or around, a certain date. Now you need to send a final letter, with your license enclosed, as an official notice of closure. There may be a closing requirement on the state website, it’s different for each state.
- State Medicaid: Let the state Department of Health know the facility is closed and if you have a new mailing address for payments.
- PSAO: The PSAO will notify all parties of the closure, but will keep payment lines open. You may have contracts outside your PSAO; be sure to contact any PBM like CVS/CareMark or Express Scripts. If you sold to a chain, this is also the time to terminate Medicare PTAN numbers, surety bond, liability insurance, and accreditation organization(s).
- Medicare: Once all accounts have been paid, do a Voluntarily Termination of PTAN. This doesn’t cost anything but it will protect you and allow you to apply for future PTANs. If you fail to do this, NSC will find out your pharmacy closed, they will revoke your PTAN, and you, personally, cannot apply for any PTAN numbers for 10 years. This is really only an issue if you are planning to be a partner in another pharmacy or plan to open another pharmacy at a different location. It will NOT affect currently held PTANs only future numbers.
After the store closes, there is no need to retain staff except for those you’ll need to help with inventory and liquidation. Generally, the day after the store is closed, an inventory will take place. It’s best to retain your PIC, and lead technician, to help with the inventory, depending on the size of your inventory behind the counter, you may need an additional set of hands. Depending on remaining inventory of the front end, misc. furniture, fixtures, and equipment that needs to be sold, you’ll want to retain some employees to help pack, liquidate, and/or clean. You can also hire a liquidation company or auction company depending on the size of the facility. Be sure you have enough cash on hand to pay for their time worked as it may take a few days to have the funds of the sale appear in your account.
What to keep, what to shred, what stays for now, what stays forever, keeping records can be confusing but nothing needs kept forever other than for sentimental purposes. Chains will take two years of DEA files, and two years of pharmacy prescription files, unless the state requires three years. Keep in mind you will have access to those items for any audits that may occur. Here’s a list of time frames for Record Retention:
- 2 Years - State pharmacy board prescription files, DEA 222’s and invoices, DEA and CSOS Files
- The buying pharmacy will take these files with them in the sale
- The seller will retain the DEA 106’s, DEA 251, 252, and 253, plus the Power of Attorney for signing DEA 222
- 6 Years – All files containing Protected Health Information (HIPAA requirement)
- 7 Years - Medicare Part B files
- 10 Years - Medicare Part D files
You may need to keep everything for 10 years because, when looking at most general filing practices, things are co-mingled and it’s hard to keep Medicare patients separate from other patients.
Bless your heart if you are going to try to handle running your business, negotiating terms on your own, and handling the closing process. It truly is a lot to handle but, if you are well organized and have a great team supporting you, you should be okay. If you’re considering selling and in the process of vetting brokers, print this blog out and ask them how they will help accomplish these items post sale. After all, if you’re giving them between 8-15% of the sale price, they should be helping with the entire process not just the first part.
R.J. Hedges & Associates is a Pharmacy Compliance and Brokerage company. We can help by ensuring a smooth transition from former owner to new owner, and assist you by preparing notices, applications, letters, and even press releases to help close out your business. Feel free to reach out or peruse our website for additional information.