Common Legal Issues Impacting Therapy Practices

Key Takeaways:
Therapy practices face serious legal risks if compliance is overlooked. The most common issues include breaches of confidentiality and HIPAA privacy rules, improper therapist–patient boundaries, failures in informed consent and accurate documentation, and billing errors that may trigger audits, fines, or fraud claims. Partnering with a small business lawyer for medical practices helps therapists protect patient trust, maintain licensure, and avoid costly penalties while allowing you to keep your focus on quality patient care.

Therapists play an important role in the lives of their patients. As steward of your patients’ mental health, you must walk a delicate line between providing the help your patients need and adhering to the strict legal and ethical guidelines governing the industry. There are many potential legal issues which can impact your therapy practice, and the consequences for legal violations can be severe. Fines, license suspensions, costly medical malpractice lawsuits, and damage to your professional reputation can all potentially occur if you don’t have the proper legal guidance to navigate the varied requirements placed on therapists.

The following overview will help you understand the most pressing legal issues your therapy practice may face. The best way to avoid facing legal consequences that can jeopardize your therapy practice is to work with a small business lawyer who has experience working with medical practices, and more specifically mental health providers and mental health practices.

therapist working with a patient

Confidentiality and Privacy Issues

Confidentiality and privacy are critical components of the therapist/patient relationship. For patients to feel comfortable talking about highly personal information, they need to feel secure that this information will remain private and confidential. Therapists must adhere to confidentiality standards build into the American Psychological Association’s (APA) code of ethics, and they must also comply with HIPAA confidentiality regulations protecting the medical records and personal information of patients.

Confidentiality breaches can range from the improper sharing of client information to failing to secure patient health records. These violations can result in heavy fines and other penalties under HIPAA and state laws. To avoid these issues, therapists must use secure systems, train their staff on all state and federal confidentiality regulations, and obtain explicit client consent before disclosing any information.

Boundary Management Issues

As a therapist, you must maintain appropriate boundaries with your patients in order to preserve a professional relationship. When these boundaries aren’t upheld, it can potentially create a conflict of interest and impair your ability to provide the impartial treatment your clients require and deserve.

Therapists must establish clear boundaries with patients regarding:

  • Physical Contact – Engaging in a sexual relationship with a patient is never acceptable and can result in significant harm. It’s common for patients to regress, experience feelings of guilt or isolation, lose their ability to trust and be at an increased risk of suicide when they have a sexual relationship with their therapist. Sexual relationships with patients is never appropriate.

  • Dual Relationships – For the therapist/patient relationship to remain professional, it’s critical to avoid a dual relationship. Dual relationships can occur when a patient is your friend, family member or business partner. Therefore, it is not appropriate to treat people you have a pre-existing relationship with.

  • Personal Disclosure – While the relationship between a therapist and patient is intimate by nature, it’s important for therapists to avoid disclosing intimate details of their personal life, as this can constitute an ethical violation. As a professional, you should always maintain a boundary between your personal life and your patient’s.

Failing to maintain proper professional boundaries or abusing the therapist/patient dynamic can result in serious legal consequences such as medical malpractice lawsuits and potential license revocation. In some cases, it may even result in criminal charges.

therapist treating a patient

Informed Consent and Documentation Issues

Informed consent is critical to ensure your patients have realistic expectations for their treatment. Some of the important informed consent topics you should discuss with your patients include:

  • Limits of confidentiality
  • Your expertise, training, and experience
  • Fees and billing practices
  • The specific services you can’t or won’t provide
  • The nature and extent of your record keeping
  • The patient’s right to terminate treatment and any resulting financial obligations
  • The length of time you believe the relationship will last

In addition, it’s important to adhere to best practices for documentation of patient care. This includes:

  • Providing documentation in a timely manner (within 24 hours of the therapy session)
  • Linking progress notes to the treatment plan
  • Including verbatim statements when relevant
  • Using objective, professional language
  • Avoiding copy/pasting prior notes

Failing to adhere to federal and Colorado-specific informed consent requirements or neglecting to maintain accurate records can potentially expose you to malpractice lawsuits and insurance audit failures.

Billing Accuracy Issues

Billing accuracy is critical when submitting claims to insurance companies for reimbursement, especially when working with Medicare or Medicaid. Improper billing, up-coding, or submitting claims for undocumented or non-rendered services is a violation of the False Claims Act, and it can result in audits, fines and, in some instances, criminal charges for fraud. To avoid these serious penalties, you must make sure your billing is accurate, services are justified and all claims are supported by proper documentation.

Elizabeth Lewis Can Help Your Therapy Practice Avoid Legal Issues

The best way to avoid the serious consequences associated with these common legal issues is to work with an experienced small business lawyer. At the Law Office of E.C. Lewis, we’ll make sure your practice remains protected.

Elizabeth Lewis is a small business lawyer for medical practices, mental health practices, and alternative health practices in the Denver area, and she regularly helps therapy practices remain compliant with all state and federal regulations. Elizabeth will provide the guidance you need to navigate the complex legal challenges impacting your practice. Her assistance may include reviewing your policies, providing ongoing compliance training and making sure you understand how to maintain proper patient documentation.

Contact us today to schedule a consultation. The Law Office of E.C. Lewis serves clients in Denver and the surrounding areas of Colorado.