Selling a Medical Practice: Some Basics to Consider

Selling a medical practice

credit: Flickr

Selling a medical practice can have a lot of advantages for physicians.  It can be a transition to retirement or other careers or an opportunity to make a profit and eliminate a broad array of administration headaches.  Here are some things to consider …

Who would be interested in buying your practice?

There are a lot of people interested, below are some options.

  1. Another physician.  Perhaps another physician is looking to purchase an independent practice and wants to take over yours.   The other physician might be working in your practice or perhaps approach you through associates.
  2. Hospitals.  Area hospitals are regularly looking to expand and are offering incentives and future job opportunities to physicians who don’t want to manage a practice anymore.  Reach out to senior hospital management or the Chief Financial Officer’s office for initial contact.
  3. Insurance Companies.  Players in the game these days, health insurance companies are also looking to acquire practices to expand their services to their patients.  In this scenario, you could become an employee or you just sell your patient list.
  4. Real Estate Investment Companies.  Perhaps you own some prime real estate and the value of the building needs to be considered separate from the practice.  Keep this in mind when you’re selling, you might want to do two separate transactions.  Work with your accountant and/or a real estate attorney to make sure that you can separate your real estate from the practice as businesses.  Being able to separate the two might depend on how your practice is financially structured, but doing so can significantly improve the valuation and ease of sale of one or both sets of assets.

Getting Good Advice

Considering working with an accountant and a healthcare contract attorney who have experience brokering medical practices.  They will know the market and be able to explain the ins and outs of various clauses.  Remember if you’re not working with another physician the entity purchasing your practice will have more experience in buying than you do with selling.  Get smart advice to get the best value.

Consider also working with a practice management consultant or medical practice broker.  They will take a fee or percentage of the sale and are incented to get you the best price.  The best way to find one is to ask your associates for a referral to a good consultant.  Beyond that, see if a broker’s name pops up regularly from recent sales in your area (which are listed in your local business journal).

Things to Consider

If you’d like to continue practicing medicine after the sale, think about how you’d like to continue; after all, the purchasing entity might want to restrict how you can work after the sale.  Typical restrictions include requiring you to stay with the practice for a certain amount of time or limiting you to work outside a certain geographic area around the sold practice after the sale.  All of this is negotiable, so think about what you want.

You also might want to become a commercial landlord.  By selling the practice and then leasing the building to the purchaser you’ll guarantee income after the sale but you will have the headache of having to manage a building.  Of course, you can also hire a management company to do that for you.

Remember the contract will have the final say, a recent comment from a physician inside a Sermo conversation suggests, “Get it in a contract, written and spelled out.  If they can’t do what you want, walk away and go to the next suitor.  It’s a seller’s market right now in most areas.  If you want Fridays off forever, get it in a contract.  If you want an hour protected lunch, have it in the contract.”

Remember Tax Implications

Selling your practice will have tax implications.  Make sure you know exactly what they are while you’re negotiating the sale.  It might make sense, for instance, to take a payout over time to help defer some taxes.  You’ll make a much more informed decision with the help of  an accountant and your attorney.

Finally, remember: the sale of your practice depends on how you’d like to continue practicing (if at all), your local market and the revenue your practice produces.  Other factors are if a local entity is looking for a particular specialty or if your area has a lot of activity and you can play one purchaser off another.   Keep all these things in mind when making your final decision.

Got some more advice?  You can comment here, or if you’re a doctor who’s been through the process, join the conversations in SERMO!

These insights were culled from the answers marked most helpful across a series of posts inside SERMO.

 

Comments

  1. says

    Nice article. It’s about time someone spoke to burnout as part of the conversation around selling a medical practice!

    I’d also recommend an article that talks about both the internal and external processes to consider before selling. It can be found .

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