Life happens, and sometimes not as we expected.
This is why it’s critical for your medical practice—whether you’re a sole practitioner or a partner in a group practice—to plan ahead. Having a comprehensive transition strategy in place can help you navigate life-altering scenarios such as your retirement, the sale of your practice, or the unexpected departure of a partner, to name a few.
As a healthcare-focused CPA who is also a Medical Practice Broker and Valuation Analyst I can help you think through the many tax and financial considerations involved in a transition. Together, we’ll develop a strategy that ensures a smooth and successful transition.
Medical practice transition services for solo practicing physicians
I can help you plan for retirement and assist in the sale or disposition of your medical practice. This could include making sure you have adequate retirement funds in place, calculating a value for your medical practice, and assisting in the buyer search. I can also assist with the creation of a practice continuation arrangement with one of your colleagues.
Medical practice transition services for group medical practices
I can help you plan for the departure or retirement of a physician employee or owner and assist in the recruitment of a replacement physician. I can also review your ownership agreement to make sure it’s relevant for your current situation.
In the event of a physician-owner departure, I can calculate their financial buy-out as well as the buy-in of an employee physician. What’s more, I can facilitate the sale of your practice to a third party, such as a hospital system or private equity, and assist in the dissolution of the practice entity if necessary.
Questions I can help you answer:
Failing to plan ahead not only increases the pressure of a transition, but it often leads to costly mistakes—and a decline in the practice’s value. As a Certified Healthcare Consultant who works solely with physicians, I can help you avoid common pitfalls and make the most of the transition.
If you’re focused on building your practice or caring for patients, it can be hard to think about the future. But this can put you and your practice in a precarious position. Developing a transition strategy—one that fits your needs today and tomorrow—is critical to coming out ahead.
Finding buyers can be difficult. One, you can recruit a new doctor to come in and eventually take over the practice. Another option is to canvass nearby competitors and inquire if one of them want to purchase your practice. If the local hospital has its own medical group, that would be a potential buyer. Some doctors try to find buyers on their own by conducting a nationwide search – such as placing online advertisements in local and national physician publications. Finally, there is putting the practice into brokerage – hiring a broker to sell your practice, just as you would hire a realtor to sell your house.
The standard used to be one year. However most practices now use a two to three year employment period before becoming eligible for an ownership opportunity. This gives ample time to determine if the employed physician is “partner material” and allows the practice the financial opportunity to make a profit on the employed physician’s services.
Keep in mind the offer includes the purchase price, payment terms, and in most cases post-transaction compensation for the selling physicians. It is best to engage a qualified healthcare consultant experienced in practice sales to assist in the evaluation of the offer and related due diligence issues.
There are many, many pros and cons to selling out, too many to list here. But here are a few:
- Doctors can focus 100% of their attention on patient care without the burden of management oversight
- Ability to add new services for patient care
- Selling out provides a transition strategy for the older physicians
- Potential increased reimbursement from third-party payers
- Access to capital to grow the practice
- The doctors become employed physicians and lose autonomy/
- control, not only over the management of the practice, but their future compensation as well
- Will now have to work within an entirely new system, which doctor may not like
- Now working with doctor you are unfamiliar with
- Potential impact on selling doctor(s)’ referral sources
If one wants to retire and sell their practice, the first step is to engage a valuation professional experienced in medical practice valuations. The key word here is “experienced” – how many medical practice valuations has the professional performed over the last five years. Then there is a discussion of valuation methodology – which valuation approaches would be preferred for valuing your medical practice. There is the Asset Approach, Income Approach, and the Market Approach. To value most practices for sale, most valuators will use the Income Approach.