Selling Your Practice? Important Issues to Consider

Healthcare providers sell their practices for a variety of reasons –  major health care market changes or health care reform, desire for a less demanding work schedule, frustration with insurers, retirement, etc. If you are thinking about selling your practice, there are several steps you should take now that will help you maximize the purchase price and ensure a relatively smooth transaction.

I want to Sell, Now What?
Start by reviewing your practice’s current financial condition. It is essential to identify areas of weakness such as: your practice‘s collections or cash flow. In addition, how do your staffing levels compare to those of similar practices? Issues such as these can reduce the appeal of your practice. It’s often beneficial to deal with these issues before you put your practice on the market.

In addition, it’s important to work with an advisor to get a realistic valuation of your practice’s potential worth.  This can be a tricky process as valuation isn’t always black and white.  Tangible assets, such as medical equipment, computers and furniture, are relatively easy to value while things such as the power of your brand are difficult to value.   The good news is that there are well established methods that can be used that are compliant with the health care regulations to establish a range of fair market value.

And Now?
You may receive an unsolicited offer but many don’t. If you don’t, consider reaching out locally or contacting a health care consultant who specializes in selling medical practices. An experienced consultant can identify and contact qualified potential buyers.

The speed with which a sale may occur will largely depend on the deal you’re seeking. If you are looking to continue practicing as an employee rather than an owner, then looking for a group practice, hospital or other corporate buyer may be the best route. When the sale goes through to one of these entities, you will be able to continue to work without the responsibilities of ownership.

If retirement is your goal, you may opt for a gradual buy-in by a physician who will take over your practice. Typically, this arrangement requires you to employ the prospective buyer and, under the terms of the deal, after a trial period of a year or two, offer a partnership with a documented exit strategy for you.

Finally...
When you receive an offer, it’s important to review the would-be buyer’s financial condition and the payment terms if you plan on retiring. If you plan to continue working at the practice with the individual or entity who may buy it, you should carefully review all ramifications, including transfer expenses and malpractice terms involved in the sale.

Once you’ve reviewed the financial and legal issues involved in the sale, you should also ensure that you will be able to fit into the potential buyer’s organization and that your advice and input will be welcomed.

Remember, whatever way your practice’s sale is structured, there will be tax implications. Let us help you secure the most tax-advantageous sale terms. We have extensive experience in this area; please contact us if you would like assistance.