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5 Factors to Consider When Selling a Medical Practice

Updated on June 19, 2017

A successful medical practice sells quickly in today’s market. However, as a physician selling your practice, you must ensure that the deal is not only in your favor, but that there are no legal ramifications following you afterward.

Hospital acquisitions are popular today for medical practitioners but have drawbacks. Also, entering a partnership or being absorbed by another practice is equally common practice, but not always in the best interest of your career.

Therefore, you must weigh all options and perform due diligence before accepting the first offer you receive.

Why are More Physicians Selling Private Practices?

Today, selling a private practice is more popular than it was a decade ago. Mainly, the issues of time and money associated with regulatory compliance make it harder for a physician-owned practice to keep up. Therefore, they allow hospitals and larger medical clinics access to their patients and reputation through sales and acquisitions.

Whether you seek a stable paycheck or you find regulatory compliance is too costly, consider the following factors before accepting an offer.

5 Critical Factors for the Physician Ready to Sell

  • Consider your motivations for selling. From the increased costs of employee benefits to carrying malpractice insurance and updating to electronic health records, you might find that the costs to maintain a successful practice are too much. However, is your sole reason for selling monetary gain? Do you also seek consistency with your schedule or stability when it comes to annual earnings? Your long-term goals and motivations for selling will determine what buyer you want purchasing your practice.

  • The marketable factors of your business. What does your practice have to offer? Some buyers want primary care physicians for their hospitals, while others seek specialties. Think about what marketable features your practice has, and the value you bring to hospitals or clinics looking to buy out your practice.

  • Leave the valuation to an expert. You cannot possibly evaluate your practice accurately. Instead, you need a valuation expert that can go through the buying models and review your past financial statements to decide what value your practice offers – and how much a buyer must pay for it.

  • Determine your purchase price and terms of the acquisition. You need an attorney for this stage. An attorney helps you review all practice-owned assets and how to handle them after the purchase correctly. You also want to consider taxes in your purchase agreement, so that you are not struck by a harsh tax bill months after the fact.

  • Performing your due diligence. Negotiations might feel natural, but you still have due diligence to conduct. First, you must review the record of your buyer. If joining a partnership or hospital, what is the complaint history for that buyer? Also, you must ensure your current patients can transfer over with you, what insurances you might lose, and pending lawsuits you might have that must be completed. Also, you must review the regulatory compliance program in place for the company buying you out.

Make an Acquisition Work for You, Not Against You

You want a profit, but you also want to protect your reputation and your patients. Whether you are selling and leaving medicine for good, or you are looking to expand your options with a partnership, the more due diligence you perform, the more likely you will have a great outcome from your sale.

Working alongside the right team of professionals is equally important. You need an attorney with experience in the medical industry, an accountant, and a financial advisor within that team to cover all aspects of your due diligence.

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