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Medical Practice Sales, Appraisal and Financing

Medical Practice Sales, Appraisal and Financing

Practice owners understand that proper preparation is essential for success. They spend considerable time and money to ensure the viability of their businesses. Yet when it comes to succession and retirement planning for doctors, many lack plans to continue the business post-retirement. In fact, even when business owners expected to retire within 5 years, nearly half (46%) had not found a suitable successor (Massachusetts Mutual, 2007). The same study reported: "Almost a third (30.5%) have no plans to retire, ever.... Many people plan to die in office, which is not beneficial to the family, the firm, its employees or its clients." Although retirement, death, and disability may not be pleasant topics, the reality cannot be ignored. Succession or pre-sale planning is in the best interest of a medical practice seller and his or her family.

Issues to be considered include licensure, ownership, and business continuity. These concerns are especially relevant for medical doctors, because their businesses (medical practices) are in part linked to their status as physicians. Unlike other businesses, not just anyone can own a medical practice—only those with formal training and licensure. While it varies by state, licensure is related to ownership. When a doctor dies the State may give the spouse a grace period to own and operate the practice. This grace period is not indefinite in states with corporate practice of medicine laws (e.g. California), which prohibit a non-physician from legally owning a medical practice.

It is never too early to begin succession planning. What will happen to the practice when you retire from medicine? Who will manage it in an emergency situation? Often we receive calls from spouses and widows of doctors who had fallen suddenly to illness. Unfortunately, there is little one can do if the physician has died. Without a succession plan, however, even living doctors are forced to accept undesirable terms due to their failing health. Moreover, health complications diminish the physician-owner's productivity, which results in declining revenues and, ultimately, decreased practice value.

So what should you do as a medical practice owner? Establish a succession plan early. Communicate it to your family and other parties involved. Do not assume that your associate doctor can or wants to take ownership of the practice. Clarifying expectations early is essential for a smooth transition. Advanced planning allows you to negotiate on your own terms. Often practices are sold to younger doctors or expanding medical groups. In that way, the community continues to be served, a new generation of physicians enters private practice, and you secure your family's interests.

Transition Consultants specializes in medical practice sales. We assist doctors with pre-sale planning to ensure the continuation of their practices for optimum value. Our medical practice consulting experts will show you how to prepare your practice financially and guide you through the entire process. If you do not have a succession plan yet, call us today at 800-416-2055 for a complimentary consultation.

Written by Transition Consultants

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