Physicians often reach a point where they no longer want the headaches of owning their medical practice, which comes with administrative, financial, regulatory and legal burdens. While they might wish to continue to see patients, they no longer want the headaches of ownership and desire the financial security from selling their practice.
Buyers of medical practices generally are looking for one that is well regarded, has a similar philosophy regarding patients, is healthy financially and has a potential to generate income. Finally, they want to be able to arrive at an agreeable compensation agreement. In the process, a buyer will look for anything that could be a deal breaker.
The status of a medical practice is very important for many reasons. Name recognition can be a primary factor for new patients, referrals, hospital relationships and insurance carriers, as well as recruiting new physicians. Reputation is the key. The staff should be prepared for a visit from potential buyers to size up the organization, the office, its furnishings, professionalism and interaction with the patients.
Buyers need to feel like the practice is a group of team players who are willing to work together to grow the practice through eliminating unnecessary expenses, improving its efficiency and the quality of patient care.
Obviously, the physician wishing to sell the practice wants to obtain a generous compensation package. Some of this money will be up front. The remainder can be in the continued employment agreement providing a base salary and incentives for growth and performance. Both sides will have their own parameters and negotiations will be ongoing throughout the process, until the terms and conditions are agreed upon.
Once the reputation of the practice has been accepted and it is determined that there is a group of team players who match the buyer’s philosophy, the task of analyzing the financial health and income potential begins. Financial statements, tax returns, salary histories of staff and physicians, payer mix reports and coding practices must be reviewed. Disclosure of any outstanding liability exposure, including existing or potential malpractice claims must be made. Finally, an examination of the quality of furnishings, equipment and computers must be conducted. It is never a good sign if a practice is still using paper files for billing purposes or patient information.
Just as in the purchase of a home, a primary factor to consider is price. Red flags that prevent a deal from ever getting off the ground are unrealistic expectations of the worth of the practice or unreasonable expectations of future compensation.
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