With the pressures on private practices showing no signs of letting up, it’s essential that physicians understand their options for exiting practice ownership—and the financial implications of each. Selling to or merging with a larger private practice, selling to a health system, or even entering an early retirement can all carry different implications for doctors’ personal and professional finances.
An effective exit strategy from practice ownership considers the necessary obligations as well as available opportunities that physicians will need to consider when transitioning their business. By nature, this type of transition is a long and detailed process that takes time and careful planning if owners want to get the most out of the transition, so for physicians considering retirement or a sale or merger, the time to get started is now.
What You Need to Know
Most physicians have ample opportunities available to them when they choose to change their practice ownership, so while many suitors may attempt to pressure a fast transaction, we recommend exercising patience and careful consideration. At a high level, there are six key areas for consideration:
- Assemble your team.
While the attorneys and accountants physicians work with can be helpful during this process, they often don’t have experience with the operational challenges of transitioning a medical practice. We recommend consulting with a wealth management professional and an experienced healthcare industry operations advisor to help you understand the logistics so that you can make the most out of the change and meet your personal goals.
- Create a personal retirement cash flow plan.
An effective wealth manager can help you understand how much money you will need to support your desired lifestyle or comfortably retire, ultimately influencing your decision on a sale price for your business. For more specific information about retirement planning, Curi Capital has explored some of the key considerations in a blog post.
- Understand what your business is worth.
Understandably, some owners overestimate the goodwill value of their business and are unaware of its actual monetary worth in the marketplace. We recommend hiring an impartial third party to evaluate the value of the business without personal bias. This will ultimately help you decide if you wish to remain an employee of the practice as well as help determine who your most likely buyer will be.
- Decide how much control you want to keep.
Depending on the terms of the sale, previous owners may choose to give up 100% control of the practice or they may choose to have some level of voting rights. This may be determined by several factors, including whether you will remain an employee, a leader, or a shareholder within the practice. It’s important to do a candid self-evaluation early in the exploration process and understand what level of control will be important in your overall satisfaction so that your financial and emotional needs are met.
- Create a plan for practice assets.
If you are leaving the practice, it’s important to understand what will happen to its assets. This includes staff, patient information, equipment, the practice name, real estate, and business records. Depending on the circumstances, the original owner may be responsible for asset disposition if the practice is not being acquired by a larger organization. Many physician owners may also want to focus on how this transition will affect their practice staff. We recommend that owners carefully deliberate with advisors to ensure a smooth transition for their employees. In addition, owners will need to consider existing vendors and contracts to plan for trailing obligations post-sale. Maintaining access to patient medical records is also important, as providers are still responsible for state record retention requirements and subject to potential malpractice liability, and they may need to use these records to defend their case.
- Establish continuity of care for existing patients.
If your practice is undergoing sale or a merger, most patients will have the option to continue their care under the new entity, and physicians who are retiring and shuttering their practices may need to terminate the doctor-patient relationship entirely. For more information about your obligations in this scenario, click here to read Curi’s guide to patient termination.
The decision to transition your practice can be challenging both professionally and personally, and taking the necessary time to prepare will be critical to make the most out of your exit strategy. For more information about how to start developing an effective plan, please reach out to a member of the Curi Advisory team at 800-662-7917 or the Curi Capital team at 982-202-2800 for individual consultation.
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The opinions and analyses expressed herein are subject to change at any time. Any suggestions contained herein are general, and do not take into account an individual’s or entity’s specific circumstances or applicable governing law, which may vary from jurisdiction to jurisdiction and be subject to change. Distribution hereof does not constitute legal, tax, accounting, investment or other professional advice. Recipients should consult their professional advisors prior to acting on the information set forth herein.