Medical Practice Opportunities, Inc.

    Sale or Purchase of a Podiatric Medical Practice

    Preparation for Purchase or Sale of a Medical Practice

    The purchase and sale of a medical practice can be a very stressful event for both parties. It often involves one of the largest financial events each participant will ever experience in their medical career. It can be a complicated interaction which, more often than not, breeds suspicion between the participants. This stems from the fact that most of us have had little background or experience to prepare us for the purchase or sale of a business. Understandably, we become anxious and apprehensive about the interaction.

    As medical practitioners, we have seen similar anxiety and apprehension in our patients as they contemplate an upcoming surgery. This anxiety is frequently eased by thorough consultation explaining the medical problem, the procedure, the risks, and post operative course.

    Similarly, Medical Practice Opportunities will prepare both parties for marketing, negations, and financing in the sale and/or purchase transaction of a medical practice.

    Acting as an Agent for the Seller

    Once we have been engaged by the seller to represent them, we will provide the following services:

  • Comprehensive Practice Analysis
  • Practice Portfolio
  • Estimate of Practice Worth
  • Portfolios of Potential Buyers
  • Community Demographic Analysis
  • Review of Common Obligations of a Seller
  • Review of a Buy-Sell Agreement
  • Review of Practice Transition Details
  • Aid in Negotiations
  • Aid in Finding In-State Legal Representation
  • Avenues for Practice Enhancement
  • Brokering Associated Real Estate
  • Listing of Practice *In the event we are also representing a buyer, our ultimate responsibility is to the seller.

    Acting as an Agent for the Buyer

    Once we have been engaged by the buyer to represent them, we will provide the following services:

  • Create a Personal Portfolio
  • Provide a Detailed Analysis of Prospective Practice
  • Aid in the Negotiation Process
  • Aid in Obtaining Financing
  • Review of Buy-Sell Agreements
  • Aid in Finding In-State Legal Counsel
  • Aid in Establishing a Smooth Transition Process
  • Guidance in Obtaining Licensures, Hospital Privileges and Inclusion in Local Insurance Plans
  • Access to Resources for Practice Management Training
  • Aid in “Start Up” Marketing Techniques *If also engaged by a seller, our primary commitment will be to the seller, not the buyer. However, we will ensure appropriate protection by their legal counsel.

    Creating a Practice Portfolio

    In order to market a practice and determine a sale price, we must first establish the physical, financial, historical, and community demographics pertinent to the medical practice. This data will be collected through detailed questionnaires, financial records, photographs, and a possible site inspection. Once this data has been compiled and reviewed, we will attain a mutually agreed upon asking price.

    We will then create a basic portfolio which describes the general demographics of your practice and can be disseminated without the need for a non-disclosure agreement. We will also create a detailed portfolio which will contain sensitive financial information and will require a signed non-disclosure agreement before it can be released.

    Timing is Critical

    The ideal time period, when a commitment is made by an associate, or buyer to purchase a medical practice, should ultimately be at least nine months prior to their intent to begin practice. This time period is essential because of the lengthy application process required by most state licensing departments, hospitals, and insurance plans. Each entity will claim an approximate 90 days process time. However, they fail to mention these processes is dependant on each other. Most hospitals will not grant staff privileges until state licensure has been granted. Many insurance plans will not accept applications unless hospital privileges can be verified. Therefore, a total processing period may take 9 months!

    Unfortunately, many buyers (often residents) are too busy to prepare this far in advance for their commitment of starting a new business. Buyers feel they have an abundance of time and delay the process to the last 4-6 months of their programs. This will only increase the anxiety and stress and push them towards hasty decisions about their future. It may also cost them thousands of dollars in lost income potential, as they are not yet signed up with the necessary insurance companies or hospitals. If a practitioner is not licensed, with hospital privileges, and not classified as an insurance provider, he/she cannot see patients and bill for those services.

    Ideas on How to Handle the Selling Doctors Accounts Receivable

    Depending upon the volume of a practice and its collections efficiency, the value of the accounts receivable may be as much as 50-80% of the sale price of a practice. A dilemma is often encountered by buyer and seller on how to handle this revenue. The seller provided the services for this uncollected revenue and therefore feels that he/she is entitled to it. However, the buyer usually feels no motivation to collect the fees and should not have to pay staff to collect them.

    There are a few options available. One method involves seller paying buyer a collection fee (usually 4-6%) on any collected revenue from pre-sale date accounts. Although this is probably the most accurate accounting of the revenue, it is also a book keeping nightmare for office staff.

    Another approach is for the purchasing physician to purchase seller’s accounts receivables. This is done based on a historical (usually 2-3 years) collection percentage for the practice, plus a collection percentage (4-6%). This method makes for a cleaner split between buyer and seller and much easier accounting. Additionally, this gives buyer an immediate cash flow and most banks will lend the adjusted value of the accounts receivables because it is a liquid tangible asset.

    Transitioning a Practice from a Seller to a Buyer

    Successful transition of a practice from seller to buyer requires significant commitment and co-operation from both parties. The transition period may last a few months, to as long as a year.

    Requirements of each party will usually be spelled out in the Purchase and Sale Agreement. The seller will usually be required to actively and aggressively market the incoming doctor by introducing him/her to patients and the medical community. A letter of introduction to active patients and the medical community is common. Advertising in the local media is also an option. Membership in local community clubs and groups, etc.

    This period of interaction between incoming and out going doctors varies. Some incoming doctors want the established doctor to stay as long as possible to aid in introductions and, more importantly, aid in the business side of the practice. Other incoming doctors may want the established doctor to leave as soon as possible, thereby allowing them to establish their own identity.

    On the other hand, some established doctors have a hard time giving up the reins, while others want to be out the door as soon as possible. This transition period, and the requirements of both doctors, should be spelled out in the Purchase and Sale Agreement. It is customary for the established doctor to maintain a reasonable presence in the practice and promote the new doctor, usually for a period of 8 weeks after the sale date, without compensation.

    When and How to Involve the Staff in the Sale of a Practice

    Sale of a medical practice is a traumatic event for office staff. This is especially true if they have been with the practice for a long period. Staff may fear for their own job security and wonder if they will like the new doctor. However, they are an asset to the practice and part of its success. Their continued presence after the sale is vital for incoming doctors to learn the business and provide familiar faces to established patients.

    When to tell your staff of your intentions to sell is debatable. The earlier news of the intended sale is known, and the more people who know it, the greater change your referral base among the provider and patient communities may be adversely affected. However, if you wait too long to tell the staff and fail to confide your intentions to them, they will most likely feel betrayed. The decision will depend on your relationship with staff, their degree of tenure, and individual ability to cope with such a change. In general, the sooner they know your intentions, the more they will feel empowered in the decision process and can potentially help in the transition process acting as an asset to the incoming physician.