Selling A Physician Practice

ProHealth StrategiesPhysician PracticeLeave a Comment

By Mubarak Chouhdry, MBA –

The market for buying and/or selling medical practices has been extremely active for the past several years. The major considerations for the hospital are: increase their market share, add to the bottom line and control the delivery of medical services.  Another important aspect is to stop physicians admitting to other hospitals especially in metropolitan areas with physicians having privileges at other hospitals.

According to Physicians Advocacy Institute (PAI) Study, Published in February 2019.  

  • The percentage of hospital-employed physicians increased by more than 70% from July 2012 through January 2018.
  • An additional 14,000 physicians were employed by hospitals, and the percentage of hospital-employed physicians increased by 6%.
  • An additional 8,000 physician practices were acquired by hospitals, and the percentage of hospital-owned practices increased by 5%.

Few Items to Consider When Selling to the Hospital:

  • What is Physician’s Added Value – The hospital is buying an active profitable business which definitely has a certain dollar “Value” attached to it. Physicians need to have a good understanding what that “Value” is and the parts of their business that make up that “Value.”
  • Know Your Accounts Receivables – Who owns them at the time of sale? It may be easier for physicians to retain their Accounts Receivable and use the current Practice Management System to continue to collect.
  • What is Your New Relationship – It is essential to have a new job description that well defines your new role? Are you considered an employee with the hospital taking over the complete management of the practice? Is their daily patient quota or monthly revenue quota that a physician must meet?
  • Never Say You Plan to Retire in a Few Years – Some physicians getting close to the retirement age declare during negotiations that they may be quitting in few years. Any good negotiator on the hospital team will consider this a reduction in price item.
  • Do Not Get Emotional – Founding or managing physicians have built the practice and faced many challenges from inception to the current period. When selling you should be objective and not subjective and stay focused on the big picture.
  • Prepare Well – It is highly critical to have objective experts on your side including healthcare consultants providing this service along with a CPA and an attorney.

Upon a successful sale of the practice, a physician must keep in mind that it is a new beginning and must be taken as such. The good thing is that the physician has eliminated all the hassles involved with running a business especially HR, marketing and various parts of Revenue Cycle Management.

However, there are few other changes that may at first bring some discomfort. For example, the physician may feel loss of autonomy since he may no longer be in control of making big decisions.

Hospitals will implement their rules and regulations. The decision making may be considerably slow as there is now a bigger bureaucracy involved in this process, to deal with.

Perhaps the most difficult one is that there will be more oversight. A physician will have to comply with the hospital’s rules and regulations, and with its expectations of work and productivity quotas.

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