Whether you’re in a group practice or a sole practitioner, succession planning can’t start soon enough for physicians who put in years of hard work and sacrifice to build a successful medical practice.   Proper planning is needed to ensure their practice is in good hands when they retire, so they can enjoy the fruits of their labor with piece of mind.

The following are some of the essentials any retiring physicians needs to consider:

  • Who will buy your practice?  For physicians working in a group practice, this could be a simple question to answer, as chances are a buy/sell agreement is in place with the other owners that will facilitate an exit. This contract spells out the transition of a current physician owner out of the practice upon certain events.

If this is the case, you should consider:

  • When was the last time the buy/sell contract was reviewed?
  • Have any other physicians bought in or sold pursuant to the terms in the buy/sell?
  • Are payout provisions clear (both in terms of valuation and repayment terms)?
  • Who will step into your role?

Another thing to consider is whether your practice did a good job recruiting and training physicians so patient care can continue at a high level. This could be especially important if you are to be paid out over time so you are ensured your buy-out.

For sole practitioners, this can be a complex question to answer. The follow are questions sole practitioners should consider.

  • Will a larger group practice or hospital system be interested in your practice?  If so, should you consider aligning with a system before your planned exit?
  • Do you want to bring in a younger physician to take over and buy you out? Recent trends suggest larger hospital systems will be eager to discuss and bring you on board if you are the right fit.  Chances are you may have multiple systems courting you.  If you plan to bring someone on to take over your practice early recruitment, engagement and planning are essential.
  • Are your books and records in order? This is especially important for a sole practitioner. Any buyer will want to perform due diligence and go over your financials, which could include billing, production, and collections for the past two to three years.  If this data is not readily available, this could significantly impact the price anyone is willing to pay or if they are interested at all?
  • What about your patient charts?  Are they still paper files or have you migrated to electronic medical records?  The key to this is preparation.  Be prepared before you starting talking to potential suitors.  A well-organized practice with accurate and reliable data that is readily available will make a good impression.
  • Do you have a long term lease?  Physicians are often either forced to or receive concessions from entering into long-term facility lease agreements.  While this can be a good thing if you are nearing retirement or thinking about joining a larger health system, you should think twice about a long-term lease agreement.  The potential buyer may not want to utilize this space and could view this as a liability.
  • What about semi-retirement? Is this an option at your practice? Does your shareholder/employment agreement address this situation?  Often times a part-time physician is not the most economically feasible option for a group practice or hospital system.  It is important to know if this is an option for you and what the specific terms are.

In summary, early planning and preparation are key factors physicians must do in order to facility the most seamless and financially beneficial transition.  Contact an advisor for further information and helpful tips for the successful transition of your business in order to maximize its full value.