The Steps to Take to Sell Your Medical Practice
In many ways, selling a medical practice is very similar to selling any other type of business.
There needs to be a valuation, a due diligence phase, negotiation and close of sale.
In many other ways, though, selling a medical practice is very unique. There are assets and liabilities a medical practice has that other businesses probably don’t. There are also valuable and sensitive patient information medical practices have that need to be handled with care.
If you’re selling your medical practice, here are some of the main steps you need to keep in mind.
Figuring out the valuation of your company is something every business must do. Medical practices have some specific guidelines that will often determine the initial value of the business.
The generally accepted figure is that general practitioners, podiatrists, internists and other more basic medical practices will sell for approximately 50% to 70% of their annual revenue. If their annual revenue is $1 million, for example, their practice will often be valued at $500,000 to $700,000 in a sale.
Higher-end specialty practices could sell for anywhere from 80% to 100% of their annual revenue. In that $1 million example, this would mean their sale price would be in the $800,000 to $1 million range.
What to Include in the Sale
When you sell your medical practice, you’ll need to agree with the buyer as to what will be included, and what won’t be included, in the sale.
Some of the obvious assets that likely won’t be included in the sale are any of your personal effects in the office, including your certifications, diplomas and artwork.
You likely won’t also be including any cash value of insurance policies that you have — since the new owner will have to get their own. You’ll also likely keep the cash that’s in your bank accounts and the funds that are in. your pension.
One asset that could be up for negotiation would be real property, if you own the building in which your practice operates. You could choose to include the building as part of the sale — which would increase the value — or simply lease the building to the new owner.
On the opposite end, you’ll also want to negotiate liabilities that the new owner may or may not assume at closing. These could include leases on equipment or on the building. It could include service agreements you have for staffing, billing, janitorial services and equipment.
When the buyer assumes your liabilities, you will likely have to loop in the creditor to this part of the agreement. They’ll need to re-write the agreement in the new owner’s name so you aren’t liable for the debt.
How to Notify Patients
It is incumbent on one party in the sale to notify patients that the medical practice is changing hands. This is something that should be agreed upon at the negotiating table.
Each patient should be sent a formal letter with some basic information on it. This should include:
- Basic information about the sale of the practice
- The last date the former practice will be in operation
- Instructions on how patients can obtain their medical records (if they want them)
- Information about where their medical records could be sent
There should also be contact information put for both the former and new owner of the business in case the patients have any questions.
What to Do with Medical Records
There are rules and regulations you have to follow when you deal with patient medical records. The state you’re in is likely the entity that will determine those rules you have to follow.
No matter what, you should not transfer any patient’s medical records to another practice without their permission. This includes transferring records to the new buyer of your practice. The patient has the right to say they don’t want their records to be part of the sale.
As mentioned above, you should give your patients advanced notice of the upcoming sale, and give them options for transferring or obtaining their records.
For those who don’t respond, you will need to maintain and store the records in a safe place. There are, again rules and regulations to how this must be done.
As you’re progressing in the negotiations for selling your practice, it’s a good idea to get a head start on investigating what you need to do regarding medical records.
Check with your state regulatory body so you know you’ll be following all the rules properly. Then, start taking early steps to prepare for when you’ll need to roll everything out.
When you get far enough into the sale, you’ll also want to loop in the new buyer as to what you’re doing, why you’re doing it and your progress. Educating the buyer on the rules is always a good idea, as it will help them understand why you’re not just turning records over to them.
If you are aiming for an easy transaction talk to a Sunbelt South Florida broker today!
Sunbelt Business Brokers of West Palm Beach provides dedicated business brokerage services for all of your selling needs. Whether you are an established business owner nearing retirement and looking to sell, or an ambitious entrepreneur seeking your next investment opportunity, there is no reason to look beyond Sunbelt Business Brokers. Visit us at 800 Village Square Crossing
Suite 216 Palm Beach Gardens, FL 33410 or contact us at (561) 832-9222.