Exit Strategies for Physician Practices

Exit Strategies for Physician Practices


“To sell or not to sell?” That is the question facing many physicians today. Despite the reports of gloom and doom, the AMA reports that over 47% of physicians are still practice owners.  Many of those physicians will be targeted for acquisition by larger healthcare groups and hospital systems. Those physicians not looking to become “employees” will transition to concierge medicine, cash only services, or retail models, to replace lower reimbursements or opt out of third party reimbursement models completely.

But what if you want to sell? You have sacrificed over the years to build your practice into a successful entity, exiting should be on your terms, at the best price possible, with little tax liability. Now is the time to start shaping your practice into a package that buyers, investors, or other physicians (inside or outside the practice) want.

Now is also the time to start thinking about planning for your retirement and how the sale of your practice can get you closer to your financial goals.

Here are three items for consideration:
•    If you wish to retire, is the practice viable without its biggest revenue producer;
•    Before putting your practice on the market, should you merge with or acquire another practice to make yours more attractive, and
•    Would developing a medical facility to leverage a real estate investment make sense?

Buyers will want to purchase a practice with profit and cash flow, one that can run smoothly after your departure, or with little transition time needed for a new team to take over operations. Well documented policies and procedures must be in place for each business process. You want to ensure that your practice is “a going concern,” and there is a return on investment for the buyers or investors. That ROI will be low if the value of the practice is only in the patient base, and thus your selling price point will be low as well. To get top dollar, physicians must start the Exit Planning process NOW.

Buyers are looking for:
•    High probability of future cash flow
•    Strong management team and professional, well trained staff
•    History of patient and practice growth
•    Realistic business valuation
•    Well positioned in marketplace or geographic footprint

Strategies that might enhance value include:
•    Merging in practices in no-cash transactions, where equity interests are combined. The new entity then defines which partners retire, and which physicians will move up and manage operations. Multiple locations can enlarge the practice footprint.

•    Develop a medical facility (or clinic) in a limited partnership with several doctors who are all equity investors, and will own and manage the facility. Consider a new facility or refurbishing an existing building, then leasing the space to the partners' practices. Capital can be raised to finance the development and build-out. The entity can be sold at a capital gain or produce an annuity.

•    Engage a professional business and financial advisor to help formulate a strategic plan and its execution, establish credibility with potential merger partners, lenders and investors. Banks, “angel” investors, and creditors may hesitate to work with the physician alone and often prefer a third party expert. There are certified Business Exit Planners who can bring objectivity, contacts, financing, and M&A transactions to the table. They create an operating plan with assumptions and financial forecasts, assist with due diligence and with negotiating a transaction.


Contact Us: Dream about leaving your practice one day but don’t know how to begin? Fuoco Group is the right resource to help you get started today for the best possible outcome tomorrow. Lou Fuoco, CPA, is a member of the Business Enterprise Institute and Exit Planning Institute, and is trained in the Seven Step Exit Planning Process™ which complements estate planning to provide more financial security for you and your family members. Contact Lou for a complimentary consultation – you can reach him directly at This e-mail address is being protected from spambots. You need JavaScript enabled to view it or 561-209-1101.


 

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