Nearly half of all physicians are older than 50, and approaching retirement. Early retirement planning and open communication can help you find a buyer for your practice, ease your transition to retirement, ensures your practice thrives and provides effective care coordination for your patients.
You’ve worked hard to build a successful medical practice and you are beginning to see the retirement light at the end of the tunnel.
So now what? Who will care for your patients? Will you be able to find a buyer who is the right fit? How do you make sure you go into the transition with the best chance for success?
Whether you have a solo practice or are part of a group, the main ingredients for a successful transition are advanced planning and good communication.
This may seem obvious, but as practice management consultants, our firm has encountered situations where a failure to address these fundamentals resulted in a failure of succession.
Here are some of the essentials to a successful transition when you approach the end of your career.
The importance of advanced planning
A practice has much less value at the “last minute,” and the last minute will sneak up on you faster than you suspect.
This is true in any case, but particularly if you are in solo practice. An abrupt retirement will drive your patients to another doctor in short order. The astute type of successor, the kind of person you want to attract, will look for a well thought out transition plan, because risking a loss of patients is counterproductive.
Having a good transition plan is an indication of a well-run practice and sends the right message to your potential buyer.
Even in a group setting, a quick departure will impact value since much of the overhead will continue. Ongoing overhead without related production takes money right off the bottom line. Patients will typically hang in longer with a group, but if they can’t get an appointment with those who remain or don’t have a good opportunity to build rapport with their new doctor, they will leave.
Good advanced planning ensures that all stakeholders (you, your partners, and the new doctor coming in) are all on the same page. Planning before a transition is on the horizon is beneficial because it helps avoids decision making based on individual agendas and instead causes everyone to think in terms of what is best for the practice.
In order to facilitate a smooth transition and establish expectations, here are important topics to address and questions to answer within your group.
How early should you start?
How much notice is required to retire with full value (i.e. stock value, account receivable payout, etc.)?
We recommend a minimum of a year, and to have the notice and timing well-coordinated with the recruiting time table for doctors completing training.
For example, if a one year notice is required but is given at year-end, you may miss out on the doctors available the next summer.
What about partial retirement?
Is semi-retirement, dropping call, etc. allowed? If this is not decided in advance, some doctors will assume that going part time is naturally permitted.
But, a part-time practice still requires space and overhead and can limit capacity necessary for a new doctor to build a practice. Economically, accommodating a part-time doctor is difficult without a significant reduction to compensation.
A semi-retirement arrangement should ideally have a defined duration only long enough for the transition to be successful, and it should be allowed only if it is good for the practice as a whole.