Selling a medical practice: Planning tips for physicians

Selling a medical practice is rarely a simple financial transaction. For physicians, it often involves years of preparation, difficult timing decisions and careful consideration of legal, tax and operational issues. A successful transition depends not only on securing fair value, but also on protecting staff, maintaining continuity of patient care and ensuring the practice can continue to thrive after ownership changes hands. Physicians must weigh multiple succession options, from internal buyouts to hospital partnerships or outside strategic buyers, each with different implications for compensation, control and long-term goals. Emotional factors can also complicate the process, as stepping away from ownership often means redefining one’s professional role and legacy.

Medical Economics spoke with Kevin Baker of Emergency Care Partners about these challenges.

(Editor’s note: Transcript has been edited for brevity and clarity)

Medical Economics: What is the biggest mistake physicians make when they start thinking about selling their practice?

Kevin Baker: First and foremost, you need to get yourself a good advisor in your corner. That can be a CPA, attorney or financial advisor, but get good advisors. Another mistake is waiting and failing to prepare. Some often wait until the last second. A common mistake is not getting finances in order. Many practices get by with financials that only allow them to file taxes, but what you really need is financials that let a buyer compare time periods and key performance indicators. Another major mistake is focusing solely on price or valuation. The highest headline offer is not always the best deal. Physicians need to look at deal structure, how much is paid at closing, how much is contingent, and post-close employment expectations.

Medical Economic: How far in advance should physicians begin preparing for a sale?

Baker: The best transactions are rarely reactive, but intentional, and begin years before a transaction. Succession planning is about asking yourself: if I step away in three to five years, what would need to be true for this practice to thrive without me? Don’t wait to think about succession planning until you actually need it. Good things rarely come from last-minute decisions when you are backed into a corner. Making preparations maximizes value, gives sellers more leverage and control and reduces attrition among teammates.

Medical Economics: What factors have the greatest impact on valuation?

Baker: Value is mainly driven by financial performance, risk profile and future growth opportunity. The starting point is earnings, specifically high-quality earnings, often measured by EBITDA. Buyers want to know how reliable and sustainable those earnings are. On the risk side, we look at issues like reliance on hospital subsidies, dependence on locums providers, contract renewals, ED volume trends, payer mix and recruiting challenges. Then there is growth potential. Buyers pay more when they see opportunities to expand through new locations, cost savings or revenue cycle improvements.

Medical Economics: What financial and legal documents should physicians have ready before approaching buyers?

Baker: One of the first things to understand is your legal entity structure: LLC, partnership, S corporation or C corporation. If you are an S corp or C corp, there can be tax implications, so work with your tax attorney and CPA early. Also make sure your ownership or cap table is up to date, and document physician partner buyout arrangements. Many groups have off-balance-sheet retirement payouts that are not well recorded. Finally, begin preparing a data room by collecting legal, financial and operational documents in one place, including vendor contracts and payer agreements.

Medical Economics: What are the key differences between selling to a hospital system, private equity-backed strategic buyer or junior partners?

Baker: If you sell to partners, the payout is often small and based on accounts receivable, usually paid over several years. Hospitals typically are not very competitive on valuations because they often do not have large cash reserves for acquisitions. Many hospital deals involve temporary salary increases followed by lower long-term compensation. Strategic buyers with additional capital can often maximize liquidity because they can realize synergies and offer stronger valuations. Many also offer equity as part of the transaction, which can have tax advantages and help diversify holdings.

Medical Economics: How should physicians think about staff transitions and
patient continuity when planning an exit?

Baker: This part is often underestimated. For many physicians, the practice is their life’s work. Even when a sale makes financial sense, it can feel emotionally complicated. Physicians need to prepare for two parallel processes: the transaction itself and the identity transition. They should define success beyond the closing table. Is it maximizing value, protecting staff, preserving clinical quality, creating personal freedom or ensuring continued community service? If the buyer does not prioritize clinical quality and team support, I would be wary of partnering with that person.

Medical Economics: How open should physicians be with staff during the sale process?

Baker: It depends on the culture and communication style of the practice. Early on, there should be discretion, especially when evaluating whether a partnership is right. It is often best to have buyers work directly with third-party advisors like CPAs rather than involving staff immediately. If staff involvement becomes necessary, a confidential conversation with a trusted executive such as a COO or finance leader is often the best approach.

Medical Economics: What tax implications should physicians keep in mind?

Baker: Many people only think about the headline number, but there is more to it. Transactions often include equity in the acquiring company, which helps diversify risk. Usually, transaction proceeds may qualify for long-term capital gains treatment rather than ordinary income tax rates, which can create a substantial tax advantage. The difference can be five to 25 percentage points in tax rate. There is also a net present value benefit, because buyers are paying multiple years of earnings upfront, and that money can then be invested immediately.

Medical Economics: What should physicians negotiate if they want to continue practicing part time after the sale?

Baker: Communication is everything. If that is your intention, tell the buyer upfront. Buyers do not like surprises. As long as there is a strong bench of providers who can absorb the workload, it is usually not a problem. Physicians should also consider implications like whether part-time status affects eligibility for medical, dental and vision benefits.

Medical Economics: Is there anything else physicians should know?

Baker: Planning and preparation are everything. If you are thinking about succession planning at all, start today. Start having conversations. Signing an NDA does not force you to close on a transaction. It simply gives you more information so you can make an educated decision about the future of your practice.