Get necessary details on how to sell a solo practice.
Q: I have had enough of my private solo internal medicine (IM) practice. I need to sell it, but I'm unsure how to proceed. I owe $80,000 (bought an electronic health record [EHR] system in 2009, and a physician left after a year). My lease doesn't expire until 2015, but we're in a beautiful office space in a modern medical park. I have a successful practice, but after overhead is paid, I don't get fairly compensated. I have more than 3,000 patients, ages 16 to 101. How do I package a practice, and to whom? What Web site should I use to list it? How do I sell without informing my staff before it's appropriate?
A: In your case, the practice has no financial goodwill value because income is reportedly sub-standard for a 3,000-patient IM practice. Unfortunately, the EHR was purchased rather than rented, creating an $80,000 remaining liability, and the EHR company probably also would want a "license transfer fee" to a new owner. There is also the anticipated lease liability for 4 more years, probably at least $1,500 per month for
40-plus months, or more than $60,000. Total liabilities before accounts payable and accrued staff benefits, therefore, likely exceed $150,000.
The best solution if you are set on giving up now is to approach the local hospital about acquiring your practice, employing you at fair market value, and letting it assume the liabilities, do the recruitment, and improve the profitability. Another choice is to have a larger local group take over your practice.
The last choice, with slim chances of success, would be to find an internist from out of town to relocate to your city and buy the practice, in which case you might have to pay him or her a substantial amount.
Even for the best and most financially successful of practices, finding a buyer to come in from out of town usually means finding someone who has a reason other than financial to be there, and smaller, rural, and economically depressed towns have the hardest time of all in recruitment/sale.
If you want to try a for-sale-by-owner strategy, statistics indicate that most buyers now find their acquisitions online. Three of the top online locations to place ads are http://www.bizbuysell.com, http://practiceworld.com, and http://MergerNetwork.com. Those are among the top ones that medical practice brokers use.
If you wish your staff to not find out, you would be better to use a confidential intermediary such as a practice broker or attorney. Commonly, 90% of inquiries will not be qualified to buy, so screening candidates is important. Make sure to use a medical specialist attorney to represent you in any transaction to clearly eliminate the liabilities without creating more. A non-specialist attorney may not know the relevant Medicare, Stark, and other applicable laws related to sales.
Possibly the only other practical solution, other than living with a low income or declaring bankruptcy, might be to get a practice management consultant in there to help solve the economic problems (maybe add a midlevel provider and some ancillary services) and make the practice profitable first, and pay off the debts.
Answers to readers' questions were provided by Judy Bee, Practice Performance Group, La Jolla, California, Keith C. Borglum, CHBC, Professional Management and Marketing, Santa Rosa, California, and Alice Gosfield, Alice Gosfield & Associates PC, Philadelphia, Pennsylvania. Send your practice management questions to firstname.lastname@example.org