By JAY A. SHORR, and MARA SHORR
They say the days are long and the years are short. For medical providers and practice owners approaching the back nine of their careers, you'll notice this quicker than ever. If you're now thinking about retirement in the next five to 10 years, constructing an exit strategy should be in your cards.
Not jumping into things too quickly is key, so be sure to consider the following:
Do you want to sell or just close your practice?
As consultants, we find physicians often believe their practice is worth more than it actually is, which hurts the ego when the actual evaluation is completed. The issue becomes personal, as a lot of sweat and hard work went into creating your practice. Your practice may have supported you all of these years, but changes in insurance reimbursements have unfortunately lowered the values of many practices.
Ultimately, you'll want to consider which of the following reasons is causing your retirement:
- Relocation to another city or state
- Maintaining your practice is too much of a physical or financial hardship, and you're now physically or financially unable to meet the demands of the practice
- Lowered insurance reimbursements no longer make it worth your while
- Governmental regulations have changed and it's too much to keep up with
- You no longer want to manage your staff and you want to just practice medicine and let someone else run the business side.
- Finally, if you have been offered a buyout and it seems too good to be true... BEWARE!
How much is your practice worth?
When selling a practice today, the value is more in the tangible assets (capital equipment, supplies and website), real estate and receivables rather than the number of charts you have to sell. The patients came to YOU and may not be interested in going to a new, different provider. Hire a professional who specializes in medical practices to determine the actual value of your business, so you can make a more informed decision about how to proceed, remembering that this process takes planning, accounting, and even involves legal guidance.
Prior to entertaining or discussing the sale of your practice, ensure you have secured a non-disclosure and confidentiality agreement from ALL parties involved. Beyond personal information about to be disclosed, there is also the potential for disclosure of your patients' protected health information (PHI). Ensure any and all information which may be in the possession of any third party be immediately returned and/or destroyed at the conclusion of the negotiation.
When you are negotiating to sell your practice, the purchaser may not want to purchase the stock of your business because as it also assumes the potential and existing liabilities associated with the practice. This can be a positive thing if you are interested in an insurance component, as the insurance negotiated contracts may go along with the sale.
Who can purchase your practice?
Be sure to understand who may purchase your practice. In many states, regulations which stipulate who can and who is prohibited from purchasing medical practices. In Florida, for instance, it is permissible under certain standards for non-physicians to own a medical practice. Be sure to consult with legal, accounting and consulting professionals who are skilled in this field.
What if you're just going to close the practice's doors?
If you are just going to close the practice, you will need to ensure you follow proper protocols for the benefit of your patients and the legal guidelines in the state where you practice. This includes proper notification to your patients of your pending retirement where you must terminate your physician/patient relationship. This will eliminate the legal process of patient abandonment. You should give your patients about 60-90 days advance notice of your intent to retire.
Prior to your notification, it is always best to have a referral base of colleagues with whom you can refer your patients. This should go in the letter you send to your patients once you have decided the time is near. Allow your patients the opportunity to pick up their medical records if they so desire. Have a system in place where the patients' records can be maintained, stored and recalled in the event a patient, attorney, malpractice carrier or governmental agency has a need to request them. State laws vary, so be sure to consult the advice of a professional who is knowledgeable in this regard.
Do you need to let the licensing boards know?
Many states require you notify them if you elect to no longer practice medicine. You may keep your license on an inactive or part-time status but be sure to not just let your license expire or lapse. In addition, remember to send proper notification to any medical facility/hospital where you have privileges, so they are not just inadvertently terminated due to lack of renewal, payments, etc.
What are your existing financial obligations?
As your practice progressed, you had to enter into some type of contractual agreements. These may have included, but not limited to, capital/tangible equipment, such as lasers, your websites, rent/mortgage/lease agreements, employee salaries and retirement obligations including local, state and federal taxes. You'll want to make sure all of these items are properly addressed.
Who should you have on your team?
Make sure to assemble a strong team of healthcare associates who are familiar with helping to close or sell a medical practice. We've seen a number of issues when practices try to use a family friend unfamiliar with the issues that come into play. Your team should include, but is not limited to, a healthcare attorney, a strong accountant, a medical practice business consultant and a business/transactional broker. Remember to have non-disclosure paperwork and a business associate agreement signed for all parties involved.
There's a lot to think about, and we've seen analysis paralysis happen before. Getting started is the first step to moving forward towards your next steps.
Mara Shorr, BS, CAC II-XII serves as a partner, as well as the Vice President of Marketing and Business Development for Shorr Solutions, assisting medical practices with the operational, financial and administrative health of their business. She is a Level II - XII Certified Aesthetic Consultant and program advisor, utilizing knowledge and experience to help clients achieve their potential. A national speaker and writer, she can be contacted at email@example.com.
Jay A. Shorr BA, MBM-C, CAC I-XII is the founder and managing partner of Shorr Solutions. He is also a national professional motivational speaker and writer, an advisor to the Certified Aesthetic Consultant program and a certified medical business manager from Florida Atlantic University. He can be reached at firstname.lastname@example.org.