Practices for sale

[DrAwsome]

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Anyone care to comment on how buying a practice works normally? I've seen a number of ads where people are selling practices. What exactly is being sold, the patient base or what? And normally if one buys a practice, would one hire physicians in that specialty or what? Just curious.

 

[docu]

Anyone care to comment on how buying a practice works normally? I've seen a number of ads where people are selling practices. What exactly is being sold, the patient base or what? And normally if one buys a practice, would one hire physicians in that specialty or what? Just curious.

I've always wondered the same thing. I think some people go as far as getting their practice appraised to find out the value, but i have no clue what the going rates are. I'm sure there are a multitude of factors that go into pricing a practice.

 

[Obnoxious Dad]

Anyone care to comment on how buying a practice works normally? I've seen a number of ads where people are selling practices. What exactly is being sold, the patient base or what? And normally if one buys a practice, would one hire physicians in that specialty or what? Just curious.

I would be very careful these days about buying a practice. This is especially true if you are saddled with a ton of med school debt. You might end up being burdened with another huge debt.

The solo practicioner is fading out of the picture. The overwhelming majority of physicians will be working for hospitals or groups because of the efficiencies associated with large practices.

One big problem with buying a practice is placing a value on it. You can hire a valuation analyst to figure out a price but that price will be based on a lot of questionable assumptions about patient volumes and reimbursement rates.

Be careful.

 

[FutureCTDoc]

I would be very careful these days about buying a practice. This is especially true if you are saddled with a ton of med school debt. You might end up being burdened with another huge debt.

The solo practicioner is fading out of the picture. The overwhelming majority of physicians will be working for hospitals or groups because of the efficiencies associated with large practices.

One big problem with buying a practice is placing a value on it. You can hire a valuation analyst to figure out a price but that price will be based on a lot of questionable assumptions about patient volumes and reimbursement rates.

Be careful.

The hospital model is awful, you wind up a well paid employee. Solos are doing fine surprisingly, it's just that doctors are on average some of the worst business people I've ever seen. For valuation it depends on what sort of practice, generally there is relatively little value in it because most people come to see Doctor X, not to go to the XYZ Clinic. If you plan to buy you need to get an investment banker to come in do a discounted cash flow/comps valuation. A boutique shouldn't charge that much.

 

[DrAwsome]

I would be very careful these days about buying a practice. This is especially true if you are saddled with a ton of med school debt. You might end up being burdened with another huge debt.

The solo practicioner is fading out of the picture. The overwhelming majority of physicians will be working for hospitals or groups because of the efficiencies associated with large practices.

One big problem with buying a practice is placing a value on it. You can hire a valuation analyst to figure out a price but that price will be based on a lot of questionable assumptions about patient volumes and reimbursement rates.

Be careful.

No med school debt, and I have a spa type business of my own on the side but I keep seeing these ads abou practices and I am not sure what they are selling, that's why I was asking really. I mean-so you buy the office location itself and the patient base? But that would mean that the patients would have to stay with the new physician, which may or may not be the case. I mean what is the point of buying someone's practice? I gues sI don't get it.

 

[DrAwsome]

The hospital model is awful, you wind up a well paid employee. Solos are doing fine surprisingly, it's just that doctors are on average some of the worst business people I've ever seen. For valuation it depends on what sort of practice, generally there is relatively little value in it because most people come to see Doctor X, not to go to the XYZ Clinic. If you plan to buy you need to get an investment banker to come in do a discounted cash flow/comps valuation. A boutique shouldn't charge that much.

Yeah taht's what I was thinking. But the patient base itself is not that great if they don't stay with the new physician. I was looking at the derm practice that was supposedly billing 4 mill/yr and asking for 2. I am not sure who would buy that given that the pts may choose to go with another doctor if the current one does not stay with the practice.

 

[michaelrack]

I mean what is the point of buying someone's practice? I gues sI don't get it.

If the practice has insurance contracts ("numbers") that the buyer of the practice could take over, that could be valuable. The old docs could be deleted from the contract, the new docs added, with little delay in billing. This is just speculation on my part, I don't know how easy it is to do this.

 

[Dr. USMLE]

Yeah taht's what I was thinking. But the patient base itself is not that great if they don't stay with the new physician. I was looking at the derm practice that was supposedly billing 4 mill/yr and asking for 2. I am not sure who would buy that given that the pts may choose to go with another doctor if the current one does not stay with the practice.

Interesting topic. The thing is...the potential risks are obvious so you can include them in your analysis of the practice worth and calculate the likely attrition rate given the practice type, pt population, location, and stardard attrition rate. It seems like this sort of thing would be a buyer's market anyway so you could prolly lowball.

 

[NotAProgDirector]

Actually, when someone buys a practice, usually most patients stay. First, people tend to be lazy -- so it's easier to just stay at the old practice and see what the new guy/gal does. Second, usually when you do this part of the deal is overlap -- for 3-6 months you are both working in the practice, so the old doc introduces the new doc to the patients.

So, for the most part, when you buy a practice you're buying the patient base. You're also buying all the office equipment -- exam tables, echo machines, whatever. Sometimes the doc also owns the building they are in and then that can be part of the deal also (or you'll end up paying rent to the prior doc).

 

[DrAwsome]

Actually, when someone buys a practice, usually most patients stay. First, people tend to be lazy -- so it's easier to just stay at the old practice and see what the new guy/gal does. Second, usually when you do this part of the deal is overlap -- for 3-6 months you are both working in the practice, so the old doc introduces the new doc to the patients.

So, for the most part, when you buy a practice you're buying the patient base. You're also buying all the office equipment -- exam tables, echo machines, whatever. Sometimes the doc also owns the building they are in and then that can be part of the deal also (or you'll end up paying rent to the prior doc).

Sure. I guess if a good patient base is established and they stay with the new doc it's a great thing, particularly if it's been profitable. But if people leave then you may end up worse off than if you just had started your own practice and built it up. I thought it was interesting that's all.

 

[DoctwoB]

It also depends on the field. If you buy a PCP clinic, most patients may stay. But if your patient volume is dependent on referrals, then there is no assurance that PCPs who referred to the previous owner will continue to refer to you. It takes time to build a reputation and connection with local providers, and buying a practice (especially in saturated markets) may not expedite the process significantly.

 

[Socrates25]

I would be extremely wary about buying a practice unless that practice has large market share or pseudo monopoly-like power in the market and thus has some leveraging power over hospitals and insurance networks.

With the ACO crap being shoved down the pipeline, it starts off as just a carrot with no stick i.e. join an ACO and we'll reimburse you an extra 5%

In 10 years, the fed govt will pull get rid of the carrot and use only a stick. They'll pull a bait and switch and say "you either join a large hospital network ACO group or we'll cut your reimbursement by X%" where X starts out at 5%, then goes up to 10, 15, 20% etc until all small group practices are wiped out or forced to be bought out by the behemoth ACO-hospital groups.

Having large market share always helps regardless of the ACO model, but it is even more at a premium in an ACO world where large hospital networks know that the federal government is going to start leveraging reimbursement against single clinics.

 

[DrAwsome]

I would be extremely wary about buying a practice unless that practice has large market share or pseudo monopoly-like power in the market and thus has some leveraging power over hospitals and insurance networks.

With the ACO crap being shoved down the pipeline, it starts off as just a carrot with no stick i.e. join an ACO and we'll reimburse you an extra 5%

In 10 years, the fed govt will pull get rid of the carrot and use only a stick. They'll pull a bait and switch and say "you either join a large hospital network ACO group or we'll cut your reimbursement by X%" where X starts out at 5%, then goes up to 10, 15, 20% etc until all small group practices are wiped out or forced to be bought out by the behemoth ACO-hospital groups.

Having large market share always helps regardless of the ACO model, but it is even more at a premium in an ACO world where large hospital networks know that the federal government is going to start leveraging reimbursement against single clinics.

Wait why would reimbursement be cut from clinics? I did not understand that.

 

[Socrates25]

Wait why would reimbursement be cut from clinics? I did not understand that.

Because the federal govt in its infinite wisdom has decided that healthcare should be delivered by large entities called ACOs (accountable care organizations). Examples of this would be Kaiser Permanente in California and Intermountain Healthcare.

Individual clinics who dont belong to one of these groups are incompatible with the federal government's vision, so measures are being taken to force them to merge with giant ACOs.

The first step is that the govt will give a "bonus" to clinics to who are ACO affiliates, maybe a 5% or 10% increase from baseline reimbursement. Everybody at ground level says "hey that sounds good we can sign on to that."

Then in 10 years, once the model is established, the federal govt pulls a bait and switch. They get rid of the carrot and institute sticks -- you either join an ACO or you take a 5% cut in reimbursement.

What this will do is force individual clinics to sell at a loss or at a much lower value to the large ACOs. The ACOs know that they will have all the leverage over these individual clinics so they will make lowball offers. No individual practitioner or small group will be willing to take the risk to buy these clinics, which will turn the market into a kind of monopsony where one buyer (ACO) faces many sellers (individual clinics), thereby forcing down values of the clinics.

The best time to sell your clinic is right now, because in 10 years you wont get nearly as much value for it. The only buyers will be a few large ACOs.

 

[DrAwsome]

Because the federal govt in its infinite wisdom has decided that healthcare should be delivered by large entities called ACOs (accountable care organizations). Examples of this would be Kaiser Permanente in California and Intermountain Healthcare.

Individual clinics who dont belong to one of these groups are incompatible with the federal government's vision, so measures are being taken to force them to merge with giant ACOs.

The first step is that the govt will give a "bonus" to clinics to who are ACO affiliates, maybe a 5% or 10% increase from baseline reimbursement. Everybody at ground level says "hey that sounds good we can sign on to that."

Then in 10 years, once the model is established, the federal govt pulls a bait and switch. They get rid of the carrot and institute sticks -- you either join an ACO or you take a 5% cut in reimbursement.

What this will do is force individual clinics to sell at a loss or at a much lower value to the large ACOs. The ACOs know that they will have all the leverage over these individual clinics so they will make lowball offers. No individual practitioner or small group will be willing to take the risk to buy these clinics, which will turn the market into a kind of monopsony where one buyer (ACO) faces many sellers (individual clinics), thereby forcing down values of the clinics.

The best time to sell your clinic is right now, because in 10 years you wont get nearly as much value for it. The only buyers will be a few large ACOs.

Wow so private practice is going extinct then? So if this is the case and we all become hospital employees, can we unionize, demand higher wages when we are not happy with our conditions, strike and so forth?

I'm kind of perplexed at what the gov wants overall. It just baffles me that they would think people would continue to go into medicine if ultimately there is no financial reward of any kind. Clearly people don't go into medicine just for $, but if after 14 or so years of training there is no financial reward, why not do something much simpler and take it easy? I know a number of docs who are going back to their previous careers because they are fed up with this. My husband's ophtho already informed us that he's closing shop. I fear for what will happen to the healthcare industry if the gov does not wake up and values their doctors.

 

[michaelrack]

I'm kind of perplexed at what the gov wants overall.

Total Control

 

[DrAwsome]

Total Control

So what happens when people start dying because the gov thinks nurses can do the same job for less? It's a serious question. The financial reward is progressively becoming less. From anesthesia to FP and even derm with midlevel encroachment who would think of becoming a doctor when they can get their little online PA/NP/CRNA/anti doctor degree and make quite a bit for a few years post undergrad? It's surprising that the gov does not see the only reason why this model works currently is bc of supervision. No supervision = disaster. Why don't they also close down medical schools or certain specialties then if they don't feel doctors need to do them? I guess I'm either an idiot or I simply don't get this.