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Ready to Sell Your Medical Practice? What You Need to Know!

Posted on December 17, 2019

With a dynamic healthcare market and an increasing number of consolidations of practices, selling a medical practice may be a valid option for you and/or your business partners.  However, selling a medical practice can be complex and includes several important legal and financial matters.  If you are contemplating selling your medical practice, there are a few key items you’ll want to understand before you move forward. 

Planning for a Potential Sale

  1. Planning in advance is key.  You will need to obtain an objective third-party appraisal of your medical practice to understand its true value.  The value of your medical practice will be determined by a combination of tangible assets, accounts receivable, and goodwill.  Not only is this important so that you have a solid base from which to negotiate pricing, but it also is important for regulatory issues.
  2. Prior to beginning the process with any potential buyer, it’s good practice for your potential buyer to sign a non-disclosure agreement so that any information you share will remain confidential.
  3. You will need to decide if you plan to retire from the practice or continue working for the practice once the business is sold.  A comprehensive legal employment agreement will determine your future involvement and exit options from the practice.  You will need an expert on your side to ensure your best interests are incorporated into this document.
  4. You will need to thoroughly review all current contractual agreements the medical practice has and determine how to include these (or not) when you sell.

Preparing and Negotiating the Medical Office for a Transfer/Sale

  1. As the current practice owner, it becomes your responsibility to maintain insurance for the medical practice through the date that it is sold to another entity. 
  2. Electronic Health Records (EHR) are by far more valuable than old-style paper medical records.  EHR will make your life – and the sale – more efficient and easier.
  3. You will need to abide by HIPAA laws in the transfer of all patient files and information.  Additionally, you will need to follow certain regulations related to retaining and storing patient medical records even after the sale of the medical practice.  There is a possibility to legally transfer custodianship of medical records to the buyer through a special agreement known as the Medical Records Custody Agreement.  This type of agreement may necessitate another important agreement since the buyer would become your business associate with regard to the patient documents or protected health information (PHI.)
  4. You will also need to carefully review any equity you may own in the office space or building where your medical practice or practices are located.  If you own equity, you may want to seek a formal legal buyout for the sale of the medical practice and ensure you receive appropriate compensation.  Alternatively, you could choose to maintain your ownership in the office space and lease it to the practice in which case you would be the landlord.
  5. Once you’ve discussed all the details with your attorney but before you get excited about one particular offer, let other potential prospects know of your intention to sell your practice.  Reach out to other local medical offices or hospital administrations.  Having more than one bidder can help you get the best price for your medical practice.

Communications with Patients, Physicians, and Medical Community

  1. Physicians cannot leave their practice without communicating to patients or they can face “patient abandonment” charges.  Hence, you must provide adequate notice to patients if you will be transferring the practice.
  2. In the negotiations of the sale of the medical practice, you may offer transitional marketing assistance to the new owners.  This may involve staying on for a limited time to provide introductions and a smooth transition with patients, referring physicians, and other key industry colleagues.

Ultimately, it’s your choice.  You can set yourself up for a risky transaction without expert counsel. 

Alternatively, you can set yourself up for success by working with an expert attorney to guide you through the process of determining value, drawing up and filing the proper legal documents, entering negotiations, complying with HIPAA regulatory laws, selling your medical practice, and establishing your role post-sale.

ECanter Lawyers

Healthcare business owners as well as physicians face unique regulations as they purchase or sell practices or ancillary businesses. At ECanter Lawyers, we have the necessary legal expertise to properly assist clients with the purchase or sale of medical-related practices in Florida. In addition, our firm assists with the drafting, review, and the negotiation process of medical and healthcare related contracts, including: 

  • Entity Formation
  • Structural Compliance
  • Ownership Documents
  • Medical Directorships
  • Sales & Purchases – Space Leases
  • Buy-ins & Buy-outs

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