Monday, November 30, 2009

The Best State to Practice Medicine

Physician's Practice came out with its list of the best places to practice medicine in the November 2009 issue, based on the following criteria:
  • Medicare Geographic Practice Cost Index
  • Cost of living
  • Number of physicians per 1,000 residents
  • Malpractice climate
  • Medical Board Major Disciplinary Actions Per 1,000 Physicians
  • State income taxes
It is most interesting to note how many states are "in crisis" or have "serious problems" when it comes to the malpractice climate. This underscores the view that reform addressing malpractice is long overdue. Even in the states with a multitude of favorable qualities for practicing medicine, the malpractice situation is downright scary.

Tuesday, November 17, 2009

SBA Loans for Electronic Health Records systems

Senator John Kerry has proposed a bill that would allow physicians to obtain SBA loans for the acquisition of electronic health record systems and other computer technology to modernize their practice. This is a welcome relief to physicians who are worried about the high costs involved in acquiring, implementing, and maintaining such systems. Investing in electronic health records will be required in order for physicians to qualify for some government incentives and comply with upcoming mandates. It is encouraging to see that there is a push to make SBA loans more accessible to physician practices, especially in light of a puzzling move by the SBA last year to place a cap on goodwill for acquisitions. The goodwill cap has since been revised and it has still been possible to obtain amounts in excess of the limit through an individual review process, but the thought of such a limit being implemented is still disconcerting.

Monday, November 16, 2009

Protecting Practice Value - Southern California Physician

The latest issue of Southern California Physician featured an article entitled "Protect the Value of your Practice", which discusses the importance of a contingency plan for the practice in the event a physician-owner passes away. In such an instance it is vital for the sale of the remaining assets to occur as soon as possible. Intangible assets and goodwill are often the most valuable assets in a practice, and their value erodes rapidly once the principal is incapacitated or passes away. The article suggests the use of a revocable living trust as a way to address the drawbacks of the probate process. While this may be a stop-gap measure for further erosion of remaining asset values in the practice, a more important aspect to consider is the planning of a comprehensive exit strategy in advance. We often receive phone calls from relatives of recently deceased physicians who are looking to dispose of the remaining practice assets. In most cases it is difficult, if not impossible to find a buyer. It is imperative for older physicians to think about exit planning far in advance even if thoughts of retirement or mortality are unpleasant. Selling the practice outright is one solution. Bringing on an partner/associate and negotiating a buy-out plan in advance is another option. These are steps which can help to preserve some of the goodwill value of the practice and avoid a fire-sale situation in the event of death or incapacity.

Wednesday, November 11, 2009

Optometric Management - Staff meetings in the Optometry practice

Regular and well-administered staff meetings are vital to the management of any healthcare practice. Especially as practices grow and diversify these venues become increasingly important. Wise practice owners can use these opportunities to gauge key factors before making adjustments to business practices. In addition, staff meetings can be crucial outlets for the discussion of topics which are not suitable to address during normal operations. An article in Optometric Management on How to make your staff meetings more effective touches on a number of helpful strategies to get the most of out of these opportunities.

Wednesday, November 4, 2009

Selling a Professional Healthcare Practice - Frequently Asked Questions

Frequently asked questions about the sale of a practice...and answers, provided by yours truly.

When is the best time to sell my practice?
The decision to sell can be driven by a variety of factors: retirement, career change, lifestyle desires, or financial concerns. Addressing personal timing in conjunction with financial considerations is crucial when trying to obtain full value for the practice. From a financial perspective, the ideal time to sell a practice is during a period of solid earnings. The value of a practice is largely driven by recent performance. Buyers and financing sources will look for consistency over the prior 2-to-3 year period with additional emphasis placed on the last 6 months to 1 year. Growing and maintaining the practice in anticipation of pursuing an exit strategy is important to maximizing potential value.

How much is my practice worth?
A practice’s value depends on many factors. A professional appraisal, conducted by an expert in healthcare practice valuation, takes highly specific market factors and industry nuances into account. In choosing an appraiser for this purpose it is important to consider whether the appraiser uses sound principles and has a strong foundation in the realities of practice transactions occurring on the market. An appraisal is only as good as its ability to realistically reflect the value of the entity.

How long does it take to sell my practice?
The marketability of a practice and timetable for completing a transaction are dependant on various factors. The most common aspects that come into play are: practice earnings, practice valuation, specialty, buyer demand, geographic area, and seller motivation. In general, 6 months to 1 year is a fair timeframe to consider for the complete lifecycle of a transaction. A major determinant of success in this process involves the ability of a consultant to anticipate potential challenges and diligently prepare an approach prior to marketing.

Why not sell the practice myself?
Practice owners may discover that the time and expense involved in trying to sell the practice themselves does not usually result in savings or a successful outcome. The mere decision to sell a practice is one of many steps in a potentially complicated and emotional experience, coupled with the intricacies of a transaction process for which an owner may have limited prior experience in handling. Even well-seasoned individuals may find that supervising the process themselves draws focus away from the management the practice, thus risking a decline in the very asset they are trying to obtain optimal value for. Working with a qualified practice transition specialist can yield a much higher probability of obtaining maximum value for the practice. A specialist is able to expose the opportunity to a larger pool of potential buyers and can rigorously qualify candidates both professionally and financially. In addition, the expert guidance and assistance provided by an advisor can make for more effective negotiations and a streamlined and successful transaction. Sellers can also address the need for confidentiality more effectively when an intermediary is in place.

How do I choose a consultant?
It is vital to select a transition advisor who is knowledgeable about the nuances of selling healthcare practices and can gauge market realities when devising a selling strategy. A good advisor who can give an honest analysis upfront and provide reasonable expectations for selling the practice is much more likely to deliver actual results within your given timeframe. It is important to work with someone who is committed to providing full service guidance from start to finish.