Medical Practice Sales and Appraisal

Have you thought about buying a pediatric practice? We currently have two practices which are available in Orange County. These are excellent practices. One is a part-time opportunity which can be acquired as a start-up alterntative or expansion of exisiting operations. It boasts gross collections of $300,000 and net income of $180,000 on only 20 hours of MD coverage annually. The second practice is a full-time opportunity with gross collections of $700,000 and net income of $300,000. For details on these listings please call medical practice broker at 800-416-2055.

Also contact us for details on pediatric practice appraisal and valuation

An important component in the success of a dental practice is the lease agreement for the office space. Occupancy costs can be one of the largest expenses in a dental practice. More importantly, selection of a good location is critical to patient flow and income. Therefore, dentists should consider the lease of an office location not just as a necessary expense, but as an investment. If the location is poorly chosen or if the terms of the lease are overly slanted in the landlord’s favor, it can affect your finances as well as reduce the ability to transfer or sell the practice. A new dental practice buyer is unlikely to assume a highly unfavorable lease and purchase a challenging or unsuitable location.

Running and growing a dental practice is hard enough, and an above-market lease payment can be a drag on growth. New dentists sometimes fall into the trap of associating high-end, high-cost office space with high earning potential. These are not necessarily associated with one another. Be sure to conduct a feasibility study and formulate a detailed business plan before making the site selection.

Also, with the amount of extensive build out and lease-hold improvements done in a dental office, a dental practice cannot be easily moved. Once the build out has started, consider yourself committed to the location. It is important to remember that the property owner’s broker or attorney likely drafted the lease agreement. You should always seek the advice of your own broker or counsel before engaging in such an agreement. Failing to do your due diligence can be a costly mistake!

Charles Kim is a dental practice broker at Transition Consultants, a practice merger and acquisition firm. Mr. Kim provides transaction advisory and dental practice valuation services to dentists and dental groups nationwide. He can be contacted at 800-416-2055 (x224).

The income based approach to valuation is commonly used in the valuation of medical practices and healthcare businesses. However, appraisers who apply the improper methods (mostly out of convenience) can drastically over or under value the practice. One frequent mistake I see is the use of the capitaliztion of cashflow/earnings method when the practice has a clear history of volatile profitabilty. When possible, it is better to use the discounted cashflow/earnings method. Even if the business forecast is somewhat unclear, the discounted cashflow method offers the appraiser a much higher degree of accuracy. This is especially relevant when appraising smaller medical practices; reimbursement changes have an effect of greater magnitude on these entities. Avoiding shortcuts and using the proper methods is critical to an accurate assessment of practice value.

OptometryLoans.com is now offering a new source of financing for Optometrists, providing 100% financing for:

* Practice Purchase + Working Capital
* Start-up Practices
* Practice Loan Consolidation & Refinancing - Increase Cashflow
* Fixed Rates as low as 6.5%
* Terms up to 15 years

For details please contact one of our Optometry practice loan experts at 800-416-2055

For optometrists looking to further their treatment plans and gain additional skills, there are additional vision care certifications which can be obtained. This can be a great opportunity for new optometrists starting a private practice to differentiate themselves from the competition. Established optometrists can also benefit from these certifications and sharpen their skills. In California for example, a glaucoma certification is available which allows optometrists to treat these conditions in patients over 18 years old. While the requirements can be cumbersome, the certification it is an excellent way to improve skills and treat more patients. Ultimately, the more patients treated and the wider scope of care you can offer will help to improve practice revenues. Among the requirements for the certification (§ 1571 Requirements for Glaucoma Certification) as adopted by the California Board of Optometry are the following:

Maintaining an active optometry license in good standing
Be certified to use Therapeutic Pharmaceutical Agents (TPA)
Complete a course of at least 24 hours in diagnosis, pharmacological, treatment and management of glaucoma
Complete a required case management involving at least 25 patients treated for 12 or more consecutive months. This involves patient evaluation, necessary testing, diagnosis, recognizing glaucoma type, and creating treatment plans, and making referrals to an ophthalmologists as needed. There are a variety of case management treatment options. Among these are:

Case Management Course
Grand Rounds Program
Preceptorship Program

For optometrists who achieve the glaucoma certification, each renewal period will involve 10 hours of glaucoma specific continuing education.

Dental practice valuations can be a challenging task with many complexities. A professional valuation company can charge thousands of dollars to determine the fair market value of a practice. Before spending that money, it is important to do your homework and choose an appropriate valuation expert, and to properly understand the benefits and limitations of the valuation report.

Unfortunately, there is no standardized universally accepted formula or “rule of thumb” that a valuation company may use to establish the value of a dental practice. There are many objective factors that should be considered to determine the value, and there are as many subjective factors unique to the dental industry (and to each specialty within the dental industry) that are just as important.

In reality, a valuation of a dental practice is closer to providing a subjective opinion rather than using complex formulas or “industry standards”. Be sure to work with someone that understands the dental industry to develop a reasonable and useful dental practice valuation. This valuation should be discussed in further detail with your financial advisors to prepare for the transition process.

Naturally, the valuation will incorporate much of the financial data to analyze the “numbers” of the dental practice. Perhaps more helpful, will be analysis of the key factors of profitability and growth that are unique to the specific practice being evaluated. Each dental specialty has its own attributes that must be considered, such as different standards for reimbursements, payor mix, percentage of patients by referrals, etc.

Charles Kim is a dental practice broker at Transition Consultants, a practice merger and acquisition firm. Mr. Kim provides transaction advisory and dental practice valuation services to dentists and dental groups nationwide. He can be contacted at 800-416-2055 (x224).

Transition Consultants had been retained to assist in the sale of a general clinical dermatology practice in Westchester County, New York. Established for 34 years, this practice has primarily focused on the diagnosis and treatment of dermatologic pathology. Presently all MOHS and dermatologic surgeries, pathology, patch testing, and cosmetic procedures are being referred out, but could be retained in house to increase revenues by a qualified physician buyer. The practice payer mix consists mainly of Medicare and PPO, offering desirable fee for service reimbursement rates. Currently the seller works 30 hours a week, with very little hospital and skilled nursing facility visits, generating consistent gross revenues of $650k and discretionary earning of $450k. Seller is open to an extended transition and willing to remain part time for up to 2 years.

We funded two optometric loans this week. One was as startup practice in Phoenix Arizona. Project total of $180,000 included office build-out, leasehold improvement, lanes, display cabinetry, frame inventory, and working capital.

The second project entailed the refinancing and debt consolidation of a optometry practice in San Diego California. The orginal term loan was a practice startup loan which was wrapped with additional business debts into a lower fixed rate term loan. The resulting monthly debt service improved the practice cashflow greatly. Our streamlined finance processing and optometry practice appraisal services make these projects headache-free for our clients.

We just completed the sale of an Ear Nose and Throat medical practice in San Fernando Valley California. This is a medical and surgical otolaryngology practice established for over 35 years in the West Valley near a major hospital. Servcies provided include Allergy, Hearing Testing, Hearing Aid dispensing, VNG Diagnostics, as well as some Facial Plastic Reconstructive and Cosmetic Surgery. Average Gross Collections approximatley $700,000 annually with High Net income. Diverse Payer Mix Including IPA Capitation. Trained Staff & Fully Equipped Office. We are also offering a cosmetic practice for sale and surgery center.

Acquisition opportunity in Southern California. Well established dermatology practice for sale with excellent revenue stream ($3.7 million+ annually), providing full scope of medical dermatology, surgical procedures including mohs, and some amount of cosmetic procedures. High volume clinic with great reputation and growth potential. The office is a large facility with approximately 5,000 square feet, including 11 exam rooms, 3 doctor's offices, 2 business offices, a lab, and staff area. Seller will assisting buyer with clincial and operational transition to ownership. Financing for dermatology practice purchase is available to qualified buyers. For details contact medical practice broker at 800-416-2055 (x225)

Many smaller physicians looking to integrate with hospitals may have a better option by selling their practices to health groups. Recent article about the dynamics of medical groups buying practices. This could also affect the medical home model and accountable care organizaitons in the way health care is delivered and how services are reimbursed.

Selling ophthalmology practice and surgery center in Florida display annual gross revenue of ~$780,000. Solo ophthalmology practice mainly serving adult and elderly patients. High percentage are followed for glaucoma-related conditions. Services provided include office consultations, Cataract, Glaucoma, SLT, and Oculoplastics. The ambulatory surgery center included in the practice is licensed by the State of Florida, and accredited by AAAHC and Medicare.Payor mix is mostly Medicare (80%) with smaller proportion of PPO (18%) and Cash (2%). Approximately ≈ 4,000 patient visits over the last 12 months. Referring sources include other Physicians, Patients, Directories, HMO & PPO Panels. Current number of providers includes 1 Ophthalmologist, 2 nurses, 2 Front Office staff, 1 part-time Ophthalmic Tech, and 1 part-time scrub tech. Extended transition assistance available to new physician buyer. Ophthalmology practice appraisal is also available.

Medical/Interventional Pain Medicine Practice For Outright Purchase or Buy-in. Excellent opportunity to join a well-established practice in Delaware with ownership track. Thriving pain medicine practice with great work/life balance. Annual gross collections in excess of $1,100,000 and robust net cashflow. The office is fully equipped and includes a procedure room with C-arm. All outpatient care with no inpatient coverage. Practice is located in a large professional building with ample space. Well trained staff and systems in place. Expansion opportunity by providing additional interventional services. Seller is willing to offer a flexible transition and buy-in structure. Ideal physician buyer would be residency or fellowship trained in medical pain management with exposure to interventional procedures. Up to 100% medical office financing is available to qualified buyer.

Health care administration event coming up: Health Care Executives of Southern California is hosting an event entitled Electronic Medical Records, 21st Century Healthcare's Essential Tool. Event will be at California State University Long Beach on June 16, 2011 at 5:30 PM - 7:30 PM, CSU Long Beach - Pyramid Annex, 1250 Bellflower Blvd., Long Beach, CA 90850. Should be an excellent presentation given the increased important of Electronic Health Records and meaningful use requirements for Medicare reimbursement.

Opportunity to buy a dermatology practice in a highly desirable, affluent community of Southern California. This is a premier, high earning practice with gross collections of $3,700,000+ in 2010. Services offered include a range of medical, surgical and cosmetic services including Mohs micrographic surgery. Consistent organic growth and increase in patient volume. The medical office space is an aesthetically pleasing 5,000 square foot premises with 11 exam rooms, 3 physician offices, 2 business offices, a lab, and staff room. Dermatology financing available to qualified buyer. Selling physician will remain for transition assistance to new buyer.

Excellent opportunity to acquire an interventional and medical pain practice in the Northeast. This is a solo practice generating annual collections of ~1,100,000. Great work/life balance with 100% outpatient based patient care. Service mix is currently 80% medical pain and 20% interventional pain but there is a great deal of expansion opportunity given the underserved patient need for interventional pain procedures in the area. The office is situated in large medical building with ample exam rooms and offices; additional room is available for expanding the procedure room into a surgery center. C-arm and other equipment already in place. This practice is the largest pain management practice in the region. A second medical provider and additional extenders could be added to accommodate patient volume. Currently the most common procedures performed are steroid injections. Selling doctor will assist new buyer with transition period. Financing is available to qualified buyer

Also visit new listings for medical practice appraisal services and optometry practice sales listings.

Selling an Optometry Practice on the beautiful West Coast of Florida. Comprehensive vision care practice with gross collection of ~$1,300,000 and robust growth. Roomr for new buyer to readily expand optometrist coverage. Selling optometrist will remain for post-sale transition period. Financing is available for optometry practice purchase.

Many refractive surgery-based ophthalmology practices have experienced difficulty in the wake of economic downturn and industry-wide changes. This has forced practice owners to re-evaluate critical factors and change focus in order to sustain ongoing success. Gaining new market share, maintaining patient volume, and increasing cashflow is vital to sustainability. This article is an overview of key factors to consider.

Business Focus

The business focus of a refractive practice varies by locale and should be considered in a changing market. The dynamics for refractive surgery can operate very differently from the services in the course of a normal ophthalmology practice. In a soft market for many elective eye surgeries, business diversification is necessary as a hedging strategy. Whether a new or existing practice is entering the refractive market, an investment requires serious capital and time resources. Generally, a practice will choose one of three major strategies: co-management only; handling a lower case volume of surgeries performed at a laser center; or developing a full volume in-house refractive practice. Choosing a primary strategy and maintaining a local geographic focus is crucial to establishing credibility within a market. An overextended practice with a wide focus or with remote locations is nearly impossible to maintain without increased financial resources, improved efficiencies and exceptional operational experience.

Market Share Analysis

A market share analysis of most metropolitan areas will yield similar results. A typical area can support one or two major refractive surgery practices and four or five secondary participants. Determining the primary and secondary players is not always straightforward, as private organizations do not typically make their statistics publicly available. A handful of the top practices generally comprise a lion’s share of the case volume within a specific market. The percentage of market share which each practice maintains is relatively static due to a fixed reliance on referrals. Significant changes in market share usually come from major marketing campaigns, the purchase of entities to secure referral sources (beware of Self-referral, Stark, Anti-Trust, etc), or errors from competitors. A practice’s ability to grow individually is as important as the overall growth in volume of the market in which it resides. One of the barriers to entering and remaining successful in many markets is the challenge of gaining even a small percentage of market share. Providers in the established markets are usually well-established players with many years’ experience and use the latest technology to leverage their market share. The key to remaining successful is continually monitoring the playing field and revising internal and external strategies to stay nimble.

Financial Forecasting

Although markets are often unpredictable, financial forecasting is a necessary part of planning the future of a refractive ophthalmology practice. Practice owners must transcend the focus on current numbers and anticipate new trends. The 3-5 year time horizon is important, even though forecasting methods may not always be accurate. Proposed initiatives must be made with cash flow consequences in mind as economic conditions warrant business changes. Practices must be prepared to make rapid shifts; their ability to scale up or down based on market trends and the general economy will dictate survival. Forecasting also involves apportioning for the acquisition of new surgical technology, and equipment considerations must contribute to the bottom line within a reasonable timeframe. New equipment must generate sufficient income to offset ongoing expenditure spent on building brand awareness and developing case volume.

Technology

The demand and marketability of refractive services can also be driven by advances in technology. The most sought after procedures usually include the latest technology, though older technology is still available. Practice owners must make careful capital considerations when deciding whether to acquire new lasers and equipment. They must also weigh the options of leasing equipment versus purchasing, or avoiding both options altogether by paying to use other surgery centers. The painful cash flow consequences of equipment acquisition are especially poignant in today’s economy, as many lasers are sitting idle in a soft market. Some ophthalmologists who do not own lasers may have less of a burden in a soft market, though their profit margins may be slimmer. Physicians with their own laser centers must make careful considerations to accommodate changing markets. In the past, surgeons have been too eager to acquire new technology without evaluating cash flow consequences first.

Market Niche Selection

Selecting and occupying a market niche is important especially in a saturated, mature market for refractive surgery. Niche selection is dependent on the skill of the surgeon as much as the current saturation of each particular niche within a market. Deciding whether to stick with a discount, value, or premium market niche will depend on the patient demographic, demand, and skill of the surgeon. Although a particular provider’s level of skill may warrant a premium niche status, the saturation of that niche can be a barrier to entrance. In addition, practicing within a particular niche involves certain expectations of services, care, and price points. Adjusting prices without adhering to market segment dynamics can be problematic. Simply reducing fees to increase volume can have the effect of reducing profit margins. Capital expenditure and working capital are required for future growth. These expenditures reduce cashflow to equity or invested capital in a refractive surgery practice. Tenure in the refractive surgery market and physician reputation in the community support different niches and price points. Some of the new strategies which have emerged in the last decade deal with difficulties in pricing and market saturation include price negotiation strategies, patient testimonials, live surgery observation, and in-house financing options.

Advertising Budget

It is not uncommon for advertising to be one of the largest expenditures of refractive focused practices. The costs of print, television, radio, and internet advertisement can soar at rapid rates. Newer practices must spend especially significant sums on advertising to build a steady patient flow. After building this initial flow the practice can reduce advertising efforts as their referral base expands. The amount of advertising expenditure depends on local competition, growth goals, and the efforts applied to developing referrals. Consumer advertisement remains a crucial part of the overall marketing mix. The effective use of advertisement in this manner involves the proper tracking of response sources and a reliable follow-up system. Strategies used to convert ad responses into sales include free consultations, free meetings with surgeons, and public seminars.

Staff and Physician Extenders

Properly trained staff is crucial within a practice and effective management techniques are pivotal to honing their ability. Staff affects the ability to deliver continuity of care, good customer service, and the cultivation of a practice image. A typical office may include a refractive surgery coordinator/counselor, support staff, and a surgeon who can manage clinical and management tasks. The proper use of staff and extenders can also be a very effective cost reduction strategy. Hiring a lower cost extender such as an optometrist or medical ophthalmologist will allow the surgeon(s) to maximize their time in the operating room. The staff can help to categorize patients and appointments and direct workflow to the appropriate extender or physician. Greater practice efficiency is achieved by taking fringe work away from the operating surgeon and increasing profit per unit of time.

Patient Referral Base

The referral base is the lifeblood of a refractive dominated practice. Patient-to-patient referral remains the number one source of new patients in almost every mature practice. Maximizing referrals requires staying in touch with past patients and building relationships. This requires good patient database management, regular bulletins, and periodic survey calls. Another vital source of referrals comes from other providers such as Optometrists. Optometry referrals have a large and growing influence on the case sourcing mix in many practices. These referral networks are made through business alliances with optometrists, the sharing of co-management services and fees with optometrists, and buying an optometry practice for sale within the referral area. A practice’s market share can be increased considerably by acquiring additional referral sources. Acquisition strategy must involve careful consideration of self-referral, Stark, and Anti-Trust statutes. A medical practice sales consultant and healthcare attorney can assist with this process.

SOLD: We just completed the sale of a medical pediatric practice in South Orange County California. This is an ideal opportunity for a pediatrician seeking work/life balance and take-home income above and beyond what could obtain as an employed physcian. Robust discretionary earnings in excess of $350,000 annually. The patient base primarily consists of small children and adolescents. Payor mix is a combination of PPO, HMO plans, MediCal, and other State managed programs. The clinic is all outpatient-based pediatric medicine, vaccinations, and minor procedures. Fully equipped space including Electronic Health Records. The office space is designed to be kid friendly and is painted in bright colors with murals and newer fixtures. The location is easily accessible from the 5 freeway with plenty of parking. Steady referral base of other Physicians, Patients, Hospitals, HMO and PPO Panels. Purchase loan financing available to qualified physician buyer.

Dermatology office for partnership buy-in or outright purchase located in the Chicago Area. Focus of the clinic is medical & surgical dermatology. Gross revenue collections of ~$1,000,000 dollars annually with 4 days per week of dermatologist coverage. Good sized space located in a Medical Professional with 3000+ square feet. There are seven exam rooms, two doctor’s offices, a procedure room, and a lab. The payor mix is primarily PPO insurance (60%). Remaining payors and insurance consist of Medicare (18%), HMO (12%), other insurance and patient pay (10%). Selling dermatologist is willing to remain for transition to new buyer. There is dermatology practice purchase financing available for this transaction. Seller may also entertain hiring the buyer as a locum tenens or associate doctor with a structured buy-in / buy-out. Please call medical practice broker for details.

Just completed the sale of a pain management practice in central California. This is an established practice collecting $1,600,000+ annually. Emphasis on evaluations and pain management; well trained medical staff and office staff in place. Buying physician will retain selling doctor through transition period and fill-in coverage. The practice offers a spectrum of pain managmenet treatment including medication management, epidural steroid injections (cervical/thoracic/lumbar/caudal, facet blocks, discography, intercostal nerve blocks, radio frequency, intrathecal pump implants, and spinal cord stimulators. Visit our website for additional pain management practices for sale, medical physician job positions, and locum tenens opportunities.

Doctors often wonder about the value of medical equipment and other physical assets within the context of a practice valuation. I wrote a short bit about tangible assets and how these are considered when determining the value of a medical practice. Physicial assets can be more or less relevant depending on the specialty, type of practice, and nature of the transaction.

Sale is pending on this general medical pediatric practice in Orange County. This is a long established practice with a strong net income of ~$350,000 annually. Located in a highly desirable coastal community, providing full scope of pediatric care. Contact medical practice broker for details.

Buying a dermatology practice versus starting from the ground up depends on numerous factors including the specific market, patient demographic, and number of practices currently available for sale. With the difficulty in starting a medical practice from scratch, purchasing a practice outright is sometimes a better alternative. Earning income from day one and acquiring an established patient base are some of the primary benefits cited. I've previously discussed some of these topics in other articles, including a discussion about the items which should be included in a medical practice business plan. We currently have an opportunity available in Alabama which is an excellent example of a viable alternative to a startup. This is a solid practice focused on medical dermatology and surgical dermatology. The seller currently collects $700,000 annually and maintains a very efficient cost overhead of 32%. Discretionary earnings in the practice are quite robust. The office is situated in a great location within an expanding metro area of Alabama. A mature practice such as this has much potential to continue growing as the patient draw area develops greater needs for dermatologic care. One way in which an incoming buyer could grow and expand the practice is by offering Mohs micrographic surgery, which is currently referred out by the seller. In addition, a cosmetic component could also be offered which is not presently available to existing patients. While a startup can be a very rewarding option for a newly minted dermatologist, an acquisition such as this may be an ideal way to jumpstart a career and attain financial success.

Selling a Cosmetic Surgery Practice in a prime west-side Los Angeles location. Includes AAAASF certified ambulatory surgery center. The office is located in a prominent medical office building with 2100 square feet inclusive of the surgery center, exam rooms, and consult room. Gross collections are approximately 1,000,000 annually. Most common procedures currently performed include breast augmentation, rhinoplasty, liposuction, and tummy tuck. Incoming buyer could readily expand the practice by offering additional facial plastic procedures to the existing patients. Selling doctor is willing to assist with a Purchase financing is available to qualified buyers. For additional information please contact Medical Practice Sales Consultant: Mo Majdi 800-416-2055 (x225)

Great primary care medical practice located in the Long Beach vicinity. Focus on Geriatrics. Seller will remain for transition to new buyer. Acquisition purchase financing available.

Los Angeles California Primary Care Geriatric Medical Practice for Sale. This clinic has been established over 30 years. Seller has a reputation for providing high quality care. Annual gross collections of ~$780,000 with very low overhead. Practice operation is will-run and highly efficient. High net income opportunity. Focus on geriatrics. Medical practice financing available.

We just completed the sale of an Ophthalmology practice in East Texas. This is an established medical ophthalmology practice with an optical shop. Annual gross collections were ~$1,000,000+ annually with annual net income of ~$650,000+. View additional Ophthalmology practices for sale on our website.

We just completed a new optometry startup financing project in Houston Texas. The practice will provide the full scope of vision care services including: comprehensive eye exams, contact, contact lens fitting, treatment of ocular diseases and trauma, pediatric vision exams, LASIK laser eye surgery consultations, sports vision & eye nutrition, and latisse. Updated pictures from the launch of the new optometry office are posted on our website.

There are many considerations in an associate buy-in/buy-out arrangement. Practice valuation is one of these important aspects to consider in deal negotiation. Appraisal can also impact the mechanics of a structured buy-in occurring over many years. In these types of arrangements, the buying doctor often purchases multiple minority interests from the selling doctor on a piecemeal basis over a set time line. This makes the proper calculation of discounts and premiums of utmost importance. Check out the article about appraisal for buy-in on MomMD, a website geared towards the female physician.

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