buying a practice?

[GoBeers]

anyone have any experience buying another practice? i have an opportunity to talk to a retiring doc who has been well established for decades locally. tried to forum search but maybe i wasn't typing in the right key words. any link to prior threads is appreciated. still fresh out of fellowship and curious.

get third party evaluation?
I suppose these would be things to consider: cost of clinic building (cap ex, maintenance, side rental opportunities, taxes, basic real estate valuation)? value of current office supplies? value of his shares in ASC? patients (volume, types of insurance to therefore theoretically calculate income based off prior 3 years) ?

ive heard people say "buying the patients" . what does that even mean? patients can choose to go wherever they want and i would have to be in-network with their insurances to be able to see them right?

anything else to look out for?

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[callmeanesthesia]

Watch out for them looking to dump all their chronic opioid patients on. Don’t trust what they say about how many they have - if you buy their practice those patients become your patients and you are then responsible for continuing or tapering them. you can probably get a decent idea by review a month or two worth of their appointments and charts, to see how many are med checks, or interviewing their staff.

 

[Agast]

There are companies that do valuation on medical practices. If you're serious, he should hire one of these companies and pay for the valuation himself or you pay a small portion. I think it's several thousand. They look at all the physical goods and then they also try to put a value on the intangible (patient rolodex). Expect to retain 70% of patients or less after the doctor leaves. I doubt you will be able to just buy his ASC shares, usually those groups have rules on who is eligible.

If he doesn't own a fluoro suite with a C-arm himself, I don't think it would be worth buying his practice.

 

[Pain Applicant1]

I personally would recommend starting your own practice as opposed to buying another. The guy is retiring anyway so those pts will need a place to go. But... if I were to buy a practice I would mainly focus on the balance sheet and the p&l statement. That should pretty much tell you everything you need to know. Like every businesse it's just a numbers game. Calculate those numbers and don't forget to include the cost you're paying for the practice. I also like the idea of going through a couple of months of patients to get an idea of what you're getting into.

You'll probably contract with the insurance companies which the majority of pts have as payers so being out of network shouldn't be an issue.

I don't mean to be a douche but from the questions you're asking are you sure you want to own your own practice. I would recommend doing more homework on things beforehand.

There's a lot that goes into being a business owner. I own a few of my own businesses including my own practice which I started after fellowship.

 

[RoloTomassi]

See if there's any space to lease next door, start your own practice.

 

[gazzer]

I personally would recommend starting your own practice as opposed to buying another. The guy is retiring anyway so those pts will need a place to go. But... if I were to buy a practice I would mainly focus on the balance sheet and the p&l statement. That should pretty much tell you everything you need to know. Like every businesse it's just a numbers game. Calculate those numbers and don't forget to include the cost you're paying for the practice. I also like the idea of going through a couple of months of patients to get an idea of what you're getting into.

You'll probably contract with the insurance companies which the majority of pts have as payers so being out of network shouldn't be an issue.

I don't mean to be a douche but from the questions you're asking are you sure you want to own your own practice. I would recommend doing more homework on things beforehand.

There's a lot that goes into being a business owner. I own a few of my own businesses including my own practice which I started after fellowship.

Any suggestions on where to learn how to ask the right questions?

 

[GoBeers]

I personally would recommend starting your own practice as opposed to buying another. The guy is retiring anyway so those pts will need a place to go. But... if I were to buy a practice I would mainly focus on the balance sheet and the p&l statement. That should pretty much tell you everything you need to know. Like every businesse it's just a numbers game. Calculate those numbers and don't forget to include the cost you're paying for the practice. I also like the idea of going through a couple of months of patients to get an idea of what you're getting into.

You'll probably contract with the insurance companies which the majority of pts have as payers so being out of network shouldn't be an issue.

I don't mean to be a douche but from the questions you're asking are you sure you want to own your own practice. I would recommend doing more homework on things beforehand.

There's a lot that goes into being a business owner. I own a few of my own businesses including my own practice which I started after fellowship.

sorry what's P&I statement?

I currently work at another local private pain practice. I have built a pretty good reputation in community and am well liked. this opportunity was presented to me through mutual colleagues.

i'm sure i'd like to own my own practice but i don't think anyone is ever prepared until they jump in. the idea of owning a practice wasn't on my radar this early on but i thought i'd get some baseline advice here since i was contacted. i have experience with small real estate rentals but other than that, no business experience. we haven't scheduled the dinner yet but we'll see how it goes.

thanks!

 

[nopain1234]

Profit and loss. Have an experienced financial advisor and accountant look into it for you

 

[drusso]

anyone have any experience buying another practice? i have an opportunity to talk to a retiring doc who has been well established for decades locally. tried to forum search but maybe i wasn't typing in the right key words. any link to prior threads is appreciated. still fresh out of fellowship and curious.

get third party evaluation?
I suppose these would be things to consider: cost of clinic building (cap ex, maintenance, side rental opportunities, taxes, basic real estate valuation)? value of current office supplies? value of his shares in ASC? patients (volume, types of insurance to therefore theoretically calculate income based off prior 3 years) ?

ive heard people say "buying the patients" . what does that even mean? patients can choose to go wherever they want and i would have to be in-network with their insurances to be able to see them right?

anything else to look out for?

I've bought 3 practices...some of the advice on this thread is painful:

1) Get a valuation. If it's a good-faith transaction (you really want to buy and s/he really wants to sell) split the cost 50/50. It will probably cost between $5-7K. Pennies in the grand scheme of things...recognize that there are different methods to value a practice---asset-based, income-based, and fair market value. Do your homework. Remind the appraiser that s/he works for BOTH of you. NDA's all around.

2) Sellers (especially founders) over-estimate the value of their practice. Buyers underestimate the "sunk costs" required to open a shop.

3) Goodwill is a thing. If the book value of a practice is $200K and the seller wants $250K and your "walk away number" is $225K do you really want to lose the deal over $25K? Pay it. "Leave the gun, take the cannoli."

4) If you buy out someone's practice you're doing them a Mitzvah. It's a pain in the ass to wind a thing down, lay off employees, etc. Remind him of that.

5) Don't be greedy. Don't be douchey.

The best "transitions" I've seen work like this: "Look, you've got a problem, and I'm willing to help you solve it, but I'm not going to the bank to finance this thing. Banks are for *******. Your business is worth about $xxxK. Why don't we agree to do this: You "carry the paper" and stick around for X months to make sure we have a smooth hand-off and I'll pay you X monthly payment "off the top" of my collections." The seller has a incentive for you to be successful.

 

[callmeanesthesia]

I've bought 3 practices...some of the advice on this thread is painful:

1) Get a valuation. If it's a good-faith transaction (you really want to buy and s/he really wants to sell) split the cost 50/50. It will probably cost between $5-7K. Pennies in the grand scheme of things...recognize that there are different methods to value a practice---asset-based, income-based, and fair market value. Do your homework. Remind the appraiser that s/he works for BOTH of you. NDA's all around.

2) Sellers (especially founders) over-estimate the value of their practice. Buyers underestimate the "sunk costs" required to open a shop.

3) Goodwill is a thing. If the book value of a practice is $200K and the seller wants $250K and your "walk away number" is $225K do you really want to lose the deal over $25K? Pay it. "Leave the gun, take the cannoli."

4) If you buy out someone's practice you're doing them a Mitzvah. It's a pain in the ass to wind a thing down, lay off employees, etc. Remind him of that.

5) Don't be greedy. Don't be douchey.

The best "transitions" I've seen work like this: "Look, you've got a problem, and I'm willing to help you solve it, but I'm not going to the bank to finance this thing. Banks are for *******. Your business is worth about $xxxK. Why don't we agree to do this: You "carry the paper" and stick around for X months to make sure we have a smooth hand-off and I'll pay you X monthly payment "off the top" of my collections." The seller has a incentive for you to be successful.

In what circumstances have you bought 3 other practices? Did you do it expand your business? I have a potential opportunity to do that, but I’m not sure I really need to since a decent chunk of their patients will find their way to me anyway. How did it work out for you?

 

[Pain Applicant1]

sorry what's P&I statement?

I currently work at another local private pain practice. I have built a pretty good reputation in community and am well liked. this opportunity was presented to me through mutual colleagues.

i'm sure i'd like to own my own practice but i don't think anyone is ever prepared until they jump in. the idea of owning a practice wasn't on my radar this early on but i thought i'd get some baseline advice here since i was contacted. i have experience with small real estate rentals but other than that, no business experience. we haven't scheduled the dinner yet but we'll see how it goes.

thanks!

No need to say sorry, profit and loss as mentioned. You definitely learn the most after starting it, especially as most academic folks don't tend to know much about running a business or private practice but you should have some type of baseline understanding. The questions you asked such as not understanding out-of-network insurance tell me that your knowledge is somewhat limited with regard to billing. I could be wrong but either way, bad billing can sink a practice quickly. I would never discourage entrepreneurship for anyone btw.

Remember that the ball is in your court as it is not easy to sell a practice. The market could care less about the sweat, blood, and tears someone put into it as it has no value.

The dinner thing you mention is interesting. I imagine the seller will be inviting or has invited you to dinner and is planning on paying for it. This is very symbolic in a relationship as it shows who is courting you. Guys typically take out girls when courting them to try and win them over. I used to bring lunch and take potential referrers out to dinner when I first started. I (really Bos Sci) would pay for it. Now that I'm established it's different and the surgeons are taking me out as they want referrals from my office. I'm going to guess he's going to try to sell the practice hard to you. Don't forget that you, as the buyer, hold all of the cards.

 

[Pain Applicant1]

Any suggestions on where to learn how to ask the right questions?

Ask questions in here. Read through the forums. Take it bit by bit as there's a lot involved in medicine as there are a lot moving parts, gov't regs, insurance, leasing, buying, marketing, etc.

I read the series on starting a practice from Med Economics. I also read a book on it but don't remember the name of it.

I befriended the billing staff in my hospitals during residency and fellowship. This is how I learned the majority of my billing and I can honestly say I probably understand and know billing more than most billers do.

 

[GoBeers]

No need to say sorry, profit and loss as mentioned. You definitely learn the most after starting it, especially as most academic folks don't tend to know much about running a business or private practice but you should have some type of baseline understanding. The questions you asked such as not understanding out-of-network insurance tell me that your knowledge is somewhat limited with regard to billing. I could be wrong but either way, bad billing can sink a practice quickly. I would never discourage entrepreneurship for anyone btw.

Remember that the ball is in your court as it is not easy to sell a practice. The market could care less about the sweat, blood, and tears someone put into it as it has no value.

The dinner thing you mention is interesting. I imagine the seller will be inviting or has invited you to dinner and is planning on paying for it. This is very symbolic in a relationship as it shows who is courting you. Guys typically take out girls when courting them to try and win them over. I used to bring lunch and take potential referrers out to dinner when I first started. I (really Bos Sci) would pay for it. Now that I'm established it's different and the surgeons are taking me out as they want referrals from my office. I'm going to guess he's going to try to sell the practice hard to you. Don't forget that you, as the buyer, hold all of the cards.

you are right , i do not have much billing exposure. all i do is provide cpt code and match with acceptable icd as best as possible. at my current clinic practice, there are two separate entities that check and double check billing for the providers.

any general pearls of wisdom or is that too vague of a question? lol

in my area, it is vastly dominated by HMO/IPA and medicare so i've never thought about OON. the idea of OON doesn't make sense to me, though. why would a patient pay all that money for PPO insurance only to spend even more money on OON care? it seems like an incredibly unreliable or difficult patient population to rely on.

appreciate your insight

 

[Pain Applicant1]

you are right , i do not have much billing exposure. all i do is provide cpt code and match with acceptable icd as best as possible. at my current clinic practice, there are two separate entities that check and double check billing for the providers.

any general pearls of wisdom or is that too vague of a question? lol

in my area, it is vastly dominated by HMO/IPA and medicare so i've never thought about OON. the idea of OON doesn't make sense to me, though. why would a patient pay all that money for PPO insurance only to spend even more money on OON care? it seems like an incredibly unreliable or difficult patient population to rely on.

appreciate your insight

I would recommend getting contracted with as many insurance panels as possible including medicaid. Once you're busier you can start cherry-picking. LEARN BILLING. It's annoying and cumbersome but most billing companies are awful. As much as you may not want to hear this, I recommend you do the entire billing cycle for a couple of months. I'm referring to creating the claim, submitting it, following it up, correcting denied claims, populating the data from the EOB and posting it, and billing out to the pt. Then following up on paid and unpaid claims from both the payer and the pt. It's tedious and awful but at least you'll have a solid understanding of how billing works. You can then farm it out however you'd like but at least you'll have the knowledge to audit those who are working for you. Most docs know little about billing which is why tens if not hundreds of thousands are left on the table for solo practices.

 

[Darkside_]

Do you guys recommend the ASIPP course for billing and coding?