How to Sell Your Medical Practice

Decide what you want to sell and what comes next

Write a short description of your ideal outcome. Include your desired role after the sale, the time you want to spend practicing and whether other owners share the same goals. Discuss retirement, ongoing employment and retained ownership separately. They create different financial and personal commitments.

Then map the business. Identify the practice entity, ownership interests, equipment, real estate, intellectual property and any related businesses. Clarify which assets you expect to sell and which you intend to retain. A buyer may have a different understanding of what is included, especially where property or ancillary operations sit in another entity.

Get the owners aligned before negotiations become detailed. Ask who can approve a transaction, who needs information and what happens if an owner wants a different outcome. Bring the governing documents to counsel so those questions can be evaluated against the actual arrangements.

Prepare for a useful medical practice valuation

An online multiple gives you little help with the terms of a real offer. Start with financial statements, tax returns, collections, expenses, debt and owner compensation. Ask your accountant to explain unusual items and help reconcile the records before circulating them to a buyer.

Explain how the practice earns and spends money

Organize revenue by the categories relevant to your practice. Include provider responsibilities, payer relationships, staffing, equipment and facility costs. Identify where the practice depends on your continued work or on a particular contract. Give the valuation adviser enough context to examine the business behind the statements.

If a buyer proposes adjustments to earnings, ask for the calculation and the assumption behind each adjustment. Have an independent adviser assess the reasoning. Keep an issue list so a disputed assumption can be resolved in the right conversation rather than getting lost in a revised spreadsheet.

Compare proceeds with the ongoing obligations

Ask for a breakdown of cash at closing, debt repayment, transaction expenses, deferred payments and retained investments. Bring your tax adviser into the comparison. The IRS explanation of a business sale describes how asset classification and purchase-price allocation affect tax treatment. Your own proposed structure needs a transaction-specific analysis.

Consider your compensation after closing alongside the sale proceeds. If you plan to keep practicing, ask how the proposed employment arrangement fits your expected workload, schedule and financial needs. Evaluate the combined picture before deciding whether the offer supports your goals.

Understand an MSO affiliation before accepting the offer

A management services organization, or MSO, provides management and administrative support under an agreement with a practice. When an MSO approaches you, ask it to describe the proposed transaction in plain language. Is it purchasing assets, acquiring an interest in a management business, providing services or proposing a combination of arrangements?

The MSO healthcare guide explains the basic model. For a seller, the immediate task is to identify what changes in your own practice. Ask what you will own after closing, who employs the staff, how management services are paid for and what documents govern the ongoing relationship.

Get specific about the support being offered

Ask which functions the MSO will take on and how you will evaluate performance. Billing support, technology, purchasing and administrative staffing should have a defined scope. Find out who handles a service problem, who approves changes and how additional charges are addressed.

Request the proposed healthcare management services agreement alongside the offer and employment terms. Review how the documents interact, including their duration, renewal, termination and exit provisions. Ask counsel to assess professional independence and applicable requirements for the practice's location. The Medical Board of California's guidance, for example, identifies decisions reserved to licensed physicians.

If the proposal includes ownership in the platform, find out exactly which entity issues that interest. Ask how you receive financial information and what happens if the relationship ends. The buyer's broader growth plan should be considered alongside your rights under the actual documents.

Compare the terms beyond the purchase price

Put the major economic terms into a comparison that you and your advisers can follow. Distinguish the consideration paid for the practice from compensation for future work. Identify conditions attached to every payment and any obligations that continue after closing.

Cash, deferred payments and earnouts

If part of the price is payable later, ask when it becomes due, what conditions apply and what supports the payment obligation. For an earnout tied to performance, ask how the result is measured and who controls the decisions affecting it. Have your advisers test the proposed language against outcomes relevant to your practice.

Rollover equity and retained ownership

Rollover equity places part of the transaction value into an ownership interest. Ask for the governing documents and an explanation of the class of interest, voting rights, distributions, dilution and exit provisions. Compare the investment with your need for liquidity and your comfort with continued exposure to the business.

Discuss what happens if you retire, leave employment, become unable to practice or disagree with the new owners. Where several agreements address the same event, ask counsel to explain the combined effect. A short summary of the offer can leave those connections unclear.

Bring the letter of intent into the discussion early

The letter of intent, or LOI, gives the parties a framework for the proposed deal. Ask counsel to explain the legal effect of the actual document, including which provisions are binding. Pay particular attention to exclusivity, confidentiality, expenses, access and the proposed timetable.

Use the LOI discussion to identify the business terms you need settled before committing further. That can include the assets being sold, the price structure, continued employment, retained ownership and any expected management arrangement. Put open questions in writing and agree on when they will be answered.

Share previous emails, term sheets and conversations that may affect the negotiations. Tell your advisers what the buyer has asked you to sign and the deadline given. If you have already signed something, bring it to the consultation so the next decision can be considered in context.

Organize the records buyers will ask to examine

Build a document index that matches the practice you are selling. Assign someone to maintain the folder and track questions. Start with the categories below, then tailor the request list to the transaction with your advisers.

1. Confirm ownership and authority. Gather organizational documents, ownership records and any agreements between owners.
2. Prepare financial records. Organize statements, tax returns, receivables, debt, compensation and supporting schedules.
3. Collect operating contracts. Include leases, vendor agreements, software contracts, equipment arrangements and relevant payer materials.
4. Map the workforce. Identify employment agreements, benefits, key responsibilities and proposed transition needs.
5. Document existing issues. Bring notices, disputes and unresolved questions to the appropriate adviser with relevant correspondence.
6. Set a sharing process. Agree on permissions, confidentiality and how sensitive information will be handled.

Patient records require particular attention. The HHS summary of the HIPAA Privacy Rule explains protections for the use and disclosure of protected health information. Ask counsel how diligence materials and any eventual records transition should be handled before providing access.

Work through employment and the practice transition

If you will remain with the practice, describe the working arrangement you expect. Discuss schedule, responsibilities, compensation, benefits and the process for raising concerns. Ask counsel to explain termination, restrictions and any links between employment and payments under the sale documents.

List the practical changes staff will experience. Identify who will communicate employment offers, benefit changes, payroll arrangements and reporting responsibilities. Coordinate those communications with the buyer and the relevant advisers so the message matches the agreed plan.

Consider patients, vendors and landlords as part of the transition. Ask who is responsible for notices, consents, records access and continuity of operations. Keep a written list with an owner and status for each task. The practice needs a plan for the first day after closing as well as a signature process.

Build the sale timetable around actual dependencies

A useful timetable identifies what must happen before the next step. Work backwards from your preferred closing date and ask what depends on financing, diligence, contract review, consents or other requirements. Make room for the practice to keep operating while those tasks are completed.

Set regular checkpoints with the advisers and buyer. Track outstanding information, decisions and document revisions in one place. If a proposed deadline changes, ask how it affects exclusivity, staffing, funding and your own plans before accepting a new date.

Prepare for a consultation about your practice sale

You can seek an initial assessment while you're exploring options or when a buyer has made an offer. Explain what you want from the transaction and the decision you face next. Bring the proposed documents you already have, the ownership structure and the states involved.

Include any urgent deadline, signed commitment or issue that concerns you. If you are considering an MSO affiliation, say what you have been offered and what you expect the management company to provide.

Questions about selling a medical practice