Many physician groups and health care companies will enter the market at some point to sell their business. In the rare case, the selling group will already have a buyer who is ready and willing to pay and close on the business sale. More often than not however, most sellers will utilize the services of a business broker to help find a suitable buyer, and will compensate the broker on a commission basis upon closing. Unlike real estate closings, whereby the main concern is the title of the property being conveyed, medical practice sales require much more detailed representation on all aspects of the business, including but not limited to, real property, existing contracts, existing patients, and medical equipment.
Before signing a business broker listing agreement, ensure that the following points are considered to avoid potential pitfalls:
Florida Healthcare Law Firm Attorney Jacqueline Bain will present this live lunch n’ learn webinar with legal considerations for healthcare business owners preparing for or considering the sale of their business. A healthcare business sale has added regulatory considerations on top of complicated deal points and structure simply by nature of being in the healthcare industry. In addition to the regulatory considerations, there are numerous legal risks and potential pitfalls for those considering this type of transaction.
Attorney Jacqueline Bain is both certified as a specialist in Health Law and Certified in Healthcare Compliance and has deep experience on both the buyer and seller side of healthcare business transactions. She will provide valuable insight for owners considering selling to private equity or other. She has written extensively on the topic of Selling a Medical Practice and will share practical advice in additional to strategy.
Thinking about selling a medical practice? Here are some steps for preparing your business in advance of a transaction.
Visit your financial planner.
Be sure that you can afford to leave the business, if you are retiring. Most times, buyers will require a comprehensive non-compete and you should be absolutely certain that you are financially prepared to retire or sell before you sign that restrictive covenant.
Visit your accountant.
Get your financial history in order. Review and re-review your tax returns and profit statements for the past three years to ensure that the business is appropriately reflected in those records. Take the time to clean up any “creative” bookkeeping so that the buyer is given a complete and accurate picture of the business they are buying into. You are likely going to have to make a representation that your financial disclosures are true, so take the time to get comfortable with that representation early on.
Due to financial and regulatory constraints, many companies are merging or purchasing other healthcare companies. However, prior to closing any transaction, these companies need to first determine whether government agencies must be provided advance notice of the change of ownership (CHOW). As an example, if Medicare is involved, these companies might be required to report the CHOW.
This issue is not one to dismiss or ignore because if companies fail to comply, they face significant penalties. In a recent “MLN Connects” newsletter, the Centers for Medicare & Medicaid Services (CMS) issued a reminder to report changes in ownership. The newsletter cites to an Office of Inspector General (OIG) report from 2016 that found a substantial amount of ownership changes were not being reported.
The development of ambulatory surgery centers is still going strong. Physicians who want to form or invest in them should be wary, though.
Physicians, squeezed by shrinking reimbursement and rising costs, sometimes see ASCs as a sure thing, financially speaking. They aren’t. Developing and operating them is something of an art; and care must be taken in getting into the ASC business. Developing and operating a successful ASC depends on key factors, like ensuring:
The future owners are busy surgeons who will bring cases to the ASC;
The surgeons perform services which are well compensated; and
Profit distributions will be enough to stimulate interest in the center (especially an issue when a physician owned ASC sells too much to a venture or hospital partner).
Health law is the federal, state, and local law, rules, regulations and other jurisprudence among providers, payers and vendors to the healthcare industry and its patient and delivery of health care services; all with an emphasis on operations, regulatory and transactional legal issues.