Medical Practice Valuation and Sales
(including other healthcare professional practice sales too)

Many physicians, CPAs and consultants do not realize that consulting on medical practice valuation and sales and practice-equity-transfer (like buy-in, pay-out and merger) is a licensed activity generally limited to attorneys and licensed brokers in many states (click here for a letter from the state of California. ) Keith Borglum at PMM has been licensed for medical practice valuation and sales and consulting for over 25 years, and accepted into the American Medical Association's consultant-panel for practice valuation and sale from 1993 until closure of the AMA program in 2005. Keith is still on the consultant panels of AAFP, CAFP, and AAOE, and on faculty for other medical association programs. He is also the only licensed broker (to our knowledge) who also possesses the Certified Healthcare Business Consultant ("CHBC") credential in addition to the above qualifications. Click here for his CV. Services are offered nation-wide. In those few states where we are not licensed to broker practices, we can still perform valuations and refer you to, and provide support to, local brokers in those states, though those brokers will usually not be medical specialists. Here's how we typically approach assisting physicians with practice sales or purchase:

STEP ONE: PRACTICE VALUATION

The first step is to generate an independent valuation of the practice. I will provide you with a list of questions, plus a list of data needed to value the practice; typically including 5 years tax-returns and Financial Statements. After receipt of the data, I will schedule an appointment for a visit or phone conference. I may or may not have to visit the practice to inventory and appraise assets, depending on the specialty, size of practice, and reason for appraisal. Reports are typically delivered within 30 days of receipt of all the data, often much sooner. The amount of time required to do the valuation report depends to a large extent on the quality of data and financial information provided to us. Data or financial statements that are unclear or not to specialty standards may require more research, and therefore more time. If you are planning ahead by more than one year to sell the practice, we can provide guidance on "tuning-up" the practice profitability and data prior to sale in order to maximize the value of the practice. PMM is a member of the Institute of Business Appraisers and follows their standards, and the Uniform Standards of Professional Appraisal Practice (USPAP), and the AMA's guidelines on practice valuation. If a valuation report has already been performed by someone else, and it is current and of acceptable quality, we can use that existing appraisal in the sale of the practice. We unfortunately find that most of the reports we see fail to meet the standards mentioned above.

STEP TWO: PRACTICE SALE SUPPORT

To assist you in the sale of the practice, the following are typical, but not required, actions taken by us on your behalf to maximize chances of success:

  • If you need to find a buyer, PMM can:
    Create a practice-sale promotional offering brochure
  • Advise on the pricing and terms of the offering such as seller-financing, all cash, etc.
  • Provide introductions to specialty lenders for the buyer and pre-qualify buyers
  • Advise on the details of preparing your practice for sale, physical appearance, paperwork required, and communication strategies with candidates
  • Assist in approaching local hospitals for financial recruitment support and income guarantees if available and desirable
  • Assist you with identifying potential buyers, approach those persons on your behalf
  • Act as a confidential intermediary with potential buyers, protecting your identity until a Non-Disclosure and Confidentiality Agreement is signed by the potential buyer
  • Assist in preparing, placing and managing journal ads, web ads and listings. We know, through years of experience, where to place ads online and offline for best results.
  • Create a web page dedicated to the opportunity (sample)
  • Advise on direct mail solicitation of residencies and candidates if desired
  • Advise on practice sale issues as requested
  • Advise on practice transfer issues, like schedule of seller phase-out, letters to community physicians and patients, accounting-reporting to the seller if the sale is owner-financed, marketing of the new physician, staffing, practice system upgrade, etc.
  • Notify other licensed brokers

Sales Support

To clarify the sale support process, we do the work to list your practice opportunity in appropriate locations. This includes commercial web sites and the medical society web site if listings are available there (we pay a service to track the best medical-sales web sites for us). We may also place the ad in appropriate medical journals. We create a small webpage like that at sample site that keeps the seller's identity confidential until the appropriate time, including a printable Confidentiallity Agreement.

Journal ads and web listings refer interested parties to the website, reducing the size and (often exorbitant) cost of journal ads. The two-page promotional offering summarizes the opportunity without disclosing the exact location or seller, similar to the web page. An additional marketing elective is mailing notices to residencies, if you are willing to commit–to and wait until July for a candidate; or mailing to designated likely targets, like physicians nearby, or in regional cities like L.A. or New York or Seattle.

Mailings costs are usually around $750 per thousand mailings. We then screen calls and emails from potential buyers and require from qualified candidates a signed Confidentiallity Agreement prior to releasing your identity, location, and financial details of the practice, including the appraisal. We then provide them your contact info to discuss clinical attributes of the practice, and arrange a visit at the candidate's expense. Hospitals sometimes will provide up to $30,000 recruitment support and $150,000+ in income guarantees, which we can assist requesting on your behalf if desired.

When a serious buyer is in hand, we refer you to a medical practice specialist business attorney to draw the final contract, compliant to current Federal and State law.

We are also often involved in evaluating practices for purchasers. Our opinions of value do not vary depending on the client. Sellers and buyers get the same respect and opinion of value. In an appraisal, we are an advocate for our opinion, not for a client.

FEES

We charge an hourly fee for all activity, plus actual costs like ads and FedEx and mailings. We sometimes use a combination of hourly fee and reduced commission, and will extend a portion of the commission to other practice brokers. This saves most of our clients a very large amount versus full-commission-based brokers, and allows us to be more flexible to client desires. We also can perform valuations on an hourly fee basis for use with other brokers, and we are referred-to by other brokers for specialty valuations.

Appraisal time for sales or buy-in varies widely depending on findings, but is typically 10-20 hours for a simple single-site solo-practice transaction (occasionally less than 10 hours), plus travel time if required such as for a court case. Second opinions on valuations created by other appraisers can take as little as 1 hour if everything is in order (we have a 1 hour minimum fee to review a document), or up to 5 hours or more if a written challenge is required. Appraisals for IRS or litigation purposes take longer since the report must be prepared to a higher standard and for a reader who may not be familiar with the business of medicine, or the specialty involved.

Sale Support Services, up to the point of having all the ads and listings written and placed, a web site posted (sample) and mailings sent, will likely take less than 6 hours. After the ads are placed, and/or mailings sent, our time focuses on replying to candidate inquiries and managing listing renewals, usually 1-2 hours per month.

Time-spent and costs are always in your control. You can cancel at any time with an obligation to pay only for the time spent to that point, and any ads already in place.

Commissioned brokers usually require you to pay a full (8-12%) commission if a buyer makes a full price offer, even if you reject the buyer as unsuitable. For example, a client recently rejected a full price offer because the buyer was not a physician and the seller would have had to remain liable for the remainder of the 6 year lease. With PMM you are not pressured to accept unsuitable buyers or a lower price, and you typically will pay far less than using a fully commissioned broker.

As medical practice business consultants, we can also assist you with transistion issues and increasing the success of the buyer through "best-practices" improvements to the acquired practice. This can be especially desireable if the seller is financing the sale and so is at risk for the buyer's success. 100% bank financing is usually available to qualified buyers.

Please contact us if you have any additional questions, or would like to arrange for services. Contact Link

Sincerely,
Keith Borglum
Licensed Broker #00767129 and FL BK3206346, Appraiser, and Consultant

Author or Contributor:

Contributor - Strategic Use of Health Care Data by HCIA
Author - The Medical Practice Forms Book, published by McGraw-Hill;
1996, 2003 2nd Edition
Author - The Medical Practice Preemployment Tests Book published in 1996 by McGraw-Hill
Contributor - Medical Office Handbook Second Edition, by Miriam Webster
Contributor - Closing Your Practice , 1997 by the American Medical Association
Contributor - Mastering The Reimbursement Process by the AMA
Author-Multiple articles on medical practice appraisal, purchase, sale, employment, associates, mergers, etc.

References

Samples of current medical practices for sale:

Call us at 707-546-4433 to discuss your valuation, sale or purchase needs.