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Current market conditions for private practices

Consultant's Corner - Q&A with the Industry Experts

Question: Describe the current market for selling a private medical practice.

"Overall it has improved. Buyers are less fearful and more confident in the healthcare market. Sellers are less fearful too. Of course, healthcare reform will continue to change the market dynamics but I view it like any other market force out there. And there will always be entrepreneurial physicians who will find ways to thrive within the private practice environment. – Christopher Majdi"

Question: How is it playing out for different specialties?

"Certain specialties are more in demand: Family, Internal Medicine, Pediatrics, Urgent Care. This is in part due to a greater emphasis on primary care as well as more money flowing into programs. Medicaid rates moving on par with Medicare rates also helped. Overall though, this shift is based on the expectation that more beneficiaries will be paying into the health insurance system. The sustainability of this trend is predicated on the solvency of the insurance risk pools. We'll see how it plays out. The good thing for our clients is that we constantly have our ear to the street, and can best position them and their practices based on the changing market dynamics. – Christopher Majdi"

Should I Sell My Medical Practice to a Hospital?

Consultant's Corner - Q&A with the Industry Experts

Question: Would you advise doctors to sell their practices to hospitals or health systems?

"I advise my clients of all available options given their specific situation...Sometimes that includes selling to a hospital but generally it doesn't make sense to do so. The management dynamics of these arrangements don't work in many cases and the financial outcomes for doctors are often less than desirable. You are going to see a lot of these deals unravel like they did in the 1990's.

I also believe that hospital acquisitions will slow down because MedPac and CMS are zeroing-in on payment disparity. Medicare payment rates often vary for the same ambulatory services provided to similar patients in different settings (MD Offices, ASCs, HOPDs). Payment variations across settings may encourage arrangements that result in care being provided in higher paid settings. Hospitals often acquire private practices and absorb them into hospital outpatient departments (HOPDs). These practices are providing the exact same services as before but are now billing at much higher HOPD rates. Here is an excerpt of a letter from MedPac to CMS:

Payment variations across settings urgently need to be addressed. Many services have migrated from physicians' offices to the HOPD setting as physicians have increasingly become employed in the higher-paid ambulatory setting.

CMS and MedPac are constantly searching for areas of overutilization and payment disparity. This is one of them, and the financial motivation for hospital to gobble-up private practice just won't be there anymore. There is a growing realization that increased consolidation and acquisition are driving costs higher, not lower. As a result of reimbursement scrutiny you will see a slowdown of hospital acquisitions of physician practices and ASC's and unwinding of previous acquisitions. It think that the reduced consolidation pressures may improve the market for private practices and the private practice model of health delivery in general. - Christopher Majdi, Medical Practice Appraiser & Broker"

Selling a Medical Practice in Distress

Consultant's Corner - Q&A with the Industry Experts

Question: What happens to a medical practice in a distress sale situation?

"Selling a medical practice in a distress sale situation is never easy. A distress sale may be caused by death, disability, or even a shareholder dispute. Our company receives 3-4 calls a month in this regard and it is often too late for us to act in these situations. It is essential to have a transition plan, and at the very least an appraisal report for the practice prepared well in advance. Having a practice valuation report provides a solid foundation and groundwork for your family to act in the event of crisis. Your medical practice is your identity and livelihood but it is also a community asset. Think of family, patients, & staff when planning for the future. When the actual distress event occurs it is critical for you or your family to act fast. The first priority is to stabilize the practice coverage with an associate or locum tenens. Next, evaluate all possible exit strategies which don't involve shutting the practice down. Closing the practice can be an expensive and difficult process so if there is another way to divest the practice it is usually much cleaner and easier for all parties involved. Lastly, don't go it alone. Find a set of professional advisors who can guide you. – Mo Majdi"

Seller Testimonial - Optometry Practice Diamond Bar, CA

After contacting 3 Brokers who advertise in Optometric trade magazines, I still felt they were not interested in taking the time to know the practice and me. I know things have changed in the market place for a 37 year old practice. Demographics as well as age of my patients changes. Do I sell, take on an associate and hope they buy in, or just close up and sell the assets? When a Dentist in my area whom I have known for many years told me he sold his practice, I asked for his broker and was he happy with the results. His answer was yes so I contacted Charles Kim. I found Charles to be the right person as he was experienced with all phases of selling and evaluating a practice. He came out to meet me and see what I was selling. He was professional and did his homework on the city stats. I would recommend his service and would be happy to talk to anyone wanting to sell. Thanks Charles for holding out till we sold it. With the economy and the situation with future potentials in selling a practice like mine, I appreciate all you efforts. I could not have sold it by myself. - CM Zapper, OD

Testimonial - Dental Practice Santa Monica, CA

Charles Kim is a consummate professional, always calm, and able to find a positive side to any situation. I looked forward to our meetings, not only for the long term goal, but for the genuine friendship we developed. He helped me to recognize a fair value for my practice, and designed a way to achieve my goals. His patience and and consistent effort brought us to a successful outcome. I could not have been successful without Charles guidance. I am very satisfied with Charles Kim's efforts and success, and I will be pleased to recommend him and or use him again. - TR Feder, DDS

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Most doctors looking to buy or sell their practice can’t find the time to figure out the complicated steps involved. At Transition Consultants, we’ve created a process that makes the transition painless so they can move into their next season and start living life on their own terms.

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