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During the sale or purchase of a physician group or healthcare practice there are several challenges that you need to overcome. One big challenge is ensuring that you have complied with the federal and state regulations and laws during the transaction. The regulations become complex especially when the buyer is a hospital, physician-owned, a physician, or any other healthcare entity that has to comply with the Stark Law and other ordinances. Therefore, do not think that you can handle such a situation alone. Consult an accountant and a lawyer. In some cases you may even require an appraiser and a business broker who have experience in such transactions.
Before you decide on whether to sell or buy a practice you need to have planned for at least a period of one year. Some of the processes that are involved in selling of a healthcare practice include;
It is your obligation to provide patients with proper care. Therefore, you should assure them that even after selling your practice they will continue getting the same care. This means that you should provide your clients with a notice and ensure that there is a proper transfer and custody of the clients’ medical records. If you decide to skip this step you can be sued for patient abandonment which is classified as a malpractice or professional misconduct.
Transfer and custody of medical records
You should also arrange for the custody and transfer of all the medical records. However, this will depend mostly on the provisions of the sale. In some cases the buyer can take up the responsibility for the maintenance of the original patient records. Whatever your agreement is, make sure you talk to an experienced attorney who can advise you on the relevant steps to take including the best way to comply with the Health Insurance Portability and Accountability or HIPAA.
Review of Employment Contracts
When you are selling your practice you should also remember your role as an employer. With the help of an attorney you can review all the employment contracts to make sure that your employees are noticed and that you have complied with all your obligations towards employees. This includes the notice of termination of employee benefits.
The issue of substance control is important when transferring your practice. In case you want to quit your practice permanently you should surrender your DEA or Drug Enforcement Administration registration. You should also safely dispose of any drug samples. Physicians in New York have a variety of options including returning the drugs back to the distributor or manufacturer or surrendering them to State Department of Health or the Drug Enforcement Administration. Each option has protocols that have to be followed.
Taking Care of The Contracts
During the time you worked in your practice your office has made many contracts. This can include contracts with management firms, insurance companies, equipment suppliers, and other providers. Make sure that you review each contract individually with the help of your attorney to determine what you will be obligated to do when you cancel them or assign them to the new owner.
The Selling Process
The selling process will take anywhere from 1 to 3 months. The first month is for the initial negotiations and receiving the letter of intent, three weeks will be spent on due diligence, and one month to close the sale. However, in the process of selling your practice ensure that the physician buying your practice has signed a non-disclosure agreement to protect your private information. After the physician who intends to purchase your practice has agreed to your terms, you can then proceed to the letter of intent. This letter is not a binding agreement but a confirmation of the transaction terms and some of your obligations as the seller. Some of them include
• To cooperate with the purchasing physician in due diligence.
• Not to accept any other offers for a specified time.
Due diligence is meant to benefit both parties. The buying physician will undergo the due diligence to know more of the practice. You will also have enough time to prepare for any problems that the buyer can identify to avoid reducing the asking price. It is important that you determine what levels and timing of information the buying physician has access to.
The due diligence review focuses on the following:
• Why you are selling your practice. This can be any reason, for example, retirement.
• Patient base and goodwill. Goodwill is the selling of your good reputation. However, because healthcare is a very personal practice, the buying doctor should get a discount in case patients leave after you sell your practice.
• Employee base. The physician who is interested in your practice should make sure that the hygienists and managers come along after the sale. There is also the possibility of unwanted employees being terminated.
• Capitalization. This is for the stock sale. The physician buying your practice should ensure that it will get a clean title that is near a majority if not 100% of the business’ stock.
• Assets, Accounts, and Leases. It is the responsibility of the interested physician to inspect the fixtures and equipment and make sure that the trade name is transferrable and protected. The buyer should also get an aging of the accounts receivable and review all the leases.
• Liabilities. The buying physician should also check if there are any unpaid back taxes, liens, unpaid bills, potential lawsuits, and unpaid vacation liability.
• Financial review. The buying doctor will insist that you produce the income tax return and financial records of the business for the last few years. This information will allow the doctor to determine whether the business is profitable or not. It is important for you to have an accountant and an appraiser to value your property. A bare bone appraisal can cost anywhere around $5,000.
The selling or buying of a healthcare practice is complex. In case you complete any of the steps incorrectly, those involved may suffer monetary and professional consequences. Therefore, to make your sale as smooth as possible consult an experienced healthcare attorney.