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6 Tips for Selling Your Practice to a Corporation

Todd Neely, President of NanoImproved, and Marybeth Regan, PhD, for HealthLeaders Media, October 14, 2010

For most physicians cascading paperwork, slow reimbursement, increased hours, less respect, rapidly increasing malpractice insurance payments, unrealistic demands, higher expectations by patients, greater stress, and less satisfaction are now facts of life. 

Now, more physician practices are for sale than ever before.

Historically, physicians typically had one of two reasons for selling their practices: to retire or to start work in a new area of healthcare.  Today, many are looking to sell their practice to a healthcare company and work for that company as a salaried employee.

Many hope and expect to gain the safety and stability of employment with a large company while lessening exposure to the problems now inherent in today's healthcare system.  The corporation, by contrast, wants to expand and capture market share.  And the larger the company's market share, the stronger position it has to negotiate more favorable deals. 

By selling and signing an employment contract with a company, physicians may expect a mutually beneficial situation, but this is not always the case.  

Here's an example:

A start-up company with a new medical treatment became a publicly traded corporation.  The corporation's top managers were not physicians but instead finance and business people familiar with the ways of Wall Street.  To meet the corporation's goals and Wall Street expectations, the corporation used the stock-sale proceeds to buy established physician practices around the country, aggressively marketing itself to physicians.  It quickly captured market share, exponentially raised the number of treated patients, and developed substantial revenue streams. 

The physicians who sold their practices thought selling would be a win-win situation for the physician and the corporation.  As marketed to them, the business aspect of owning a medical practice—the ubiquitous paperwork, employee issues and all the rest of the business side of medical practice so distasteful to physicians—would be handled by the company.  The physicians would spend all their work time practicing medicine, using the latest technology.  Benefiting from the company's promotions to the public, they would see an increase in their patient base.  They would receive a base salary and, most significantly, a percentage of the profits of their practice.  They also would participate in any Wall Street windfall:  As employees, they would take part in the company's stock plans; indeed, in selling their practices, many chose to take payment in stock.  The company, in turn, would gain market share. 

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