Who gets what? Plan for success by planning your succession

Long before you think about leaving your practice, you should think about who will take it over. Preparing now can ensure you get full value and full legal protection in a transfer.

By Cheryl Jackson, AMNews staff. Sept. 16, 2002.

A key element to succeeding in business is figuring out who will succeed you.

Many physicians don't give enough thought to succession planning, and their practices lose value.

Although he had practiced 37 years in Tampa, Fla., and four years in Louisiana before that, 70-year-old psychiatrist Daniel Sprehe, MD, hadn't even considered retiring until last winter, when another physician expressed interest in buying his solo practice.

"Doctors don't think in terms of their own retirement very often until it gets on top of them," said attorney Stanley Seigel, president of HR&S Financial Services in Philadelphia. "It's not often enough they think to plan what's best for them as the senior partner and best for the person taking over the practice."

Such planning has become even more important in recent years. Lower reimbursements and increased health-plan-related hassles have made finding successors more difficult.

Failure to plan for succession is likely the second most common reason -- behind undercapitalization -- for a small business to fail, said William J. Rothwell, PhD, a professor of work-force education and development at Pennsylvania State University, University Park.

"I've seen physicians who are highly successful not address this issue, and they work until they can no longer work, and no one is interested in buying," Dr. Rothwell said.

Dr. Sprehe's accountant and stockbroker had both advised the psychiatrist to sell his practice and retire. And although the deal ultimately fell through with the physician who had first expressed interested in buying his practice, the solo practitioner closed his office Sept. 1. Now he's trying to sell to a local physician. But he's in no rush. The three doctors with whom he owns his practice's building are fine with having an office shut for a while. [...]