BUSINESS

True value: Buying or selling a practice

There are ways to ensure that the transaction comes at the right price for both parties.

BUY: Be clinical
SELL: Don't be emotional

By Mike Norbut, AMNews staff. April 7, 2003.

There are no termites to worry about when you're buying a medical practice. Probably no leaky roofs or 25-year-old furnaces, either. But there still are plenty of pitfalls and costly traps that can snare the unsuspecting physician.

The evidence-based approach that doctors take when it comes to their clinical work should be applied to business dealings as well, whether they're buying a full practice or a small percentage, consultants said.

Instead of taking the selling physician's offer at face value, the buyer would be wise to commission an independent appraisal or have the seller's offer analyzed by a trusted financial adviser, consultants said.

"It's much more debatable and variable than selling a house," said Keith Borglum, vice president of Professional Management and Marketing, a consulting firm based in Santa Rosa, Calif.

With a medical practice, the value is directly proportional to the amount of business the doctors generated the year before. But some practices assign an arbitrary buy-in amount for new partners that may not coincide with the practice's true value, consultants said.

For example, a new doctor with an opportunity to buy into a practice may be told that he or she would need to pay $150,000 after three years of employment, or that buy-in could be deferred in the form of a lower salary over those three years. While the system may seem fair, the amount may not be correct, consultants said.

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