Should I sell my medical practice? New update page 4

You should definitely take this deal, particularly if they are taking the $300,000 in business debt. You can pocket 1.5 million while essentially making the same money you already are bringing in for the next two years. I’m in clinical services as well and have always thought that the provider is the practice. Meaning an established practice has little value if you don’t have talent working there. I also would not reinvest for the “second bite.” They could sell to a greater fool but they could also lose their arse if they start changing things that are working. Optum was buying practices like crazy the last few years but these offices aren’t doing well once the founders leave. I would definitely take the money then leave after two years if you don’t like it and start another practice.

Take it and work through the 2-3 year transition period then bounce. In my experience, PE is great for the owners but end up changing everything enough to make your current employees leave. In 2-3 years you’ll have a different team than the ones who built it with you and you likely won’t want to be there anyway.

I worked in the healthcare industry for 42 years, including 4 with a hospital, 6 managing physician groups and over 23 with large health insurers, some of whom acquired independent medical clinic groups, including one my sister was a CFO for.

My take...

In recent years, there has been a notable shift from solo or small private practices toward employment by or affiliation with larger organizations, such as hospitals, health systems, private equity firms, and large corporate groups including insurers or retail chains.

There’s something like 78% of physicians in the United States are employed by hospitals, health systems, or corporate entities such as insurers and private equity firms. Notably, practices owned by corporate entities (30%) have now surpassed those owned by hospitals (28%). This represents a significant shift from the traditional model where the majority of doctors were practice owners.

So....

Hang on or not? That's obviously a personal experience and what you think your future is in your market. Declining reimbursement. Rising overhead costs. Staff. Near impossible to run solo or small practices and survive these days.

Love providing care to patients? Hate the constant worry of meeting payroll, providing for your family, worrying about the future? Take the deal.

BUT..

Be advised (and this is from my sister's perspective, albeit she wasn't a care provider, just an administrator)...

Private companies often set unrealistic productivity standards for solo practitioners, causing burnout, reduced care quality, and loss of autonomy. Although corporate jobs provide financial stability, these drawbacks lead some clinicians to pursue independent or alternative practice models.

She ended up quitting and going to a county-based healthcare system. That might not be your experience because I don't know the players or your personality, just keep all of that in the back of your mind as you make your deliberations.

Best of luck!

Assuming this is an opening offer, there will be room to negotiate. Places like white coat investors can be very helpful in what could be on the table and where you have the most leverage.

A lot depends on the private equity company's reputation. In similar industry and several colleagues quit management before their prescribed management time is up and leave money on the table because of the crap the private equity people do. Some have had great success and happiness after taking the deal. Quite often the profit share they offer is not what you will realize. There are some consultants out there who can help you value your practice to make sure this is a good deal. They may have insight into the reputation of this private equity firm. Your offer should be many multiples of your EBITA. Don't take their first offer.

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You're a physician I assume? Not being a dick but a physician has more value than a mid-level. Not to offend anyone.

ETA-just by shite luck, you picked the absolute worst time in the history of medicine to start a practice. As overhead has skyrocketed, reimbursement has been cut to the bone. The fact that you have created a profitable practice during this time is a much bigger achievement than you may realize.
Especially with a second practice that is now cash flowing.

What state/area are you in?
Can you say what group is trying to buy you?
I know a little about this industry.

200-250k a year with 2 medical offices seems like a fairly low take home income?

Is it closer to 500k and they used a 3x multiplier on free cashflow/sde?

Not a physician, allied health fields.

Short version - It is a good deal and if you go for it, no reason to 2nd guess.

At your age putting close to $1 million after taxes into investments and able to continue with a salary around $300,000, you would be around the top 10% of wealth in the USA. Just doing nothing crazy with the lump sum and leaving it invested would get you to top 5% by your mid 50s.


Now the other side, are you leaving money on the table? Have you had a valuation done on your business? It might be something to look into if you have not. $1.5 million might be roughly right, they may come back and say your company is worth $3 or $5 million though.

Once again, taking the initial offer is a good decision financially. Less work and peace of mind is always a good call