Mistakes doctors cannot make when buying or selling a practice
In the process of buying or selling a practice, emotional issues can sometimes overwhelm financial ones. Fear of losing autonomy or worry over inevitable culture clashes often crowd out basic financial considerations, but it’s crucial not to overlook them.
Private equity firms show appetite for medical practices
Leveraging the timing of a deal, negotiating smartly, and making sure the practice financials mesh well are all as important as strategic fit, experts say. Details that seem small during negotiations can magnify quickly when learning to live with a new arrangement. And then there are the surprises that somehow didn’t come up during the due diligence that can doom any merger’s success.
Despite all the unknowns, however, physicians are still buying and selling at a healthy pace, says Stephen Curtis, JD, regional manager of Bank of America’s Western Medical Division in San Francisco, which finances about 2,300 physician practice acquisitions each year. He says the pipeline of practice startups also is full.
“There was a big fear in the industry that physicians weren’t going to be starting up practices anymore [because of healthcare reform requirements], but we haven’t felt it, and we also haven’t seen any increase in the last five years in defaults or late payments,” Curtis says. Low default rates and expectations of only a modest uptick in interest rates should keep borrowing costs low and deals flowing, he says.
Irving Levin Associates tracked 78 large acquisitions of physician medical groups in 2015, up from 60 in 2014, for a total value of $2.3 billion, says Lisa Phillips, editor of the Health Care M&A Report.