Providers exit their practices for a variety of reasons — dissatisfaction with the demands of running a business, the desire for a less strenuous work schedule, frustration with insurers, retirement. If you are thinking about exiting your practice, there are several steps you should take now that will help you maximize the purchase price and ensure a relatively smooth transaction.
Lay the Groundwork
Start by taking a critical look at your practice’s current financial condition. Identify areas of weakness. For example, does your practice experience poor collections or weak cash flow? How do your staffing levels compare to those of similar practices? Issues such as these can reduce the appeal of your practice. It’s to your benefit to deal with them well before you put your practice on the market.
You’ll want to have a realistic appraisal of your practice’s potential worth before you put it up for sale. Tangible assets, such as health care equipment, computers, and furniture, are relatively easy to value, though they generally make up only a small part of a health care practice’s total value. Goodwill is an intangible asset that can be difficult to value. But there are methods that can be used to establish a reasonable estimate. Some other widely used methods include the discounted cash flows and market multiples methods.
Identify Potential Buyers
You may receive an unsolicited offer. If you don’t, consider reaching out locally or contacting a broker who specializes in exiting health care practices. An experienced broker can identify and contact qualified potential buyers.
The speed with which a sale may occur will largely depend on the deal you’re seeking. Do you want a buy-out that will let you continue to practice as an employee? In that case, looking for a group practice, hospital, or other corporate buyer may be the best route. If the sale goes through to one of these entities, you will be able to continue to work in health care without the responsibilities of ownership.
If retirement is your goal, you may opt for a gradual buy-in by a provider who will take over your practice. Typically, this arrangement requires you to employ the prospective buyer and, under the terms of the deal, after a trial period of a year or two, offer a partnership with a documented exit arrangement for you. This arrangement could be in the form of a severance package.
Review All Offers Carefully
If you receive an offer, your focus should be on the would-be buyer’s financial condition and the payment terms if you plan on retiring. If you plan to continue working at the practice with the individual or entity who may buy it, you should carefully review all ramifications, including transfer expenses and malpractice terms involved in the sale.
Apart from satisfying yourself about the financial and legal issues involved in the sale, you should also feel that you will be able to fit into the potential buyer’s organization and that your advice and input will be welcomed.
Remember, whatever way your practice’s sale is structured, there will be tax implications. Let us help you secure the most tax-advantageous sale terms. Please contact us if you would like assistance.
The speed with which a sale may occur will largely depend on the deal you’re seeking.
We Can Help
To schedule a complimentary consultation with a CIG Capital Advisors professional, click here.
Dental tools photo: Succo/Pixabay
Stethoscope photo: Julio César Velásquez Mejía/Pixabay
Improving operational efficiencies should be an ongoing process for all medical practices. Reevaluating and examining existing procedures can help identify areas of weakness that can drain revenues and increase costs, lowering the bottom line. The following suggestions may help jump-start your own thoughts about ways you can maximize your practice’s revenue stream and reduce costs without sacrificing patient care.
Keep Coding Current
Miscoding is expensive: It can reduce reimbursements and cause delays or denied claims. Miscodes are often due to old data, under coding to avoid penalty risk, or leaving coding decisions to inexperienced support staff.
For more accurate coding, maintain updated coding manuals and software, keep a code reference summary handy in exam rooms, and use online coding resources. If you make notes during each patient visit, you’ll be able to bill more accurately. Taking coding refresher courses will help your staff stay current with coding practices.
Finally, periodic assessments of your practice’s coding accuracy can help uncover problem areas. These assessments could include a review of your practice’s forms and a comparison of billing codes with the actual services that were provided.
Improve Employee Productivity
Consider these ideas for improving productivity:
- Set productivity goals and offer incentives to your staff for reaching those goals
- Delegate administrative functions (ensure that physicians spend most of their day doing only what physicians can do)
- Plan patient flow so that physician and medical assistant billable time is maximized
Exercise More Efficient Control over Staff Time
It is often possible to trim overtime expenses without reducing the quality of patient care. Start by reviewing the payroll records of your non-exempt employees to determine who worked overtime and why. Find out if your practice was fully staffed and simply busy or if it was short one or more employees on the days when the overtime occurred. If overtime was necessary because you were short-staffed, see if this was due to vacations or some other controllable situation. It may be time to revise your practice’s policy on vacation time if scheduled time off was the cause of the jump in overtime.
Update Fee Schedules
Patients can be price conscious and resistant to fee increases. Nevertheless, if your practice hasn’t raised fees in some time, you may want to consider appropriate increases. In addition, you should periodically examine the reimbursement rates of all the plans you participate with and reevaluate whether it makes economic sense to continue accepting patients from some of the ones that reimburse poorly.
Improve Your Purchasing Practices
Medical and office supplies can be a significant part of a practice’s expenses. Busy practices may take the path of least resistance and continue ordering from the vendors that have always supplied them. That can be an expensive mistake. Choose several of your practice’s “high-volume” items and find out how much other vendors are charging. Use that information to negotiate lower prices with your current suppliers, consolidate orders with fewer vendors, or switch to new suppliers to save money.
We Can Help
We can help you identify areas where streamlining operations may help optimize your practice’s bottom line. Please call.
. . . if your practice hasn’t raised fees in some time, you may want to consider appropriate increases.
To schedule a complimentary consultation with a CIG Capital Advisors professional, click here.
Photo: Daniel Sone/Unsplash
Is your medical practice moving forward, standing still, or losing ground? You’ll know the answer if you compare different aspects of your practice’s operations to appropriate benchmarks (as you can do here using the CIG Capital Advisors Medical Practice Dashboard). Benchmarking can give you the data you need to make informed management decisions about the direction of your practice.
What To Measure
There are two types of benchmarking: Performance and process. Performance benchmarking compares a practice’s operating performance internally over time and externally against other practices of a similar size in the same specialty. Process benchmarking compares a practice’s work protocols. By tracking key benchmarks from quarter-to-quarter or year-to-year, you can identify the areas in which progress is being made.
Start by choosing a few indicators that are important to you. For each indicator, determine your objective and define what you’ll measure and how you’ll do it. Keep tracking the data regularly so that you can make meaningful comparisons over time. Here are some of the indicators your practice may want to use in its analysis.
Look at measures such as net income (or loss) per full-time equivalent physician and operating cost per physician. Other useful areas to analyze would include operating costs as a percentage of total medical revenue and total support staff cost per physician.
Billings and Collections
What percentage of submitted claims is rejected by third-party payers? Is that percentage higher or lower than it has been in the past? If you determine that the number is increasing, you’ll need to review the quality of your coding. If coding errors are at fault, it’s critical that you tackle this issue immediately.
Examine the percentage of accounts receivable over 120 days. Is it higher or lower than what has been your experience? What about your practice’s fee for service collection percentage or the dollar amount of bad debts per physician? These are measures that you can evaluate.
If you track your copay collection rate for several quarters and see that it is deteriorating, have your front desk staff pull up each patients’ records when making appointments and remind them about past due payments. In addition, remind your front desk employees to ask for copays at the time of service and to request any outstanding amounts.
If your measurement of patient no- shows reveals an uptick in the numbers, consider having your staff make reminder calls or charging for missed appointments.
Time Patient Spends in Office
Patients resent lengthy waiting times. You can track the average time patients spend waiting to see a physician or physician’s assistant. Start by giving a percentage of patients (10%, for example) a card that your receptionist time stamps on arrival and collects and stamps again on departure. If the data reveal an increase in wait times, overbooking may be an issue. If that’s the case, you’ll want to reexamine your procedures and time blocking. You may even have to look into adding another physician, physician’s assistant, or nurse practitioner.
There are other indicators your practice can use to evaluate how well it is doing. Keep tracking the data regularly so that you can make meaningful comparisons over time, and be sure to try our Medical Practice Dashboard to see how your medical practice compares to other peer practices nationally. For a confidential consultation with a CIG Capital Advisors medical practice advisor, visit www.calendly.com/yhai.