Thursday, April 27, 2023

A guide to selling your medical practice

Practices sell regularly, many for a good price with minimal fanfare. At least half of all practices offered for sale never sell, however. Not every practice has value, nor does every seller try to sell their practice properly. This low sales rate is not peculiar to medicine-it’s similar for most small businesses according to business broker industry reports.

The more profitable your practice, the easier it usually is to sell, and the more it is worth to a buyer.


Who buys practices?


Hospitals have been the top practice acquirers since Obamacare started, and often the easiest purchasers to sell to.

Unfortunately, hospitals usually will only pay the fair market value of your practice’s assets, and nothing for its intangible “goodwill” value. Hospitals do this to avoid government charges that they violated the law by “paying for referrals.” They likely will offer you good-paying employment and benefits; often more than you can earn on your own.

Venture capital and private equity groups pay top dollar for leading group practices in some specialties, but they are extremely selective and their terms may be onerous.

I find that graduating residents and fellows are rarely the buyers of practices. Many get 50 to 100 job offers prior to finishing their training, mostly from large and hospital-owned groups. These job offers are inundating them and not just more preferable, but easier than taking on a new practice.

Dissatisfied employed physicians re-entering private practice, and physicians relocating to be nearer to their or their spouse’s family are the primary candidates for buying a practice. They have a choice of joining another group, starting their own practice, or buying your practice. You therefore are not competing just with other practices for sale but also with employment in groups and start-ups.

Your most likely buyers are already practicing in your area, since they don’t have to move or re-license, and they have a strong reason to be there. In many cases, the most likely buyer might be your competition.

For a seller, putting a practice up for sale not only can result in financial reward, it can also dispose of the ongoing expense of custodianship of a career’s worth of patient records. This can easily run into the tens of thousands of dollars, so sometimes it’s even worth it to pay a buyer (like a colleague in your call group) a nominal amount to take over your practice.

Check your state laws or guidelines with your malpractice insurance carrier or state medical association regarding medical record custodianship laws.


Tips to help you sell


If you are considering the sale of your practice-even if you are just early on in the thought process-here are some initial steps.


Plan and pivot


Plan at least a year ahead if possible, but also be ready to sell to the first candidate on short notice, and maybe stay employed by them during the transition. That candidate might have been looking for a while, and now your opportunity pops up and they respond.

There is no guarantee there will ever be a second candidate.


Maintain business as usual


Don’t slow down your practice in advance. Growing practices are more attractive than stagnating ones.


Don’t rule out a merger


Consider merging your practice with a local group in lieu of a sale to a unknown single buyer, with a higher compensation for one to three years in lieu of a sale price.


Know your value


Overpricing is the number one reason why businesses don’t sell. Get a professional appraisal-both to price the practice correctly and to convince a buyer of its value-using a medical practice expert that can ­demonstrate compliance with the Uniform Standards of Professional Appraisal Practice (USPAP).

Learn what EBITDA stands for, and use a multiple of it in your pricing strategy.


Have your financing at the ready


Get your business pre-qualified for a 100 percent bank loan at the asking price for a qualified buyer, which reduces low-ball offers. Both the buyer and the practice must qualify for the loan.

If you pre-qualify the practice to support a loan for the asking price, the seller then only needs to get the buyer qualified when they appear.

On the other side of the coin, if the buyer qualifies, and the bank then refuses to loan because the practice doesn’t qualify, that’s a bad thing to learn later. Get qualified in ­advance.


Polish up your online presence


Most purchase candidates now come via internet searches. Prepare a proper professional promotional package, including a dedicated search engine optimized website separate from the practice’s business site.

You should also have a regular website for the practice and be on LinkedIn and Facebook.


Make a good first impression


Clean up the office-and your desk-to make them appear modern and attractive. Fresh paint, carpet, and furnishings are inexpensive and create quality “staging.” Perhaps ask a local real estate broker for a referral to a stager.


Assemble your expert advisers


You have to assume the buyer will engage competent advisers to evaluate your practice, so engage competent counsel yourself including an experienced medical practice broker, certified public accountant, and business attorney.

Many can be found through the National Society of Certified Healthcare Business Consultants( NSCHBC.org) and HealthLawyers.org.


Get your numbers in order


Make sure your last one to three years’ accounting and statistics conform to standards like those developed by the NSCHBC or Medical Group Management Association This will give the buyer and their advisers more confidence in your data and ­operations.


Remember, you aren’t only courting a physician


Be prepared to convince the buyer’s spouse and children to live in your community, with a tour of local homes with a real estate agent, visiting schools, malls, local attractions, etc.


Pitch a progressive purchase


Consider offering the buyer a chance to work for one to three years at reduced income, then purchasing the practice for the value of the hard assets, “without goodwill.”

Your offer to sell then will look more competitive with employment. An offer document can cover all the relevant information to help an investor to make his or her investment decision.


Get a commitment on paper


Get everything in writing to avoid future misunderstandings or litigation. You can work with your lawyer or broker to list everything required for due diligence. The seller must assemble this for the buyer’s review.


Don’t zero in on a profit


In this current down market for practice value, sell for reasons of personal lifestyle-like reduced administrative hours, retirement, or disability-not for anticipated financial gain for equity to fund retirement or something else.

The practice is built to create continuing income, already harvested through work years, not for future equity.


Keep an eye on D.C.


Consider waiting until after the 2020 elections to sell, as hopefully the medical environment will have stabilized at that point, with any luck improving practice fiscal ­value.


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Wednesday, April 26, 2023

HIMSS23: Patient or customer?

In health care, there has been a shift from thinking about people as patients to customers. But Amy Goad, managing director, Sendero Consulting, says you need to see them as both depending on where they are in their care journey. Goad presented at HIMSS23 in Chicago.

When the person is in proactive mode looking for episodic care, such as for a physical, it is more of a customer experience, where you are looking for convenience. On the other hand, if you need reactive care, such as when the person receives a cancer diagnosis, it is more about a traditional patient experience. In this phase, the person is more interested in finding the highest quality and things like wait times are less of a factor if it means receiving a better outcome.

For example, a female might be a “customer” if she is in good health and is only seeing providers on occasions for routine care or check-ups. If that female becomes pregnant, her experience shifts to more of that of a patient as she spends more and more time in the health system as the baby grows. After the baby is born, the female might shift back to more of a customer as the care for herself and the baby moves back to routine.

Goad says both experiences are distinctly different, but equally important. The medical groups that can build long-term commitment through the customer experience will benefit when those people need more than routine care, Goad says.

There are three questions to ask yourself:
  • Do I understand on what end-to-end care journey is?
  • Are my patient and customer experiences balance? Recent trends are for too much effort to be put into the customer experience and the patient experience may be suffering.
  • How do I know if efforts are effective?

The obstacles to overcome are resources, because there are only so many people and so much money to go around, and there are often competing priorities. Additionally, people are tired of the amount of change sweeping through health care.

But by creating a full team effort to address the person in the right way at the right time, it builds long-term loyalty.

“You have to figure out what is most important to that individual at that point in time,” says Goad. “Take cancer patient for instance, if they are in the middle of treatment, they probably don’t want to hear about how you can help with their bills. You need to know what the person needs at that point of time, and what resources you have in system.”

The burden does not have to fall on physicians. For more of the customer-related tasks, other non-medical staffers can handle that.

One physician in the session pointed out that he doesn’t see customers, he only sees patients, and that it’s not about selling people something.

The counter-argument is that with the competition coming into healthcare in the form of Amazon, Walmart, and CVS, health care has transitioned to be more customer focused with an emphasis on convenience.

“That’s why I make the argument that the patient and customer experiences are different, but we must not lose sight that the doctor patient relationship is unique,” Goad says. “The patient is vulnerable and needs your expertise. You want the person to feel empowered in their journey.”


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Tuesday, April 25, 2023

Fixing the broken medical coding system

The rules of other consumer commerce sectors somehow do not apply to medical billing. Stop and think about that for a moment. It’s easier to make sense of how much we spend for goods and services such as groceries, clothing, and gasoline because we know how much it costs up front. No smoke and mirrors. No hidden expenses we are billed for days, weeks, or even months later. Imagine buying gasoline and two weeks later receiving a bill from the station owner because he didn’t include the excise tax on the pump price – would you pay that?

Yet that kind of scenario is exactly what healthcare consumers have learned to expect when it comes to their medical bills. Medical billing and collection is a broken system with far-reaching negative consequences-it’s about time we got down to fixing it.


What we don’t know CAN hurt us


Lack of timely payment or no payment at all is leading to a crisis in healthcare. The simple fact is that in comparison to other products and services, people do not understand how much healthcare costs. In fact, a recent report by the research company West stated that 75 percent of patients don’t know what they’ll owe until they see a bill. 75 percent! Imagine if you went to the store and purchased a gallon of milk but had no idea what it cost until a bill came later. Oh, and add to that the fact that the price of milk would vary wildly from store to store. In all likelihood, people would stop purchasing a product with such an unpredictable cost structure. Perhaps we’re onto something here…if people know prices upfront, they are more likely to pay them.


The need for clear and understandable statements


How many times have you tried in vain to decipher an Explanation of Benefits (EOB) from your insurance company? Sometimes it seems these things are written in some kind of code, seemingly with the intent to obscure benefit information from patients. It’s no surprise to many that trying to understand the healthcare billing system, how benefits are applied, and what balance patients are ultimately responsible for paying has traditionally been as confounding as trying to understand a garbled voicemail-if the message is unclear, it is impossible to take the appropriate action. No wonder so many patients struggle to meet their medical financial responsibilities.


Lack of price transparency killing private practice


As the proportion of patient financial responsibility grows with the rise in high deductible health plans (HDHP), profit risks are pushed higher for independent practices. Small practitioners are seeing larger write-offs, higher costs to collect, and longer revenue collection cycles. We seem to be amid a healthcare payment system crisis that is squeezing these small practitioners the most, forcing them out of independent practice.

Consider these statistics:In 2016 33 percent of physicians reported as independent compared to 48.5 percent in 2012
In 2016 20 percent of doctors worked in groups of 100+ compared to 12 percent in 2012
73 percent of those in independent practice would remain so if they could maintain stability and profitability, but 44 percent expect to sell their practice in the next 10 years
Research shows that small practices deliver better care, especially in areas where high-quality primary care makes a difference: lower hospital readmission rates, better outcomes for patients with diabetes, etc.

These statistics paint a distressing picture-one that shows an eroding of independent practice that ultimately leads to poorer overall health outcomes for everyone.


What can we do?


The solution to this problem is taking a price transparency cue from the retail sector to help patients more clearly understand the why and what of payment responsibility so they can make smarter decisions about healthcare consumption and budget accordingly.

Here are additional suggestions for medical providers to move toward more effective solutions to the pressing issue of poor revenue cycle management:
  • Have frank discussions with patients about ability to pay before care is delivered (only a quarter of healthcare providers do this now)
  • Embrace patient revenue cycle technology solutions that make it easier for patients to understand and make payments upfront and on-time. This will lead to greater rates of patient engagement, participation, and bill payment:
  • 77 percent of healthcare consumers say it’s important or very important to know costs before treatment
  • Just one in five (20 percent) physicians currently send reminders about payments on or near due dates
  • Join an independent physician association (IPA) or similar organization to enjoy some of the benefits of being part of a larger group of physicians without sacrificing independence, allowing the opportunity to:
  • Negotiate with payers
  • Enjoy bulk rates on malpractice insurance
  • Leverage billing companies to ensure timely and accurate notifications of patient payment responsibilities (most practices fail to bill for about 12 percent of the work they do)

More broadly, the healthcare industry needs sounder infrastructure to support independent physicians and, in turn, medical practices must be more proactive to research and adopt innovative technology tools that can successfully simplify and streamline both time-of-service and residual balance patient payments. We already know the demand is there-49 percent of physicians expect they will have to develop innovative billing and payment models to stay independent.


Healthcare price transparency and payment convenience pays dividends


One of the core faults of our healthcare pricing system is that patients aren’t required to pay for healthcare in any consistent way. As a result, one of the most pressing needs is to implement technology solutions that push healthcare providers to think less like an institution and more like a small business. The simple fact is, if you make the payment process clearer and convenient, more patients will fulfill their financial obligations. Medical providers must tailor billing and payment process to patient needs and desires, implementing tools and resources the modern healthcare consumer has come to expect-such as the ability to pay online or via a smart phone app. Providers should seek to create more of a convenient patient “experience” than an unpleasant episode.

By implementing patient revenue cycle solutions that promote price transparency and offer payment convenience, patients will experience higher levels of satisfaction, peace of mind, and trust. After all, the next generation of healthcare consumers are watching you more closely than ever, are eager to share their experiences via social media and review sites and have a virtual global peer-to-peer network right at their fingertips.

If we don’t proactively tackle the growing fiscal problems that are essentially forcing many smaller medical practitioners to fold their tents, we can’t realistically expect our healthcare system to evolve into a leaner entity with better outcomes.


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