Health Law Blog - Healthcare Legal Issues

Medical Practice Sale Retirement Issues

Planning Your Practice Exit Strategy – Maintaining Value for Possible Sale

I often get calls from independent practicing health care providers looking for advice on what to do when they retire from practice.  Most of the issues are the same whether they involve a physician, optometrist, dentist, chiropractor or any other independent practitioner.  My first and best advice is to begin the retirement planning process early, preferably 5-10 years  in advance, so that you can prepare for a smooth transition out of practice.  Most practitioners aim at going into some sort of transitional phase during the last couple of years where they gradually cut back their hours.  This requires a lot of planning especially in a single practitioner practice because it is difficult to reduce many fixed overhead items. 

A sale of the practice is the best retirement strategy because it enables you to cash out on the value of your practice.  A sale relieves the practitioner of some of the practice obligations that remain after retirement, such as the need to maintain medical records, collect accounts receivable and other activities.  There may also be contractual responsibilities on property leases, equipment leases and other practice obligations that may not coincide with your desired retirement.  Selling your practice prior to retirement will normally relieve you of these obligations if the sale is structured appropriately. 

Too often solo practitioners wait too long to consider the practice sales option.  You want to consider a sale while you are still practicing a 100% and the value if your practice is at its highest.  Reduction in revenues during a phase out period will necessarily reduce the sales value.  As you approach retirement, you will also lose leverage at the negotiating table because a potential purchaser will know that your option is to simply shut the doors and be left with some continuing obligations.

If a practice sale is not an option, you should make certain that you have budgeted adequate resources to meet post-retirement obligations.  Depending on the type of professional liability insurance you have, you may need to factor in the cost of maintaining tail coverage.  You will also need to provide for record storage and obligations to provide records to patients upon request.

Third party payors and governmental health programs can also seek repayment of amounts that they consider to have been overpaid to you.  Identified overpayments must be made within 60 days or severe penalties are imposed.  Proposed regulations would allow the government to look back as far as ten years when assessing repayment obligations and penalties.  Mechanisms need to be put in place and budgeted to address overpayment issues that could be raised by governmental payors following retirement..

In short, it pays for all providers to address retirement issues early.  This helps you develop a plan that maximizes your ability to reap the fruits of your years of hard work and avoid or at least mitigate some of the potential post termination obligations.

Random Posts


Tags: , , ,

Comments are closed.

John H. Fisher

Health Care Counsel
Ruder Ware, L.L.S.C.
500 First Street, Suite 8000
P.O. Box 8050
Wausau, WI 54402-8050

Tel 715.845.4336
Fax 715.845.2718

Ruder Ware is a member of Meritas Law Firms Worldwide

The Health Care Law Blog is made available by Ruder Ware for educational purposes and to provide a general understanding of some of the legal issues relating to the health care industry. This site does not provide specific legal advice and you should not use the information contained on this site to address your specific situation without consulting with legal counsel that is well versed in health care law and regulation. By using the Health Care Law Blog site you understand that there is no attorney client relationship between you and Ruder Ware or any individual attorney. Postings on this site do not represent the views of our clients. This site links to other information resources on the Internet; these sites are not endorsed or supported by Ruder Ware, and Ruder Ware does not vouch for the accuracy or reliability of any information provided therein. For further information regarding the articles on this blog, contact Ruder Ware through our primary website.