Buying or Selling a Medical Practice: Long Live Marcus Welby, M.D.
Robert Young wasn’t a real doctor, but he played one on TV. Americans of a certain age will remember Young as a kind-hearted physician named Marcus Welby, the lead character on the 1970s television series “Marcus Welby, M.D.
Dr. Welby shared his medical office with a younger physician named Dr. Kiley, who presumably would take over the entire practice when Dr. Welby retired, though the series ended before having to face that eventuality.
Hospitals Are Buying More Medical Practices
Transferring ownership of a medical practice today is arguably more complicated than in Dr. Welby’s time, but it appears to be happening more often. And hospitals are doing a good chunk of the buying.
As USA Today reported just last year, hospitals across the country are acquiring physician practices as part of a new way of doing business. As health care has shifted from in-patient hospital treatments to providing more and more services on an outpatient basis, various business models are evolving as well.
USA Today, quoting American Hospital Association figures, says the number of physicians and dentists employed by the nation’s hospitals jumped by more than 40 percent between 2010 and 2011, a staggering increase.
So whether a physician is transferring ownership of the medical practice to a multifaceted health care system or to a fellow doctor, consulting an attorney early on in the process should be a must on any medical professional’s to-do list. A number of legal issues will arise that make buying and selling a medical practice far more complicated than buying or selling a single-family home.
More Than Just the Property
The American Medical Association reminds its members, “In the sale of a medical practice, the purchaser is buying not only furniture and fixtures, but also goodwill, i.e. the opportunity to take over the patients of the seller.” The Code of Ethics goes on to advise physicians how to inform patients of the change in ownership and their options for transferring their medical records.
For small group practices, the American Academy of Orthopedic Surgeons recommends executing a buy/sell agreement that spells out in advance what happens to the business when one of the partners dies, retires, or some other triggering event occurs. Typically the remaining physicians then purchase the leftover interest. But such agreements must be carefully written, and the language of the legal contract is crucial.
Watching Out For Pitfalls
Doctors buying in to an already established practice will want to ask some important questions about how the business is structured. Is the medical practice organized as a partnership or a limited liability entity? Do other physicians in the practice employ relatives to help run the business? Is a non-compete clause or some other restrictive covenant a part of the operating agreement?
In 2010, American Medical News cautioned physicians about the ramifications of selling to a health system. Those deals are trickier, the publication reported, because of anti-kickback regulations, and the parties will need to evaluate whether the physician will remain with the practice and the value of any contracts included in the sale.
In short, when buying or selling a medical practice, physicians will need a good attorney on their side. At the Law Offices of Larry E. Bray, P.A., with offices in West Palm Beach and Boca Raton, we utilize a team of people to make sure your interests are protected. Before entering into an important transaction, contact us to discuss your legal and financial options.