Questions to Ask When Selling a Medical Practice
For a physician-owner in the United States getting ready to sell to a hospital system, a private equity backed group or another doctor. The 54 questions follow the order the decision usually takes: what the practice is worth and who would buy it, what is actually in the sale, the rules and payer contracts that limit it, the job you would hold afterward, what changes for staff and patients, and how the money is paid. Some are for your healthcare attorney or accountant, some for a broker, and some for the buyer across the table.
The questions
Each question, and why to ask it
Value and buyers
How would a buyer value my practice: a multiple of earnings, a share of collections, or assets plus goodwill?
Why ask it
The method depends on who is buying. A private equity backed group usually prices a multiple of earnings, another physician often works from collections and equipment, and a hospital tends to rely on an outside appraisal of fair market value. Ask whoever gives you a number to show the method and the inputs, so you can check them against your own tax returns and production reports.
Who are the realistic buyers for a practice like mine: a hospital system, a private equity backed group, or another physician?
Why ask it
Specialty, size and location decide this more than your preference does. A solo primary care office may only interest a local system or a younger colleague, while a multi-physician specialty group with ancillary income can draw several investor-backed bidders. Ask a broker or advisor which buyers have closed on practices like yours nearby in the last couple of years.
What would I take home after taxes, debt payoff, advisor fees and tail coverage?
Why ask it
Have your accountant build this from the bottom up before you react to any offer. Practice loans, equipment notes, a line of credit, the tail premium and legal and broker fees all come out before you see the money, and the tax bill depends on how the deal is structured. Compare the result with what you would earn by simply working the same years as an owner.
How far ahead of the day I want to stop practicing should I start the sale?
Why ask it
Buyers often want the selling physician to keep working for a set period after closing, so a sale begun in the year you hope to retire may draw fewer or lower offers. Ask a broker, and any buyer you speak with, what commitment they would expect from someone in your specialty. Then count backward from your own date, adding the months the sale itself takes.
What would make my practice worth less to a buyer, and how much of it can I fix first?
Why ask it
The usual discounts are for revenue that depends on one physician near retirement, one payer or one referral source, a lease about to expire, and billing that has never been reviewed by an outsider. Some of these take a year to repair and some take a month. Ask your advisor to rank them by what each would cost you at the table.
Which earnings figure is the price built on, and how is my own pay treated in it?
Why ask it
In many private equity offers the earnings being bought are partly created by lowering what the selling physicians are paid from then on. Ask to see the arithmetic: your pay today, your pay after closing, and the multiple applied to the gap. A big check that is really several years of your own income paid early is a different deal from the one the headline suggests.
Who should be advising me on the sale, and how is each of them paid?
Why ask it
The usual team is an attorney who handles healthcare transactions and an accountant, with a broker or investment banker added for larger groups. Ask each one whether the fee is hourly, fixed or a percentage due only at closing, and how many physician practice sales they have worked on in the past few years. If the buyer offers to recommend or pay for your advisor, ask who that person would be working for.
Are my ancillary services, such as a lab, imaging, infusion or a surgery center interest, valued with the practice or apart from it?
Why ask it
Ancillaries can be worth more than the office visits, and they are also where the ownership and referral rules get complicated. A buyer may want them, exclude them, or be unable to keep paying you for them the way you are paid now. Ask for each one to be priced on its own line so you can see what you are giving up.
If I have partners or employed physicians, who has to approve a sale, and how is the price divided among us?
Why ask it
Read the partnership or shareholder agreement before any buyer does, since it may set the vote needed and the split. Senior partners often want cash now, while younger ones will live longest under the new pay formula and the non-compete. Agree the division among yourselves before the first buyer meeting, so the group negotiates as one seller.
Who needs to know I am exploring a sale, and what does a buyer sign before it sees my numbers?
Why ask it
News that a practice is for sale can unsettle staff and referring colleagues long before there is a deal to announce. Ask your attorney for a confidentiality agreement that also stops the buyer from approaching your employees and physicians, and send financials only once it is signed. If you use a broker, ask at what stage a buyer is told which practice it is looking at.
How long should I expect this to take from letter of intent to closing, and what usually slows it down?
Why ask it
Ask the buyer how long its last three practice purchases took and what held them up. In medical deals the delays tend to come from payer enrollment, license and registration transfers, the landlord, and whatever the billing review turns up. Plan your own patient schedule and staffing as if the later date is the real one.
What is sold
Is this an asset sale or a sale of the entity itself, and what does each leave me responsible for?
Why ask it
Broadly, a buyer of assets picks what it takes and tends to leave the old entity, with its history, in your hands, while a buyer of the entity takes the history too. Which structure is on offer changes your tax, your exposure to old billing claims and what happens to your contracts and provider numbers. Put this one to your attorney and your accountant in the same meeting, so the legal answer and the tax answer are given together.
Who keeps the accounts receivable for care delivered before closing, and who collects it?
Why ask it
Sellers often keep their receivables and pay the buyer's billing office a fee to collect them, and sometimes the buyer purchases them at a discount by age. Either way, ask who works the old claims, for how many months, and what report you get each month. Claims nobody is assigned to chase quietly age out.
Who becomes custodian of the medical records, and what access do I keep after closing?
Why ask it
You may need a chart years from now to answer a malpractice claim, a board inquiry or a payer audit, and by then the records will sit in someone else's system. How long records must be kept, and what patients must be told about a transfer, is set by state rules, so ask your attorney what applies where you practice. Then get your right of access written into a custodian agreement.
If I own the building, should I sell it with the practice, lease it to the buyer, or keep it out of the deal?
Why ask it
Becoming the landlord can give you income after you stop practicing, but your tenant is then one buyer whose plans you do not control. Ask what lease term and renewal options the buyer would sign, and whether it has closed or moved offices it acquired before. Where the buyer is a hospital or anyone you refer to, your attorney will want the rent set by an appraisal, not by negotiation alone.
If I rent, will the landlord assign the lease, and am I released from my personal guarantee?
Why ask it
A lease that transfers while your guarantee stays in place leaves you backing the rent of a business you no longer own. Read the assignment clause before the landlord hears about the sale, and make the release a closing condition. Landlords sometimes use a consent request to reopen the rent, so ask your attorney when to raise it.
Which equipment is owned outright, which is leased or financed, and who pays off what at closing?
Why ask it
Make a list with the lender or lessor beside each item: the ultrasound, the lasers, the server and workstations, the phone system. Payoffs and early termination charges usually come out of your proceeds unless the buyer agrees to assume the contract. A buyer that already has its own equipment may not want yours at all, which leaves you to sell or return it.
Which liabilities stay with me after closing, especially overpayments and audits from my years of billing?
Why ask it
Payers and government programs can ask for money back on claims paid long before the sale, and the purchase agreement decides whether that lands on you, the buyer or an escrow. Ask your attorney how far back a payer can reach in your situation and how the agreement divides it. That answer also tells you whether to keep the old entity open and insured for a while.
What happens to the practice name, phone numbers, website and online listings?
Why ask it
Patients find you by the number they have always called, so a buyer will expect these on the asset list. If you plan to practice again later, or your own name is the practice name, ask what you are allowed to use and when. Check who actually holds the domain and the listing logins, since it is often a former office manager or a marketing vendor.
Who takes on patient credit balances, refunds owed, and stock such as vaccines and injectable drugs?
Why ask it
Credit balances are money you already hold that someone will have to refund or apply, and they are easy to forget until a patient calls the new owner. Expensive drug inventory can be a real number in some specialties. Ask for both to be counted on a set date close to closing and settled in the price adjustment.
Rules and payers
Is this buyer allowed to own a medical practice or employ physicians in my state, and if not, how is the deal built around that?
Why ask it
Some states restrict who may own a practice or employ doctors, which is why investor-backed groups often buy the non-clinical assets through a management company and leave the clinical entity owned by a physician. Ask your healthcare attorney to draw the structure: who owns what, who employs you, and who can replace the physician owner. If nobody can sketch it on one page, keep asking.
Will my payer contracts transfer, or will the practice move onto the buyer's contracts and rates?
Why ask it
Each contract has its own clause on assignment and change of ownership, and some payers treat a sale as a reason to renegotiate or re-credential. A hospital system typically moves you onto its agreements, while another physician may be counting on keeping yours. Ask the buyer which it plans, then have the clauses read before anyone contacts a payer.
What has to be filed with Medicare, Medicaid, the state and the licensing bodies, and who is responsible for each filing?
Why ask it
Ask your attorney for a single list with a name and a deadline against each item: program enrollment changes, the lab certificate, controlled substance and x-ray registrations, facility licenses and any state notice of a healthcare transaction. Some of these have to go in well before closing. A gap in enrollment can mean weeks of care that cannot be billed, so agree who carries that cost.
Does the price need to be backed by an independent fair market value appraisal, and may I see it?
Why ask it
Where the buyer is a hospital or any organization you send patients to, United States fraud and abuse rules are the reason its lawyers will insist the price reflects the practice and not the value of your referrals. Ask who orders the appraisal, what it assumed about your future pay, and whether you can commission your own. If your figure and theirs differ, ask which assumption accounts for the gap.
What will a buyer ask to see in due diligence, and how many years back?
Why ask it
Requests commonly include tax returns and financial statements, production and collections by provider and by payer, the fee schedule, the receivables aging report, staff and associate contracts, the lease, licenses, and any audit or claim correspondence. Ask the buyer for its request list when the letter of intent is drafted. Work out who in your office would have to pull the reports, since that person may need to hear about the sale before everyone else.
Should I commission my own coding and billing review before a buyer starts due diligence?
Why ask it
The buyer will sample your claims, and anything it finds becomes a reason to lower the price, enlarge the escrow or walk. Finding it first lets you fix the process and decide with your attorney what, if anything, needs to be repaid or disclosed. Ask counsel whether the review should be ordered through their office so the findings are handled under privilege.
Which of my current arrangements will a buyer's lawyers question: leases, medical director fees, family on payroll, ownership in places I refer to?
Why ask it
Arrangements that have run for years on a handshake look different when a compliance team reads them for the first time. List every financial relationship you have with a referral source or a relative and ask your attorney which need paperwork, repricing or unwinding before diligence. Start with any that have no written agreement, because the paperwork is the first thing a buyer's team will request.
How will patient information be shared during due diligence without breaking privacy rules?
Why ask it
A buyer wants to see charts, schedules and payer data long before it owns anything. Ask your attorney what may be shared at each stage, what has to be de-identified, and what agreement the buyer signs first. If the deal dies, you also want it in writing that everything is returned or destroyed.
Your job after
What will I be paid after the sale, and can you run the formula on my last twelve months?
Why ask it
A formula in the abstract tells you little. Ask the buyer to apply it to your real visits, procedures and collections from the past year, and set the result beside what you actually took home. Then ask what happens to the base when the initial term ends, since the opening terms are not always the lasting ones.
How long am I committing to work, and what happens to my sale proceeds if I leave or am let go before then?
Why ask it
Look for the link between the two contracts: some deals claw back part of the price, cancel an earn-out or buy back rollover equity cheaply if your employment ends early. Read the definitions of 'cause' and 'good reason' with your attorney, because they decide who is at fault when things sour. Ask the buyer for a year by year table of what you would forfeit or repay if you left at the end of each one.
What does the non-compete cover: how many miles, how many years, and measured from which locations?
Why ask it
A radius drawn from every site the buyer owns can cover a whole metro area, so ask for it to be measured from the offices where you actually work. There may be two covenants, one in the sale agreement and one in the employment agreement, and the law can treat them differently. Rules on physician non-competes vary by state and have been changing, so ask your attorney what would hold where you practice.
Who decides my schedule, visit length, staffing and where I refer patients?
Why ask it
Ask the buyer to name the person or committee for each, and what say the physicians have. Listen for productivity targets, standard appointment templates and a preferred referral list, and ask how a disagreement on clinical grounds is settled. Day-to-day control rarely appears in a term sheet, so do not accept a general assurance in place of specifics.
Who pays for tail malpractice coverage on my years as owner?
Why ask it
If your policy is claims-made, cover for past care generally stops when the policy does, and a claim from an old visit can arrive after closing. The usual routes are a tail on the old policy or prior acts cover on the new one, and the cost can be large enough to change your net. Get a written quote from your carrier before you negotiate, and ask whether it offers any credit for retirement or years insured.
Who buys the tail if my employment with the buyer ends, whichever side ends it?
Why ask it
This is a second tail, for the years you work under the buyer's policy, and employment agreements differ on it. Some employers cover it only if they end the contract without cause, and some never do. Ask for the answer in each exit case, and have the cost estimated so you know what resigning would run you.
Can I cut back my hours or retire on my own timeline, and how much notice does that take?
Why ask it
If you are selling as a step toward retirement, say so early and ask how the buyer has handled it for others. Find out whether part-time work changes your benefits, your malpractice cover, your call duties or the earn-out. A buyer that needs you full time for five years and a seller planning to stop in two should discover that before the letter of intent.
Can I keep outside work such as medical directorships, expert reviews, teaching or speaking, and who keeps the income?
Why ask it
Standard employment agreements often assign all professional income to the employer unless an exception is written in. List what you do now, what it pays and how many hours it takes, and ask for each to be carved out by name. Ask what the agreement says about anything left off that list, and whether new work would need approval each time.
May I speak with two physicians who sold to you more than two years ago, including one who has since left?
Why ask it
A physician two or more years past closing has seen the pay formula applied for a full cycle and knows what the buyer changed once the announcement was over. Ask them what was different from what they were told, how their pay has moved, and whether they would sell to the same buyer again. Push hardest for the one who left, who has no reason to sell you on the buyer.
Staff and patients
Will every member of my staff be offered a job, and at what pay, benefits and seniority?
Why ask it
Ask for the answer by role, since billing, scheduling and management are the jobs a larger buyer already has elsewhere. Check what happens to accrued leave, the health plan waiting period and credit for years of service. Ask your attorney which of these commitments can be written into the purchase agreement, since what a buyer says in a meeting may not bind it later.
Who tells the staff, on what day, and is there a retention bonus for the people the practice cannot run without?
Why ask it
Agree the date and the wording with the buyer, and be in the room yourself. Decide beforehand which two or three people a patient would notice missing, and ask whether the buyer or you will fund a stay bonus paid some months after closing. Those few may need to hear earlier, under a confidentiality agreement, because the buyer will want to meet them.
What happens to my employed physicians, nurse practitioners and physician assistants, and to their contracts?
Why ask it
Their agreements may or may not be assignable, and their own non-competes may not carry over to a new employer without a new signature. Ask the buyer whether it will offer each of them a contract and on what terms, and ask your attorney what you owe anyone who is not kept. If you promised an associate a path to partnership, raise it now.
What happens to our retirement plan and the balances my staff and I hold in it?
Why ask it
A plan can be terminated, frozen or merged into the buyer's, and the choice often has to be made before closing and not after. Ask your plan administrator and accountant which is possible under each deal structure and what it does to vesting. Staff will ask you about this within an hour of the announcement, so have the answer ready.
How and when will patients be told, and what notice do my state board and the payers require?
Why ask it
Notice rules for a physician leaving or a practice changing hands differ by state, so have your attorney confirm the timing, the method and what the letter has to say about records. Beyond the legal minimum, a letter over your own signature that introduces the new owner does more to keep patients than any announcement from the buyer. Agree who drafts it and who pays for the mailing.
Will patients keep the same location, hours, phone number and accepted insurance plans?
Why ask it
Patients judge the sale by whether their plan still works and whether they can still reach the front desk. Ask the buyer for the list of plans it takes and compare it with yours, line by line. If a hospital is buying, ask whether the office would start billing as a hospital outpatient department, because that can change what patients pay for the same visit.
What would change for patients on Medicaid, on plans the buyer does not accept, or with no insurance?
Why ask it
Buyers differ here: some systems have a financial assistance policy, and some groups limit lower-paying plans. If you have cared for these patients for years, ask what the buyer's policy is and whether it will commit to it for a period. If some patients will have to move, ask how they will be helped to find care, and ask your attorney what your own obligations are.
Which electronic health record will the practice run on, and who pays for and manages the conversion?
Why ask it
A move to the buyer's system usually means weeks of slower visits, so ask whether your productivity targets are relaxed during it. Find out how much history is migrated as usable data and how much arrives as scanned images. Ask too what happens to your old system's archive, since you may need to read it years later.
Price and terms
How much of the price arrives as cash at closing, and how much as rollover equity, an earn-out or a promissory note?
Why ask it
Ask for each piece as a dollar figure with a date and a condition beside it. Only the cash at closing is certain; the rest depends on the buyer's performance, its next sale or its ability to pay. When you compare two offers, compare the certain parts first.
If the buyer is another physician, how is the purchase financed, and what secures any note I carry?
Why ask it
An individual buyer often borrows from a bank and may ask you to carry part of the price as well. Ask whether the bank loan is approved or only applied for, and whether the bank would require your note to rank behind its own. Your attorney can tell you what security is realistic, such as a personal guarantee or a claim on the practice assets, and what you could actually do if payments stopped.
If I take rollover equity, what exactly would I own, and when can I turn it into cash?
Why ask it
Rollover shares usually sit in a holding company above the management company, cannot be sold until the investors sell, and may rank behind the investors' own class. Ask for the capitalization table, the debt the company carries, and what happens to your shares if you resign, retire or are dismissed. Have your accountant show your net with that equity valued at nothing, so you know what the deal is worth if it never pays out.
What would an earn-out be measured on: collections, earnings, or my own productivity?
Why ask it
After closing the buyer sets the fees, the payer contracts, the staffing and the overhead charged to your site, and each of those moves the measure. Ask for the formula with a worked example and for limits on changes the buyer can make during the earn-out period. Have your attorney check that a payment tied to volume does not run into the referral rules.
How much is held back in escrow, for how long, and what can be claimed against it?
Why ask it
A holdback gives the buyer a fund to draw on if something you stated turns out to be wrong, most often about billing. Ask for the amount, the release date, who holds it, and the process for disputing a claim. Then ask whether the buyer's claims stop at the escrow or can reach the rest of your proceeds.
What am I promising about billing and compliance, and what is the cap on what I could owe back?
Why ask it
No practice codes perfectly, so a flat statement that every claim was correct is a promise you cannot keep. Your attorney can ask for wording limited to what you know, a ceiling on your liability, and an end date after which claims expire. Ask whether the buyer would use representations and warranties insurance, which can shift some of that risk off you.
How will the price be allocated among goodwill, equipment, the non-compete and my future services, and how is each taxed?
Why ask it
The same total can leave you with noticeably different amounts depending on the split, and buyer and seller usually prefer opposite splits. Ask your accountant whether any goodwill is personal to you or belongs to the entity, since that distinction can matter for tax. Settle the allocation in the letter of intent, where you still have bargaining room.
What in the letter of intent is binding, and how long is the exclusivity period?
Why ask it
Most of a letter of intent is a statement of intentions, but the exclusivity and confidentiality clauses usually bind from signature. Once you stop talking to other buyers, your leverage drops and the price tends to drift during diligence. Have your healthcare attorney mark up the letter itself, and keep exclusivity short with a clear end date.
What happens to my contract, my non-compete and my equity if the buyer is sold or merges?
Why ask it
Investor-backed groups are built to be sold again, and hospital systems merge. Ask whether your employment agreement and restrictive covenant can be assigned to a new owner without your consent, and how your rollover shares are treated in that sale. The people making promises to you today may not be the people you answer to in four years.
How to work through a practice sale
Practical guidance for the conversation itself
Who each question is for
Your healthcare attorney
Take the whole of Rules and payers here, plus the non-compete, the records custodian agreement and the promises you make about billing. Choose someone who handles practice sales regularly; a general business lawyer may be excellent and still not know which filings a change of ownership sets off in your state.
Your accountant
Net proceeds, the asset or entity question, price allocation and the retirement plan belong with the accountant, ideally before a number has been agreed. Ask for one page showing what you keep under each offer, after tax, payoffs and the tail premium.
A broker or advisor
Value, likely buyers and timing are the broker's ground. Ask how they are paid and by whom before you weigh the answers, since an advisor paid only at closing has a reason to prefer the deal that closes.
The buyer
Save for the buyer the questions only it can answer: the pay formula on your real numbers, who makes daily decisions, what happens to staff, and the physician references. Ask them in a meeting, then ask for the same answers in the draft documents.
Before you invite offers
Get three numbers first
A tail quote from your malpractice carrier, the payoff figures on every loan and lease, and your accountant's estimate of tax. With those you can turn any offer into a take-home figure the same afternoon it arrives.
Read your own contracts
The partnership agreement, the office lease, the payer agreements and the associate contracts each contain a clause about transfer or change of ownership. Knowing what they say before a buyer does saves you from learning it as a negotiating point.
Look at your billing the way a stranger would
Buyers sample charts against claims. A review ordered through your attorney, done a few months ahead, gives you time to correct habits and document why things were coded as they were.
Keep the circle small
Until there is a signed letter of intent, the people who know should be your advisors and any co-owners. Staff who hear a rumor start looking, and referring colleagues who hear one start wondering where to send patients.
Comparing a hospital, an investor group and a colleague
Line the offers up by certainty
Write each offer as four rows: cash at closing, money held back, money that depends on results, and equity. A lower offer that is nearly all cash can be the better one once the uncertain rows are discounted.
Add the job to the price
For each buyer, total the sale proceeds and your expected pay over the years you plan to keep working, then compare that with staying independent. An offer with a high price and a steep pay cut and one with a modest price and steady pay can come out close together.
A hospital system
A system's price is commonly tied to an outside appraisal, and the offer tends to come with an employment agreement built on a productivity formula and a move onto the system's payer contracts and record system. Put your effort into autonomy, call, and what happens to your pay when the first contract term ends.
A private equity backed group
The headline number is often the largest of the three, with part of it paid in rollover equity and your future pay lowered to support it. Spend your time on the ownership structure your attorney draws, the terms of the equity and what a second sale would mean for you.
Another physician
A colleague will usually offer less and need fewer documents, and may depend on a bank loan or on a note from you. Ask how the purchase is financed, how long you would stay to introduce patients, and what security you hold if payments stop.
Signs the deal needs a second look
A price nobody will explain
If the buyer or your own advisor cannot show how a figure was reached, you have nothing to negotiate against. Ask again in writing, and treat continued vagueness as information about how the rest of the process will go.
Exclusivity before your attorney has read the letter
Signing a letter of intent feels like a preliminary step, but it usually ends your talks with everyone else. The terms you want, including allocation, the non-compete radius and who pays the tail, are easiest to win before that signature.
Promises that are not in the documents
Assurances about keeping every employee, leaving your schedule alone or never moving the office are sincere when made and unenforceable unless written down. Ask for each one to appear in the purchase or employment agreement, and note which requests are refused.
No one who sold will talk to you
A buyer with satisfied physicians can produce them. If references are limited to recent closings, or calls keep being postponed, find former owners yourself through colleagues in the specialty.