Volume downturns caused by the COVID-19 pandemic have led many physician owners to consider selling their practices, Medscape reported Nov. 17.
What you should know:
1. Why they're selling. Physician owners are considering selling not only because they're worried about finances — elective surgery standstills drastically reduced volumes and cash flow — but also because there are health risks to staying open, especially for older practitioners. Some mid-career physicians are selling their practices and becoming employees of the purchasing entity, in turn receiving some compensation.
2. Who is buying. On the heels of pandemic-related furloughs, not all hospitals are looking to acquire a new practice, and some in-progress deals have taken a backseat to the pandemic response. Still, the possibility of discounted prices is attracting potential buyers.
3. What valuation looks like in the current environment. Physician practices have had to sell at lower prices due to reduced cash flow, but news that a COVID-19 vaccine may be available by the end of the year could help valuation rebound.
"There are a lot of 'ifs' still, but if things go according to expectations, we may see an increase in the value of practices," said Mark Dietrich, a Massachusetts-based certified public accountant who deals mostly with valuations of physician practices, in an interview with Medscape.
4. What the experts advise. Physicians should hold off on selling if they can afford to wait, because practices will be worth more when volumes are at their best. Practices in rural areas or ones that have only regained a fraction of pre-COVID-19 volumes are less likely to sell.
"It's always best to sell when the practice volume looks the best, because then the practice is worth more," said Monica Kaden, director of business valuations at New Jersey firm Sobel Valuations. "But there are doctors who can't wait because revenues are really falling and they are running out of money. They may have no choice but to sell."
5. How long a sale could take. Some practices can secure a buyer within weeks, but others can take a year to sell. Preparing paperwork for the sale can take up to 60 days after a buyer is found. The building may need to be sold separately from the practice itself, creating an additional transaction timeline.
Click here to read the full article from Medscape.