At the 20th Annual Spine, Orthopedic + Pain Management-Driven ASC Conference, a panel of experts discussed the important topic of deciding when to sell, and what comes after.
The panel was moderated by Laura Dyrda, Vice President and Editor-in-Chief of Becker's Healthcare, and included:
- Michael Graziano, CASC, Administrator, Clifton Surgery Center
- Annu Navani, MD, Founder and Chief Executive Officer, Comprehensive Spine & Sports Center; Chief Medical Officer, Boomerang Health Care; Adjunct Clinical Associate Professor, Stanford University
- Collin Hart, Chief Executive Officer and Managing Director, ERE Healthcare Real Estate Advisor
The panelists discussed the various factors to consider when deciding whether or not it is the right time to sell, and what happens after the sale is complete. The session provided valuable insights into the potential opportunities and challenges that come with selling a practice.
Key Takeaways:
- Succession planning is a big part of real estate ownership for healthcare providers. Private equity is gaining ground in orthopedics and pain management, which can change the risk profile of a provider's investment. When they sell the operations, they lose control over the lease negotiations that take place. When it comes to retiring physicians, it is important to have them exit first in order to negotiate other pieces such as hospital sales and partner buyouts. The real estate transaction is completely separate from this.
- When looking at the competitive landscape for a real estate transaction, it's important to consider the benefits versus risks in terms of market timing, valuations, access to capital, recruiting and retention tools, etcetera. In addition, understanding the buyer profile (institutional vs one-off), timing, and the buyer's sophistication is key when negotiating a transaction.
- The real determining factor in the sale of the practice to a physician group was the speed, as opposed to the valuation. When selling to private equity, the real estate owners lose control over the destiny of their real estate and should make sure to get a minimum 10 year lease. This gives them more optionality to not sell immediately and helps the real estate buyer feel secure about the lease. Additionally, because a larger entity is on the lease, there may not be the need for personal guarantees from the doctors.
- The panelists discussed the sale process for medical practices, which typically takes 4-6 months. A lot of heavy work is done in the first two months to understand the practice and create a narrative to present to prospective buyers. The last three to four months are about getting the transaction across the finish line. They also advised owners, entrepreneurs, and industry experts to be thoughtful about how they approach any transaction related to their practice, get ahead of it, and think ahead when considering both an operation and real estate sale.