Finance & Enjoyment Blog

Physician Retirement and Exit Strategies

A quick Google search on "retirement and exit strategies physicians" gave me 357,000 hits. I did the same search on Yahoo and got 30,500,000 hits. While I did not look at all of these, I did scan a few pages of hits and found two words showed up quite a bit. These two words were "solo" and "group." When I first was asked to write about this topic, I was thinking more along the lines of the 60+ year old physician looking for a lighter schedule for a year or two while the patients are transitioned to another physician in the practice or to someone who is buying the practice. However, in the group model a great deal of advance planning is needed before a physician retires.

A solo physician needs to think about who is going to buy the practice. Maybe the hospital is interested in it or the retiring physician has a younger physician in mind. In the group setting, there should already be a buy-sell agreement in place. If you think the search I did above resulted in a large number of hits, a Google search for "buy-sell agreement" gave me 1,130,000 hits. Suffice it to say that a discussion of buy-sell agreements is better had with your business advisers. In the group practice, the patients will be staying and the practice needs to evaluate their current staffing. Can that patient load be absorbed with the physicians we have? Do we need to hire someone to replace the departing physician? A lot of these questions have probably been addressed as group practices will generally have some non-owner physicians who are just starting out in their careers (read "work them to death"). But again, planning based on the age of the physicians needs to be done for this situation.

Another area of importance is funding. The solo practitioner negotiates a value and either receives cash of some type of payment for a set period of time. The group practice however, is basically on the buying side of the transaction and has to find the funding. Generally, the funding will come from the cash flow of the physician's patient base (yes, cash flow does exist). However, tax issues could arise depending upon the structure of the practice (goodwill?) and the practice still needs to pay someone to see those patients.

The discussion above is to illustrate the importance of planning, early and often. There are many other areas that are just as important that your business advisers can help you to identify.


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