When considering practice ownership, two questions you should consider are: “How should I prepare?” and “How will I pay for it?”

We spoke with two industry experts who help doctors transition into practice ownership and partnership to hear their perspectives on these two important questions.

Here’s what Stuart Neiberg, partner at CohnReznick, and Josh Lantz, CRPC®, chief investment officer & financial advisor at MD Financial Advisors, had to say.

What should physicians do to prepare for buying into a medical practice or surgery center?

SN – Physicians must find the right fit from both a personal goal and business goal standpoint when looking to make an equity investment. Clearly, they should due diligence their partners and be sure there is a good cultural fit on philosophies for growth and mitigating risks.

The physician should also be sure to engage with the appropriate advisors (attorney, CPA, valuation professional) to help identify any pitfalls the physician does not regularly deal with in the course of their clinical duties. This team of advisors can help mitigate risks and prevent a physician from doing a deal they may regret.

JL – If you’re a new associate, I would encourage you to try to talk with your employer about what practice ownership might look like. Often, there’s a 2-3 year waiting period before you’ll be considered for a buy-in. The biggest thing to ask in advance is the magnitude of the buy-in. In other words, some practices require you come up with $1 million, and others require you come up with $10,000. Find out which style of practice you’re a part of. This will help you plan for your cash and/or financing needs in advance.

Once physicians are offered practice ownership and/or surgery center shares, they should require all agreements. If there’s any historical performance, request it. If there’s any projected future pro forma, request it. Having a clear understanding of what is expected from you and what you can expect from the practice or surgery center is the best way to set yourself up for success.

What are some common options to afford a buy-in?

SN – Paying for a buy-in depends on the nature of your situation, but there can be third-parties that can help finance the transaction if the physician doesn’t have the means available in cash. In physician practices, a doctor may be able to use some sort of seller financing, but this is less common and restricted by other regulatory issues for surgery centers.

I would suggest consulting counsel on permissible options; however, third-party financing from a qualified lender is generally always permitted.

JL – The options for affording a buy-in vary. You could use cash to make the purchase, but the challenge with that is often the physician making the purchase is in the early part of their career. They may need the cash for other purposes like buying a home, starting a family, funding retirement accounts, etc.

Alternatively, you could finance the purchase. There’s often internal and external financing. Internal is when the company loans you money internally and you pay back the company over time. External financing is when you find a specialized third party lender willing to loan you the money. My suggestion is to examine both and go with the more competitive option. Sometimes external financing is best, and sometimes internal financing works better. It often depends on the interest rate and the length of time allowed to pay off the loan.

Other practices have you purchase equity overtime from your compensation. These arrangements are often set up by the practice’s CPA firm. This may result in you buying into the practice using before-tax dollars.

Ready for partnership in a medical practice?

We spoke to Stuart and Josh about other topics surrounding partnership in a medical practice or surgery center. Learn more about benefits, pitfalls and trends in medical practice or surgery center ownership.

Read more about medical practice buy-in

If you are considering practice ownership, we’re here to help! The Panacea Practice Solutions team can help you get the funding you need with same-day approvals up to $400,000 and more if needed. Click here to learn more.

Want to learn more before taking the leap? Our Resources page has articles to answer many common questions about practice buy-in and practice financing. Check out one of our curated articles:

• 5 Things Physicians Need To Know About Buying Into a Medical Practice or Surgery Center
• How Doctors Should Negotiate Partnership Agreements, According To Contract Attorneys
• 5 Reasons To Consider Becoming A Partner In A Practice

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