Succession Planning Tips for Physicians
It is now widely accepted that planning for retirement is vitally important. However, many business owners, including physicians, fail to properly plan for the transition of their businesses upon the owner’s or primary physician's retirement. In fact, lack of succession planning is one of the most common reasons small medical practices fail. In order to avoid such a result in your practice, please consider the following succession planning tips:
1) Plan Ahead.
Often when the primary physician decides to retire, the practice simply closes. This strategy can be avoided. By planning ahead, a retiring physician can maximize the value of the practice by selling at a premium instead of relying on the market value on the desired date of retirement. Proper planning may provide the retiring physician an income stream from the practice well into retirement. Finally, planning ahead will allow smoother transitions for patients, who may feel that they are forced to search for a new medical provider on short notice.
2) Consider Alternative Exit Plans.
As mentioned, the easiest exit plan for a retiring physician is to simply close the medical practice. This strategy should be the last resort for a retiring physician because it completely disregards the goodwill developed over the course of the physician's career. Ideally, the retiring physician would locate a third party buyer for the practice and sell it to the buyer at fair market value. If this is not possible, other alternatives to consider may include: sales to employees; sales or transfers (gifting) to family members; or planned liquidation. Thus, planning allows for exploration of many options beyond simply closing.
3) Do Not Assume a Large Practice Group Means No Need for Succession Planning.
Having a greater number of physicians in a group practice does not mean that no succession planning is needed. The succession issues of a large practice may be different from the issues of a solo practitioner, but they are still inherent. In fact, there may be more issues, due to the size of the practice. As a result, succession planning is essential. For example, if several physicians in a group practice decide to retire within a few years of one another, it very well may create a hardship on the remaining physicians. Forming a plan to transition patients from the retiring physicians to others within the group is pivotal to the continued success of the practice.
4) Review Existing Succession Plans Periodically.
Physicians should review and revise, as necessary, their succession plans from time to time. What may have been adequate for a small practice may no longer be appropriate when the practice has grown. Also, a physician may have intended to sell his or her practice to a certain person, such as his or her child, but the child could become an unsuitable candidate because of his or her location, specialty, or pursuit of a different career.
Succession planning is important for the continuation of any business, but when it comes to a medical practice, it is essential to maximize the value of the practice and smoothly transition patients to new providers. If you have any questions or would like to discuss the succession planning options for your practice, please contact one of the health care law attorneys at Foster Swift.
With a business-minded approach, and service-oriented delivery, Mindi helps clients navigate challenges and solve problems in the areas of employee benefits law and health care law. Mindi has spoken and written extensively on employee benefits, health care reform, and health care law topics, and is actively involved in a number of legal, professional and industry organizations focused on these issues.View All Posts by Author ›
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Best Lawyers® 2021
Congratulations to the attorneys of the Health Care practice group at Foster Swift Collins & Smith, PC for their inclusion in the Best Lawyers in America 2021 edition. Firm-wide, 44 lawyers were listed. Best Lawyers lists are compiled based on an exhaustive peer-review evaluation and as lawyers are not required or allowed to pay a fee to be listed; inclusion in Best Lawyers is considered a singular honor. Health Care practice group members listed in Best Lawyers are as follows:
- Gilbert M. Frimet, Southfield
- Richard C. Kraus, Lansing
- Gary J. McRay, Lansing
- Jennifer B. Van Regenmorter, Holland
To see the full list of Foster Swift attorneys listed in Best Lawyers 2021, click here.