Medical Practice Sales and Acquisitions

Medical Practice Sales and Acquisitions

We represent healthcare providers selling or acquiring a medical practice. We assist our clients with legal representation regarding the following issues:

  • form of transaction (stock or asset purchase)
  • structure of transaction (retain practice identity or not)
  • asset valuation (hard assets, accounts receivable and intangible assets)
  • hospital employment and compensation
  • regulatory compliance
  • STARK and Anti-Kickback Statute
  • FMV versus commercial reasonableness
Atlanta Healthcare Law Firm

Our healthcare law firm represents physicians in the Atlanta and Augusta metropolitan areas and throughout Georgia and South Carolina. (See Communities We Serve.) Our attorneys have extensive experience as lawyers and hold Martindale Hubbell's AV rating, its highest rating. To schedule a consultation, email us at info@hamillittle.com or contact us at our office nearest you.

The Medical Practice Acquisition Trend Continues

The trend of hospital or hospital system acquisition of medical practices has grown in recent years. Many physicians appear more willing than ever to trade entrepreneurship for the stability of employment. A strong factor promoting this trend appears to be the increasing complexity of healthcare regulatory compliance. Doctors now face further reductions in Medicare and Medicaid reimbursement rates, overbearing insurance companies intrusive about how care is provided and arbitrary about claim denials, required new innovations (like electronic records), and other severe impositions on how doctors practice medicine and deliver care, adversely impacting the quality of professional life for doctors in private practice. That many are enticed by strong advantages hospitals offer and become willing to sell their practices is not surprising.

But selling a practice in a manner that secures the most rewarding professional and financial circumstances is a time consuming, critical undertaking that cannot be done lightly. The sale of a medical practice warrants careful consideration of many factors that will have a long term impact upon the selling physician.

An issue to be explored early on, for example, is what is being sold. The sale of a medical practice or other healthcare business can be structured as an “asset” sale or as a “stock” (or other ownership interest) sale. Each type of transaction is different in many ways, and pros and cons for both the buyer and seller may vary according to individual circumstances and objectives. Which type of sale is most advantageous for the buyer versus seller may differ and, therefore, should be carefully considered early on in discussions so that negotiations can proceed based on correct assumptions.

In a stock purchase, for example, the shareholders of a corporation that owns and operates the business sell their stock so that the buyer becomes the owner of the corporation. In an asset purchase, the corporation that owns the business sells to the buyer all (or particular) business assets, which generally comprise all furniture, fixtures and equipment, the business name and goodwill. The purchase of stock is often used when, for example, a physician employee seeks to become a full or partial owner. The buyer of stock not only acquires the assets of the practice, but liabilities as well (accounts payable, malpractice liability, contractual obligations). On the other hand, asset purchases are used when the seller desires to close the practice and keep accounts receivable, but the purchaser wants to avoid liabilities.

Generally speaking, in a medical practice three groups of things have value for acquisition purposes: hard assets (e.g. diagnostic and laboratory equipment, computers, drugs), intangible assets (e.g. good will, location, reputation, patient-payor mix); and accounts receivable (uncollected revenue). Physicians should realistically identify and assess the value of these assets when serious consideration of selling begins.

Most often, a hospital’s purchase of a medical practice requires that the physicians become employees for some designated period, typically a year. There are various ways a hospital’s acquisition of a practice may be structured, depending upon the size and specialty of the practice. The hospital might buy the practice’s assets with its doctors (and staff) retained as employees of the practice and the practice keeps its separate identity. Or, a hospital can buy the practice assets and the doctors (and staff) become hospital employees, with the practice’s identity ceasing. Or, the doctors might become hospital employees and the doctors remain with the practice that retains a separate existence. Each situation has tax and other legal implications for the hospital and the doctors.

Other factors that must be analyzed and will impact the sale of a practice are associated with regulatory compliance. For example, the transaction must be compliant with the federal Anti-Kickback Statute (42 U.S.C. § 1320-a7(b)), which proscribes direct or indirect payment for referral of Medicare/Medicaid patients. Likewise, The Stark Law’s prohibition against referrals and billing for Medicare/Medicaid where there is a financial relationship between the referring healthcare provider and the recipient of payment for designated health services requires consideration of whether the payment of the purchase price establishes a financial relationship that might trigger STARK penalties. Regulatory issues impact how compensation can be legally structured and paid to a physician upon becoming a hospital employee.

Our Law Practice is Focused on Representing Healthcare Providers

Our firm has demonstrated experience and special interest in helping doctors and other healthcare providers.

“Kevin Little [of Hamil Little] represented the Medical Association of Georgia and individual physicians in a matter addressing the abuses of the health insurance industry. Kevin was a pleasure to work with and brought forth legal theories to hold the health insurance industry accountable to physicians and patients. We received outstanding representation from Kevin.” *

Donald Palmisano, CEO and General Counsel, Medical Association of Georgia.

Kevin Little and Lee Hamil Little are AV-rated business and healthcare lawyers with offices in Augusta and Atlanta. To schedule a consultation, contact us at our office nearest you or email us at info@hamillittle.com.

* DISCLAIMER: Any result this law firm or any lawyer of this law firm may achieve on behalf of one client in one matter does not necessarily indicate similar results can be obtained for other clients.