Medical Practice Sales and Acquisitions

Hamil Little represents 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 law and the Anti-Kickback Statute
• Non-physician ownership issues
• Private equity transactions
• Due diligence
• Transaction disputes

Medical Practice Ownership Lawyers

Our Georgia-based health law firm represents physicians and medical practice owners throughout the United States. Our attorneys have extensive experience as lawyers, and our firm holds Martindale Hubbell's AV rating, its highest rating. To schedule a confidential consultation, contact us today at our office nearest you.

Medical Practice Acquisitions

Many physicians appear more willing than ever to trade entrepreneurship for the stability of employment. A strong factor in 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.

Selling a medical practice in a manner that secures the most rewarding professional and financial benefits can be a challenging 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 selling owners.

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 the 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. goodwill, 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 or private equity purchase of a medical practice requires that the physicians become employees for some designated period, typically a year. There are various ways a hospital or private equity acquisition of practice may be structured, depending upon the size and specialty of the practice. The buyer 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 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 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 the 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 federal self-referral law penalties. Regulatory issues impact how compensation can be legally structured and paid to a physician upon becoming a hospital employee.

Our Health Law Practice is Exclusively Focused on Representing Healthcare Providers

Our Georgia-based health law firm has demonstrated experience and a special interest in helping doctors and other healthcare providers. To schedule a confidential consultation, contact us today.