Start with the transition, not the asking price
For an employed physician considering ownership, the first question is not simply whether the practice is profitable. It is whether the transition is legally and operationally workable.
Review the timing of departure, notice requirements, restrictive covenants, patient and record-transfer rules, benefit changes, malpractice tail coverage, and any limits on solicitation or outside activity. An automatically renewing employment agreement should still be read carefully; renewal alone does not determine whether a restriction applies or how departure must be handled.
Understand what the numbers actually represent
Revenue does not equal transferable value. Recast the financial statements to identify normalized physician compensation, owner-specific expenses, recurring overhead, payer mix, collection trends, accounts receivable, capital needs, and the working cash required after closing.
Test whether debt service remains manageable if collections slow, a key employee leaves, reimbursement changes, or patient volume does not transfer as expected. A valuation should support the price, but the buyer’s realistic post-closing cash flow must support the decision.
Structure changes what you inherit
An asset purchase and an equity purchase can produce very different results. The structure may affect which assets, liabilities, contracts, tax attributes, employees, receivables, licenses, and historical exposures transfer to the buyer.
The purchase agreement should also address allocation of price, working-capital expectations, excluded liabilities, representations, indemnification, seller transition support, and any earnout or holdback. These terms should be coordinated with financing before documents are finalized.
A medical practice is also a regulated operating system
Healthcare due diligence extends beyond ordinary business review. Confirm ownership and entity requirements, professional and facility licensing, payer enrollment, billing and coding practices, HIPAA safeguards, controlled-substance procedures where applicable, employment arrangements, referral relationships, and open audits or repayment obligations.
Financial relationships involving referrals, ancillary services, equipment, space, or compensation may raise physician self-referral and anti-kickback concerns. The right healthcare counsel and compliance professionals should review the structure and historical practices before closing, not after a problem appears.
Protect the practice and the household together
Ownership often introduces acquisition debt, personal guarantees, lease obligations, payroll responsibility, and concentration of personal wealth in one enterprise. Review liquidity, disability and life protection, business overhead exposure, malpractice coverage, cybersecurity, key-person risk, retirement-plan choices, and family cash-flow needs as one coordinated picture.
The goal is not merely to complete the acquisition. It is to enter ownership with enough financial resilience, operating visibility, and professional support to preserve choices after closing.
QUESTIONS TO CONSIDER
- What must be resolved under the current employment agreement before a transition?
- How much normalized cash flow remains after fair physician compensation, debt service, and working-capital needs?
- Which liabilities, contracts, employees, records, and receivables transfer under the proposed structure?
- Have billing, payer, privacy, referral, licensing, and other compliance risks been independently reviewed?
- Could the household absorb a slower transition or an unexpected capital need without disrupting long-term goals?