How to Buy an Orthopedic Practice: What Surgeons Should Know
For surgeons who want independence, the decision to buy an orthopedic practice can offer an established patient base, referral relationships, trained staff and, in many cases, ancillary services that would take years to build from scratch. It can also be one of the largest financial commitments of a surgeon’s career.
This guide covers what to evaluate before making an offer, from referral sources and ancillaries to payer contracts and transition planning. Licensing, ownership and payer rules vary by state and payer, and nothing here is legal, tax, billing or compliance advice.
Step 1: Define What You Want to Buy
Orthopedic practices vary widely. Before reviewing opportunities, clarify your goals:
- General orthopedics or a subspecialty: sports medicine, joint replacement, spine, hand, foot and ankle or trauma
- Solo practice or group: buying a solo surgeon’s practice is different from buying into or acquiring a larger group
- Ancillary services: whether you want imaging, physical therapy, bracing or surgery center access
- Location: the local mix of hospitals, competitors, referral sources and payers
If you plan to join an existing group rather than buy a whole practice, the financing questions are somewhat different, because you would be purchasing a partnership stake and the group’s governing documents would shape the terms.
Step 2: Understand Where Patients Come From
Orthopedic volume often depends on referrals from primary care physicians, urgent care centers, emergency departments, athletic programs and other specialists. Many of those relationships belong personally to the selling surgeon.
Ask which sources drive new patients, how concentrated they are and whether any are tied to a hospital or health system that may change its referral patterns after the sale. A transition period where the seller introduces you to referral partners can help protect volume.
Step 3: Evaluate the Payer Mix and Contracts
Review revenue by payer over several years, including commercial insurers, Medicare, Medicaid, workers’ compensation and personal injury cases. Each source has different reimbursement, documentation and payment timing.
Payer contracts, Medicare and Medicaid enrollments and credentialing should not be assumed to transfer. Depending on how the deal is structured, you may need new enrollments or contracts, and collections may be delayed while that happens. Healthcare counsel and billing professionals can help plan the change of ownership.
Step 4: Assess Ancillaries and Related Entities
Much of an orthopedic practice’s value may come from ancillary services and related entities. Ask:
- Which ancillaries are owned by the practice, and which are separate entities?
- Does the purchase include ASC units or real estate?
- Is ancillary equipment owned, leased or financed, and what condition is it in?
- Have arrangements involving physician ownership of ancillary services been reviewed by healthcare counsel?
Our article on orthopedic practice valuation explains how ancillaries and other factors can affect price.
Step 5: Evaluate the Team and Owner Dependence
In many practices, the selling surgeon produces most of the surgical revenue. If that surgeon leaves soon after closing, revenue could drop. Review:
- Production by each surgeon and advanced practice provider
- Staff tenure, roles and compensation, including surgical schedulers, therapists and imaging technologists
- Employment agreements and restrictive covenants, which should be reviewed by counsel because enforceability varies by state
- How workers are classified, which should be reviewed by qualified professionals
Step 6: Complete Due Diligence
Due diligence typically includes:
- Tax returns, financial statements and bank statements
- Accounts receivable aging and collection history
- Billing and coding practices, reviewed by qualified billing or compliance professionals
- Lease terms, assignment rights and landlord consent
- Equipment lists, leases and existing debt
- Malpractice history, audits and any pending claims
- Patient record transfer and practice management systems
Findings may change the price, the structure or whether you move forward.
Step 7: Plan How to Finance the Purchase
Most surgeons who buy an orthopedic practice use some financing. Options may include SBA 7(a) loans, conventional practice loans and, in some cases, seller financing. Seller notes are typically subordinate to senior debt, and lenders and programs may limit seller financing and earnouts.
Lenders generally review the practice’s cash flow, your clinical experience and production history, your credit and liquidity and the deal structure. Our guides to orthopedic practice acquisition loan options and orthopedic practice loan requirements explain these factors in more detail. You can estimate payments with our SBA loan calculator; estimates are for planning only and do not represent an offer or approval.
SBA eligibility and terms depend on the business, the buyer, use of proceeds, program rules and lender review, and every loan is subject to approval.
Step 8: Plan Working Capital for the Transition
After closing, payroll, rent, supplies and implant-related costs continue while claims are processed and enrollments are updated. Building adequate working capital into the plan can give a new owner flexibility during the transition.
Step 9: Close and Transition
Closing may involve finalizing the purchase agreement, assigning the lease, transferring records, updating insurance and hospital privileges and notifying patients, staff and referral sources. A documented transition period with the seller can help retain patients and referral partners.
Mistakes to Avoid When You Buy an Orthopedic Practice
- Underestimating how much revenue depends on the selling surgeon
- Assuming payer contracts and enrollments will transfer
- Overlooking how ancillaries and related entities are owned
- Skipping a review of billing and coding
- Using all available cash for the purchase and leaving too little in reserve
Final Thoughts
Choosing to buy an orthopedic practice can be a strong path to independence, but careful planning matters. Understanding referral sources, payer contracts, ancillaries, owner dependence and financing before closing can help you avoid surprises and protect the value you are buying.
US Medical Funding helps orthopedic surgeons finance practice acquisitions. Learn more about our orthopedic practice acquisition financing and our full range of orthopedic practice financing options.
