Chiropractic Practice Due Diligence Checklist for Buyers
Chiropractic practice due diligence is the period after a letter of intent when a buyer verifies what the seller has represented about the clinic. It is the buyer’s chance to confirm that the revenue is real, the patients are likely to stay and there are no hidden liabilities that could affect the price or the financing.
Chiropractic clinics raise some issues that general business checklists miss, including personal injury receivables, cash and membership revenue and heavy owner dependence. This checklist focuses on those areas. Rules vary by state and payer, and nothing here is legal, tax, billing or compliance advice.
Why Chiropractic Practice Due Diligence Matters to Lenders
If you are financing the purchase, your lender will conduct its own review, but it relies heavily on the same documents you gather. Findings during diligence can change the price, the deal structure, the loan amount or whether the transaction moves forward at all. Starting early and staying organized can help keep the process on track.
Financial Records
Begin with the core financial picture. Request several years of:
- Business tax returns and financial statements
- Monthly bank statements that can be matched to reported deposits
- Collections reports by payer type and by provider
- Payroll records and owner compensation details
- A list of proposed add-backs with supporting documentation
- Existing debts, equipment leases and liens
Buyers should understand true earnings after paying a market salary to the doctor who will treat patients. Our guide to the chiropractic practice loan documents lenders typically request can help you organize these files.
Patient Retention and Visit Trends
Chiropractic revenue depends on returning patients. Buyers should look beyond total revenue to understand the patient base itself:
- New patient counts and where new patients come from
- Active patient counts and visit frequency over time
- Patient visits handled by the owner versus associates
- Reactivation and recall practices
- Online reviews and community reputation
If most visits are tied to the selling doctor, plan for how those patients will be introduced to you. A seller transition period documented in the purchase agreement may help.
Personal Injury Receivables
Many clinics treat patients involved in auto accidents or other injury cases. These accounts are often paid only when a case settles, sometimes under a lien or letter of protection. That can create a large receivables balance that is slow and uncertain to collect.
During diligence, buyers should review:
- The personal injury receivables balance and its age
- Historical collection rates on settled cases
- Which attorneys refer patients and how concentrated those referrals are
- Whether receivables are included in the purchase or retained by the seller
Lenders may discount or exclude this type of receivable when evaluating a deal. Our article on how lenders view personal injury chiropractic practices covers this in more depth.
Cash, Membership and Package Revenue
Cash-pay visits, memberships and prepaid care plans can be valuable, but they need to be verifiable. Buyers should match cash and card deposits to the practice management system and bank statements, review membership cancellation trends and understand any prepaid visits the buyer will be obligated to honor after closing. See our guide to cash-based chiropractic practice value for more on how lenders evaluate this revenue.
Payer Contracts and Billing Review
Review revenue by payer, including commercial insurers, Medicare, Medicaid, workers’ compensation and personal injury cases. Payer contracts, Medicare and Medicaid enrollments and credentialing should not be assumed to transfer to a new owner.
Billing and documentation practices should be reviewed by qualified billing or compliance professionals. Buyers should ask about past audits, refund requests, payer reviews and any patterns that might create liability. Healthcare counsel can advise on how the deal structure may affect responsibility for past billing.
Compliance and Legal Review
Your attorney will typically review:
- Licenses for the practice and each provider
- Practice ownership rules in your state, which vary and should be reviewed by counsel
- Marketing and referral arrangements, including any relationships with attorneys or other providers
- Any complaints, board actions, malpractice claims or pending litigation
- Patient record transfer and privacy obligations
Staff and Associates
Review each team member’s role, tenure and compensation. Associate doctors are especially important if they treat a meaningful share of patients. Employment agreements and restrictive covenants should be reviewed by counsel, because enforceability varies by state. Worker classification should be reviewed by qualified professionals.
Lease, Real Estate and Equipment
Confirm that the lease can be assigned to you, that the landlord will consent and that the remaining term supports your loan. Inspect tables, imaging equipment and therapy devices, and check for existing equipment financing or leases. If the building is part of the deal, a lender may require an appraisal and environmental review.
Red Flags to Watch For
- Reported revenue that cannot be matched to bank deposits
- A large share of collections tied to one attorney, payer or referral source
- Declining new patient counts hidden by price increases
- Unexplained gaps in financial records or tax filings
- A seller who is unwilling to commit to a transition period
Any of these may not end a deal, but each deserves explanation before closing.
Financing the Acquisition
Once diligence supports the deal, financing can be finalized. Many buyers consider SBA 7(a) loans or conventional practice loans. Eligibility and terms depend on the business, the buyer, use of proceeds, program rules and lender review. Every loan is subject to approval, and nothing here is a commitment to lend. Our guide to chiropractic practice acquisition loans explains the options.
Final Thoughts
Thorough chiropractic practice due diligence protects the buyer, supports the lender’s review and often leads to a better-structured deal. Focus on patient retention, personal injury receivables, cash revenue verification and compliance, and bring in counsel and accountants early.
US Medical Funding helps chiropractors finance the purchase of established practices. Learn more about our chiropractic practice acquisition financing.
