Can a New Physician Buy an Internal Medicine Practice?
Many physicians eventually want to transition from working for another practice or healthcare organization to owning their own internal medicine practice. A common question is whether a physician with limited ownership experience can purchase an established practice.
The answer can depend on the physician’s qualifications, financial position, the practice being purchased, and the requirements of the financing program and lender.
For physicians considering internal medicine practice financing, understanding what lenders may evaluate can help new practice owners prepare for an acquisition.
Here are seven things new physicians should know about buying an internal medicine practice.
1. Practice Ownership Experience Is Not the Only Factor
A physician does not necessarily need years of previous practice ownership to consider purchasing an established internal medicine practice.
Other factors may be important, including:
- Medical training and credentials
- Professional experience
- Credit history
- Personal financial position
- Existing debt obligations
- Practice financial performance
- Ability to manage the business
The specific requirements can vary depending on the financing structure and lender.
2. Clinical Experience Can Be Important
A physician purchasing an internal medicine practice should have the appropriate professional qualifications to operate the practice.
Relevant factors can include:
- Medical education
- Residency training
- Licensing
- Board certification, when applicable
- Clinical experience
The physician should also understand the administrative and operational responsibilities involved in practice ownership.
3. Buying an Established Practice Can Provide an Existing Patient Base
One potential advantage of purchasing an established internal medicine practice is that the buyer may acquire an existing patient base and established operations.
The practice may already have:
- Established patients
- Employees
- Office space
- Equipment
- Technology
- Vendor relationships
- Established operating procedures
However, the physician should conduct thorough due diligence before relying on historical practice performance.
4. The Practice’s Financial Performance Matters
A new owner should carefully review the financial performance of the practice before agreeing to the purchase.
Important information may include:
- Revenue
- Profitability
- Operating expenses
- Accounts receivable
- Patient volume
- Existing obligations
Understanding the practice’s historical cash flow can help the physician determine whether the acquisition makes financial sense.
5. New Physicians Should Understand the Total Cost
The purchase price is only one part of the financial commitment involved in becoming a practice owner.
Additional expenses may include:
- Working capital
- Equipment
- Technology
- Renovations
- Professional fees
- Insurance
- Marketing
- Other transition costs
Creating a complete acquisition budget can help the physician understand the total amount of capital that may be required.
6. New Owners Should Prepare for the Business Side of Medicine
Owning an internal medicine practice involves responsibilities beyond providing patient care.
A physician-owner may need to oversee:
- Employees
- Payroll
- Billing
- Vendor relationships
- Practice finances
- Compliance
- Marketing
- Daily operations
Physicians without previous ownership experience may benefit from working with experienced professionals who can assist with accounting, legal matters, operations, and other areas of practice management.
7. Financing Can Help New Physicians Become Practice Owners
Depending on the physician’s qualifications, the practice’s financial performance, and the applicable financing requirements, financing may potentially be available to help fund an eligible acquisition.
Potential financing may be used for eligible expenses such as:
- Practice purchase
- Working capital
- Equipment
- Technology
- Commercial real estate
- Other qualifying business expenses
The specific financing structure and requirements will depend on the transaction and lender.
What Should a New Physician Do Before Buying a Practice?
A physician considering ownership should begin preparing well before closing on an acquisition.
Important steps can include:
- Reviewing personal finances
- Understanding existing debt
- Determining an acquisition budget
- Researching potential practices
- Reviewing practice financial statements
- Conducting due diligence
- Evaluating financing options
- Building a team of professional advisors
Preparing early can help the physician better understand the risks and financial requirements of becoming an owner.
Can a Physician Buy a Practice Right After Residency?
A physician’s ability to purchase a practice shortly after residency can depend on several factors.
A lender may evaluate the physician’s professional qualifications, credit history, financial position, existing debt, and the financial performance of the practice being purchased.
A physician who is early in their career should carefully evaluate whether they are prepared for both the clinical and business responsibilities of ownership.
Final Thought
A new physician may be able to purchase an established internal medicine practice even without extensive previous ownership experience. However, the physician should carefully evaluate their qualifications, finances, the practice’s financial performance, and the requirements of the proposed financing.
Buying an established practice can provide an opportunity to step into an existing operation, but successful ownership requires preparation for both patient care and business management.
Physicians considering their first practice acquisition should begin planning early and evaluate the complete financial picture before moving forward.
