How to Prepare for an Internal Medicine Practice Acquisition
Purchasing an internal medicine practice requires careful preparation. Physicians need to evaluate the practice, understand the financial requirements, prepare for due diligence, and determine how the acquisition will be financed.
Starting the preparation process early can help physicians identify potential issues and make the acquisition process more organized.
For physicians considering internal medicine practice financing, preparing financially before pursuing an acquisition can also help determine how much capital may be needed.
Here are eight steps physicians can take to prepare for an internal medicine practice acquisition.
1. Determine What Type of Practice You Want to Buy
Before looking for a practice, physicians should determine what type of acquisition fits their professional and financial goals.
Consider factors such as:
- Location
- Practice size
- Patient volume
- Number of physicians
- Services offered
- Purchase price range
- Growth opportunities
Having clear criteria can make it easier to evaluate potential opportunities.
2. Review Your Personal Financial Position
Physicians should understand their own financial position before beginning the acquisition process.
This may include reviewing:
- Credit history
- Personal income
- Existing debt
- Available cash
- Personal assets
- Monthly financial obligations
Understanding these factors can help physicians establish a realistic acquisition budget.
3. Determine How Much Financing You May Need
The practice purchase price is not necessarily the only capital requirement.
Physicians may also need to account for:
- Working capital
- Equipment
- Technology
- Renovations
- Real estate
- Transition expenses
- Other acquisition costs
Creating a complete acquisition budget can help determine the total amount of capital required.
4. Review the Practice’s Financial Records
Once a potential practice has been identified, the physician should carefully review its financial performance.
Important information may include:
- Tax returns
- Profit and loss statements
- Balance sheets
- Revenue history
- Operating expenses
- Accounts receivable
- Existing debt
Reviewing several years of financial information can help identify trends and provide a better understanding of the business.
5. Evaluate the Patient Base
The existing patient base can be an important part of an established internal medicine practice.
Physicians should consider:
- Active patient count
- New patient volume
- Patient retention
- Visit volume
- Referral sources
- Patient demographics
Understanding the patient base can help the buyer develop more realistic expectations for future practice revenue.
6. Conduct Thorough Due Diligence
Due diligence allows a physician to investigate the practice before completing the acquisition.
The process may involve reviewing:
- Financial records
- Contracts
- Employee information
- Equipment
- Lease agreements
- Insurance
- Existing liabilities
- Other business obligations
Physicians should work with appropriate professional advisors to help evaluate the legal, financial, and operational aspects of the transaction.
7. Review the Practice’s Location and Lease
If the practice operates from leased space, the physician should carefully review the existing lease.
Important considerations may include:
- Remaining lease term
- Renewal options
- Rent increases
- Assignment requirements
- Maintenance responsibilities
- Tenant improvement obligations
If commercial real estate is included in the acquisition, the property should also be evaluated as part of the overall transaction.
8. Plan for the Transition
A successful acquisition involves more than completing the purchase.
The physician should plan for the transition of the practice’s operations.
This may include:
- Employee transitions
- Patient communications
- Billing systems
- Electronic health records
- Vendor relationships
- Insurance
- Marketing
- Office operations
Planning these items in advance can help reduce disruptions when ownership changes.
What Documents Should Physicians Prepare?
Physicians can save time by organizing their personal financial documentation before beginning the financing process.
Potential documents may include:
- Personal tax returns
- Personal financial statements
- Bank statements
- Information about existing debt
- Credit information
- Professional credentials
- Employment or practice history
The exact documentation required can vary depending on the financing structure and lender.
When Should Physicians Start Preparing?
Physicians should consider beginning the preparation process before they find the practice they ultimately want to purchase.
Early preparation can give the physician time to:
- Review their financial position
- Organize documentation
- Establish an acquisition budget
- Identify financing needs
- Research potential practices
- Assemble professional advisors
Being prepared can make it easier to move forward when the right acquisition opportunity becomes available.
Final Thought
Preparing for an internal medicine practice acquisition involves much more than finding a practice and agreeing on a purchase price. Physicians should evaluate their personal finances, determine their capital requirements, review the practice’s financial performance, conduct thorough due diligence, and plan for the transition to ownership.
Starting the preparation process early can help physicians identify potential issues and make better-informed decisions throughout the acquisition.
Whether you’re planning your first internal medicine practice acquisition or preparing for future growth, having a clear financial and operational plan can help you approach the transaction with greater confidence.
