Nick Hernandez, MBA, FACHE

The decision to sell your practice is never one made lightly. It takes years of hard work and unwavering dedication to build a successful physician practice. No matter how rewarding the practice is though, no one wants to work forever and eventually physicians will want to retire. As you move closer to your ideal retirement date, you begin to wonder what will happen to the practice, how will you handle the transfer of ownership, and will you make enough from the sale. There are multiple options when it comes to selling your practice, but the best decision for you will depend on your unique circumstances and personal preferences; do not let any outside professional attempt to get you into a boilerplate succession planning model. Every physician will have different goals and visions for themselves and their practices, but having an idea of your options will help you prepare for a smooth and rewarding transition.

Opting to sell your practice to an unrelated party carries its own sets of emotions and complications, but that is the course laid for solo physician practices. Outside of finding a buyer, you must decide on a value for your practice and also determine the exit plan. As I have detailed in previous articles on the valuation process, the value of a physician practice is typically based on the previous three years of data. During that time, you may have been increasing patient volume, revenue, and profitability. You have undoubtedly added new patients and may have updated technology in the practice including making major equipment purchases. All of these items can help to maximize the value of your practice before a sale. When you are ready for the final push to entertain a buyer, what can be done to improve the value of the practice, especially the curb appeal? You need to look at your practice through the critical eyes of a potential buyer. Here are a few items to consider.

It is imperative to keep new patient numbers up as this is a key metric that purchasers review and consider an indication of practice vitality. If the rate of new patients is falling off, it sends off warning signs to a potential buyer. If needed, engage an experienced marketing firm that has success in attracting new patients. They might suggest items such as launching a new website, running social media campaigns, and asking for online reviews from patients.

Speaking of websites, when was the last time your website was updated? The website introduces and describes your practice to the community. Reviewing your website is one of the very first (if not THE first) tasks a potential buyer undertakes. Is the site up to date, inviting, informative, and user friendly? Are there recent professional photos of the facility, the physicians, and of all staff members? 

Ensure that you tune up equipment and declutter the facility. Have maintenance and repairs performed on all equipment as needed, although you want to avoid making any last-minute big equipment purchases unless absolutely necessary. Replace damaged fixtures and dispose of old plants. Consider installing new carpet, replacing worn furniture, and refreshing the paint. Fresh paint and some new décor can help freshen the look without breaking the bank. Ask a friend or hire a consultant to walk through your office and provide candid feedback on the aesthetics.

Sometimes practice owners start to slow down before retirement. This results in an exponential decline in profit and practice value. It is important to maintain the historic growth rate of the practice until the sale closes. The year before you sell your practice is not the time to cut back your schedule or take an extended vacation.

A practice sale requires a lot of information be provided to the prospective buyer. Most likely you will hire a transactional consultant (different from a practice management consultant) to facilitate the entire process. That consultancy can discuss with you a checklist of due diligence items that will be needed for prospective buyers to review. Additionally, you should be proactively reviewing accounts receivable and cleaning up accounts outstanding over 90 days if A/R is going to be addressed in the valuation and/or purchase agreement.

Naloxone: Expanding patient education and access

Nothing good comes out of trying to hide a practice sale from your staff. Set the tone with the team that the transition will be welcomed and embraced as a positive step forward. If your spouse works at the practice, then they will obviously need to step aside with the transaction. If there is a position in the office that needs to be filled, consider hiring and training someone before the sale because you need to continue operations as normal and not attempt to hand off a practice that is lacking staff at the last hour.

Remember too, that transparency is crucial both internally and externally. Proactive communication about leadership changes alleviates the normal fears associated with change and uncertainty. Plan for this. Poor management of this process shakes organizational credibility and effectiveness. The bottom line is that transitioning from a practice takes time and preparation. There are a variety of issues that must be considered, which is why it requires education and adequate planning to ensure the handing over of your practice is seamlessly executed. Someday the time will be right for you to sell your practice. The best exit strategy is the one that best fits your practice and your personal goals. Decide what you want to walk away with and a transactional consultant can help you decide how you will accomplish that. Once you have made a decision to exit your practice, you can never start too early to prepare for a future practice transition. Starting early can ensure a smooth and successful practice sale, but you must have a carefully thought-out roadmap with timelines. And don’t be afraid to ask for help; it’s not every day that you sell your practice, but there are experienced professionals out there who can advise you. Don’t seek the advice you want to hear, but rather the advice you need to hear.

, a consultancy specializing in strategic healthcare initiatives for physician practices. His firm helps devise and implement strategies that will allow practices to remain competitive and solvent. E-mail him

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The decision to sell your practice is never one made lightly. 

Contemplating Succession Planning:  The solo physician dilemma

6 key aspects of an organizational chart for your practice

The purpose of an organization chart is to depict the skeletal structure of the practice, including the functional relationships between, among, and within the specific components. An organization chart provides a point of reference and improves the flow and direction of communications. It allows people to see how they fit in the big picture, increases efficiency, and maintains a balance in the practice.

The development of good structure for organizations has been a concern for managers throughout history. Medical practices have both structure and process. The structure refers to the formal organization and the plans, schedules, and procedures that hold it together. Structure is the instrument by which people formally organize themselves to carry out a task. Process represents what actually goes on: what is done, how it is done, and the way individuals or groups behave and carry out their perceptions of the assigned tasks. The structure can be seen as the anatomy of a practice, and the process as the practice's physiology.

There are six key aspects of an organization chart.

The purpose of an organization chart is to depict the skeletal structure of your practice; including the functional relationships between your staff.


Becoming a successful practice manager

The charismatic practice manager starts out by knowing her job and the staff assigned to her, and by planning, setting priorities, and meeting deadlines. But she also is able to communicate what her goals are for the practice and takes the time to explain why certain tasks are required, where the practice is headed, and how it is going to get there.

Accomplishing the mission within the capabilities of the practice and the resources allowed, while maintaining high morale, is the goal of every practice manager. An astute practice manager can become a high achiever by applying basic management and leadership principles to the practice of which she is a part.

The manager begins this process by becoming as professional in her duties as she can.

Effective management is the ability to influence staff so that they willingly and enthusiastically strive toward achievement of practice goals.


Tips to become a successful practice manager

As you sit down with your physician partners, practice manager, and perhaps consultant over the coming weeks contemplating direction for 2021, I thought it may be beneficial to offer a few pointers to help you along the way.

For starters, you should pause to reflect upon new competitors in your catchment area, as well as current competitors and new initiatives they are taking on. For physician practices, a competitive analysis is a means to assess who your competitors are, what value they provide, understanding their (and your) strengths and weaknesses, and where your practice fits in. A good competitive analysis is a scouting report of the actual market terrain that your practice must navigate in order to be successful. While analyzing the competition is an essential component of your strategy, most medical practices don't conduct this type of analysis systematically enough—a thorough competitive analysis is indispensable.

Gather a list of your practice's competitors.

Most of the time, such a list is comprised of who your practice considers to be its chief competitors. However, there may be other healthcare organizations that indirectly compete with yours, perhaps ones outside of your catchment area that offer services such as telemedicine or niche treatment modalities that are aiming for the same patients. You will also want to include information on healthcare entities that may be entering your market in the coming year. Once you have compiled the list, you can highlight those practices that will be the greatest challenge.

Analyze the competition's services in terms of features, value, and target patients.

How do they market them? How do patients see your competition? How do referring physicians view your competition? Take an honest look at their offerings. Is your quality commensurate? Do you have similar offerings? What is the unique value you provide that competitors don't or can't? Emphasize these benefits in your marketing.

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Compile a list of competitor strengths and weaknesses and remember to be objective.

You'll do your practice no good if you allow bias toward your own physicians, staff, and services to cloud your judgment. Try to see the competition's practice as though you were them. What makes their practice so great? If they are growing rapidly, what is it about their practice that's promoting that growth?

Observe how your competitors market themselves through advertising, collateral material, and perhaps the use of physician liaisons.

You will have to go to many different sources to get a complete picture. It takes practice and a little shrewdness on your part to piece together a complete picture of strategies and objectives, so the use of a qualified consultant may be to your benefit. Focus on the facts, be persistent, and trust your intuition to help you.

Determine the current market demographics for your practice.

If the market is flat, then the competition for patients is likely to be fierce. Your practice will find itself scrambling to win market share. The outlook portion of your analysis may seem like forecasting, but it's really a measure of trends. By the time you've done most of your research, you'll have enough information to determine what the outlook really is.

By evaluating yourself against your competition, you'll likely find new ideas for your practice. While compiling a competitive analysis is an interesting piece of work, it can indeed be challenging. Consequently, you may want to seek the help of a healthcare consultant to guide you through this process. You'll learn a lot about your market and in the process become a more valuable resource for your patients and referring physicians.

From there, you will want to get into an abbreviated strategic planning process. That is, development of a plan (with timelines and objectives!) for what you plan to accomplish for 2021. Strategic planning is an essential business activity. However, several common mistakes must be understood so that physician owners can guard against them. Pointing out these mistakes is not a criticism of the process but acknowledgement of improper implementation. Medical practice leaders must recognize both the benefits and the potential pitfalls of strategic planning because it is their responsibility to ensure that strategic planning is conducted properly to achieve desired goals.

Here are four of the most-common planning mistakes we find:

1. Attempting to forecast and dictate events too far into the future.

In part, this may result from the natural desire to believe we can control the future. It is a natural tendency to plan on the assumption that the future will merely be a linear continuation of present conditions, and we often underestimate the scope of changes in direction that may occur. Because we cannot anticipate the unexpected, we tend to believe it will not occur. In fact, most strategic plans are overcome by events much sooner than anticipated by practice leaders.

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This is not a criticism of detailed strategic planning but of planning in more detail than the conditions warrant. This pitfall often stems from the natural desire to leave as little as possible to chance. In general, the less certain the situation, the less detail in which we can plan. However, the natural response to the anxiety of uncertainty is to plan in greater detail, to try to cover every possibility. This effort to plan in greater detail under conditions of uncertainty can generate even more detail. The result can be an extremely detailed strategic plan that does not survive the friction of the situation and that constricts effective action.

3. Tendency to use planning as a scripting process that tries to prescribe actions with precision.

When practice leaders fail to recognize the limits of foresight and control, the strategic plan can become a coercive and overly regulatory mechanism that restricts initiative and flexibility. The focus for staff members becomes meeting the requirements of the strategic plan rather than deciding and acting effectively.

4. Tendency for rigid planning methods to lead to inflexible thinking.

While strategic planning provides a disciplined framework for approaching problems, the danger is in taking that discipline to the extreme. It is natural to develop planning routines to streamline the strategic planning effort. In situations where planning activities must be performed repeatedly with little variation, it helps to have a well-rehearsed procedure already in place.

However, there are two dangers. The first is in trying to reduce those aspects of strategic planning that require intuition and creativity to simple processes and procedures. Not only can these skills not be captured in procedures, but attempts to do so will necessarily restrict intuition and creativity. The second danger is that even where procedures are appropriate, they naturally tend to become rigid over time. This directly undermines the objective of strategic planning—enabling the organization to become more adaptable. This tendency toward rigidity is one of the gravest negative characteristics of strategic planning and of strategic plans.

Strategic planning is one of the principal tools used to exercise operational control because it will help you to decide and act more effectively. Remember though, that strategic planning involves elements of both art and science, combining analysis and calculation with intuition, inspiration, and creativity. To plan well is to demonstrate imagination and not merely to apply mechanical procedures. Done well, strategic planning is an extremely valuable activity that greatly improves practice performance and is an effective use of time. Done poorly, it can be worse than irrelevant and a waste of valuable time.

The fundamental challenge of strategic planning is to reconcile the tension between the desire for preparation and the need for flexibility in recognition of the uncertainty of the healthcare industry.

To plan well is to demonstrate imagination, not merely to apply mechanical procedures.

Nick Hernandez, MBA, FACHE

Founder & CEO at ABISA, LLC

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