When physicians sell their medical practice to a local hospital, the focus is typically on getting the best price for their assets and negotiating a generous long-term compensation package. These are certainly important aspects to any practice sale. However, more and more often, I am working with physicians who desire to repurchase their medical practices after some period of time. Unfortunately, provisions related to buying back a practice are rarely contemplated or included in sale documents, which can make it difficult—if not impossible—for physicians to easily reacquire their former practice.
If physicians are even remotely interested in one day reacquiring their practice, it is a good idea to think about including provisions that describe how that process would occur. Some concepts to consider include the following:
- How long must the selling physicians work before they can seek to reacquire the practice? Typically, practice sales are accompanied by an employment commitment of up to three (3) years. I like to link the reacquisition right to the physicians meeting this obligation.
- What happens if there are numerous physicians in the practice being sold? Who has the right to repurchase the practice? Typically, the selling physicians should agree in advance how this process will work (i.e., a majority must agree to the transaction). Without establishing this clearly upfront, a battle can occur among the physicians, which is not in anyone’s best interest.
- The time frame for the reacquisition should be specified in the initial sale documents to ensure the selling entity assists in getting the deal done. Without a time frame, the transaction may linger indefinitely and frustrate physicians. I like to suggest that the physicians be required to provide written notice triggering the reacquisition, and the parties then must use best efforts to complete the transaction within six (6) months or another agreed upon time frame. Because a valuation of practice assets and renegotiation of equipment and other leases may be required, it is important to provide adequate time to complete the particular deal. Additionally, creation of a new practice entity, credentialing new payer contracts, and other details may need to be put into place, which can take several months to complete.