Considerations When Buying a Practice

Hello and welcome back again to Podiatry Today Podcasts, where we bring you the latest in foot and ankle medicine and surgery from leaders in the field. We're thrilled to welcome back two doctors today that are sharing even more insights with us on enhancing practice opportunities this time specifically talking about considerations when it comes to buying a practice. Doctors Maryellen Brucato and Bela Pandit are back with us to let us know what their thoughts are on what we should focus on when taking this important step.

There's so much to consider when looking into buying an existing practice. For some docs out there that might just be learning about the process, What are a few of the most important pieces of information that they need to evaluate?

Okay, so if you're someone who's looking into buying a practice, a couple of the higher level things that we should be looking out for are number one. What is the gross income of this practice? How much money is this practice taking in year to year? And usually you want to look back for the last three years, right? One year isn't really a good financial snapshot of the business. So we want to look for the last three years.

Second, we don't want to look at just the gross income. We want to look at the profit. So how much is the overhead? Maybe the business is making a really high gross income.

However, a lot of that money is going right out the window to pay the staff and pay for supplies and DME and things like that. So, we want to get that number as well. These numbers are typically found in what's called a P&L or a profit and loss statement.

Your big business that you're looking at will typically provide that to you when you're in serious talks with them. You will also have access to their tax records as well and that will give you an insight on how much money the owner is making off of the business. Second, we want to know is what is the payer mix, right? So is this practice seeing all Medicare patients? Are they seeing all private insurance patients? Are they seeing all Medicaid patients? That all matters, right? Because we want to know, is it all old people? Is it all people, you know, is it all workers, comp patients? Is it all people that, you know, won't pay out of pocket, they can't afford to pay out of pocket for cash pay services or maybe this is a cash pay practice and you're going to have to sell everything. We need to know the payer mix. Another, you know, follow up on that is you don't want to take this person's work for it. Unfortunately, some people might say, we're, you know, we see, oh yeah, we see a lot of really good insurances here. Okay, well where is the proof of that? And that's usually a simple report from the EMR. We can follow that up really easily. A third thing to ask is what kind of equipment do you have? A large cost of starting up a practice is the equipment, unfortunately.

So we want to know, is the equipment outright owned? Is it still being leased? Maybe this practice doesn't own any equipment actually or maybe they're you know intending on keeping the equipment so we want to ask those three main questions to start with and then finally we want to come to you know an understanding of how much does this practice want to sell for how much are they looking you know to make off this sale and are they negotiable at all? - I think to go right into your point, you definitely need a lawyer in these kind of situations. Everyone's gonna value their practice more than, you know, in your heart, you think it's worth a whole lot. But when a lawyer looks at stuff and breaks down that P &L and everything, a lot of times it's worth nothing.

And that's kind of where you can come in and negotiate. The equipment thing's a huge thing. I've looked at practices where the equipment is 50 plus years old. That's worth, to me, very little or nothing. One thing I would say, too, is if someone's really serious about selling, they'll let you spend a day or so in the office. You can get a feel of the patience, the reputation this practice has, what the flow is.

You can see it for yourself and see if this is something you can take on or change or leave as is, you know, to make a decision. But if someone's not transparent about that, maybe think twice. Absolutely.

And it can be an overwhelming process. Bela and I are here to help. We've helped a lot of other people evaluate practices they were going to buy, advise on whether it's a good idea, a bad idea other follow-up questions to go back to the owner and ask for so this is absolutely something in our wheelhouse that we can help you with because it is an overwhelming and scary process and a lot of you know accountants and lawyers they can look at the numbers and stuff but our experience is you know it allows us to put the stuff in action.

Right they won't know the questions of the day-to-day work part right so We have to, we can help you with that because they're not, they don't know that. They just look at numbers and the whole scenario, but we're looking at everything else. So feel free to reach out if you're in that situation.

Thank you, doctors, for these important pointers. And we hope that you'll join us for other episodes of Podiatry Today podcast on your favorite podcast platforms, Podiatry Today, Spotify, Apple Podcasts, and others.