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Step by Step Guide – How to Sell a Medical Practice in Texas

This comprehensive guide explains how to sell a medical practice in Texas. We’ll cover important things to think about before making your decision.

Doctors may sell their medical practices for various reasons, like retiring or looking for better opportunities. Some might need to sell due to unexpected situations like illness or moving away. This guide is meant to help doctors understand the process.

Building Your Team: Selling a medical practice involves many legal, financial, and practical aspects. To handle these, you should get help from professionals. Having experts guide you through the process can make your practice more valuable. It’s important to assemble your team early on. Trying to sell your practice without expert advice can lead to problems later on.

At a minimum, your team should include a lawyer, an accountant, and someone who can figure out how much your practice is worth.

Healthcare Business Law Attorney: A good healthcare lawyer who knows about selling medical practices is really important. They can help with things like following healthcare laws, checking out the practice’s history, managing patient records, and dealing with contracts. Your lawyer will also help you agree on the terms of the sale and make sure you don’t have any unexpected responsibilities later on.

Certified Public Accountant (CPA): A CPA is important for figuring out how much your medical practice is really worth. They’ll create financial statements that show your practice’s financial situation. Your CPA will also explain the tax rules for the sale, which helps you decide how to do it.

Valuation Expert: Knowing how much your practice is worth is a big part of the sale. It affects the price you ask for, how many people are interested, and what you finally agree to. A valuation expert will do a lot of research to figure out how much your practice is worth, considering both the physical stuff (like equipment) and the less tangible stuff (like reputation).

Valuing Your Medical Practice: The price of your practice is the main point of discussion during the sale. It’s usually based on the “fair market value,” which means what a reasonable buyer and seller would agree on. To figure out this value, an expert looks at things like your practice’s history, finances, how much it can earn, what it owns (like equipment), and what it’s known for. It’s important to understand that fair market value isn’t the same as the final sale price. It’s just the starting point for negotiations.

Finding Multiple Buyers: Having more than one person interested in buying your practice can make it more valuable. To find potential buyers, reach out to places like hospitals, colleagues, and competitors, and let them know you’re thinking about selling.

Pre-Purchase Steps: Before you sell, there are a few things you should do.

Preliminary Agreements: To protect yourself, consider some agreements before you spend a lot of time and money on selling your practice.

  1. Letter of Intent: When you find someone who wants to buy, you can start by signing a non-binding letter of intent. This helps you both agree on some basic things and plan out what needs to happen before you make a final deal.
  2. Confidentiality and Non-Solicitation Agreement: As part of checking out your practice, the buyer will get to see confidential stuff like your finances and patient lists. To keep this info safe, you can ask the buyer to sign an agreement saying they won’t use it for anything except checking out your practice. This agreement can also stop the buyer from trying to hire your employees or steal your patients before the sale is done.

Structure of the Sale: You and the buyer need to decide if the sale will be a stock purchase or an asset purchase. A stock purchase means the buyer gets everything, including your business debts. An asset purchase means the buyer only gets specific things, like equipment or licenses. Both options have different legal and tax rules, so you’ll need your CPA and lawyer to help you pick the right one.

Due Diligence: Both you and the buyer will do some research to make sure everything’s okay. The buyer will look at your finances, business contracts, and other stuff to be sure they’re getting what they expect. You’ll also check out the buyer to make sure they can really buy your practice.

Ensuring Compliance with the Corporate Practice of Medicine (CPOM): Some laws say who can practice medicine and how. For example, Texas says businesses and corporations can’t practice medicine, and non-physicians can’t employ doctors to provide medical services. There are exceptions, but the point is to make sure doctors make medical decisions based on what’s best for patients, not just for money. If you’re selling, you need to make sure the buyer isn’t breaking these laws.

Confirm Proper Licensure: The buyer must have the right licenses to practice medicine. You also need to check if they have any issues with state or medical boards that could stop them from getting a license. This could cause problems or even stop the sale.

Determine Financial Capability: Make sure the buyer has enough money to buy your practice. Some buyers get loans, while others might want you to finance part of the sale. If you agree to finance, make sure the buyer can pay you back.

Assignability of Third-Party Contracts: Some contracts with third parties, like leases for office space or service contracts, might not let you transfer them to the buyer. It’s your job to know the rules for these contracts. If you don’t, it could delay the sale or cause other issues. If a contract can’t be transferred, you might have to leave it out of the final sale.

With your team of professionals helping gather information, the due diligence process will go smoothly.

The Purchase and Sale Agreement: The final agreement builds on the earlier steps. It includes important sections like:

Basic Terms: This part says what’s being sold, how it’s being sold (assets or stock), and the important details like price and dates. Federal laws regulate the price of a medical practice in some cases, so a healthcare lawyer will make sure everything follows the law.

Warranties and Representations: Both you and the buyer make statements about the sale. For example, you promise that your financial records are accurate, and the buyer promises they can practice medicine. The agreement will also include clauses to protect both sides from problems. For instance, you might be protected from lawsuits, and the buyer might get help if you don’t meet your promises.

List of Assets and Liabilities: The agreement should list everything your practice owns and owes. Any debts the buyer will take over should be noted.

Restrictive Covenant: If you plan to keep working in the same area after selling your practice, the buyer might want an agreement saying you won’t compete with them. This can’t be too broad or last too long.

Termination Provisions: Sometimes a sale doesn’t work out, maybe because of financing problems or other issues. To avoid long delays or disagreements, the agreement should have a clear end date when the sale must happen, unless both parties agree in writing to something different.

Medical Records and Patient Notification: You and the buyer need to agree on how to handle patient medical records and let patients know about the change in ownership. Patients have rights to their records and can choose a new doctor. You’ll also need to follow state laws on how long to keep records.

Transition Plan: Selling your practice affects your patients and staff. To minimize disruptions, you and the buyer should create a plan for the transition. This helps ensure things run smoothly for everyone involved.

Contact one of our attorneys at Dike Law Group and schedule a meeting so we can discuss at

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