Factors Influencing Buy-In Price
Aspects that can affect the buy-in price include hard assets, real estate, accounts receivable, book value, cash flow, and goodwill. The best part about buying into someone else’s medical practice is that you’re ready to hit the ground running. Everything is ready and waiting for you, including patients! Becoming a Buy-In partner means owning part of a successful medical practice or surgery center. Buying into a practice provides benefits like a share of the practice’s income on top of your salary, along with a say in how the practice is run, but without the headaches of being the sole owner of a practice. If partnership is an avenue you want to explore, here are five important things to know before buying into a medical practice.
The profitability of buying into a medical practice can vary depending on the financial health of the practice, patient demand, reimbursement rates, operational efficiency, and market dynamics. So before making a decision, conduct a thorough evaluation to assess the potential profitability. How can hospital-doctor consolidation provide more seamless care, yet it must be done with caution? We need enhanced professionalism by doctors and smarter oversight by the government.
Medical Practice Ownership Trends
Do doctors own their own practice?
- Nearly 65% of surgical subspecialists own their practices.
- Just under 15% of physicians are in solo practice, down from 18.4% in 2012.
- Older physicians are more likely to have practice ownership.
- In 2018, 10% of physicians were employed in practices that are entirely owned by other physicians, also called private practice.
Private practices offer their physicians the ability to set their own company culture. Many patients report that private practices have a more “family-like” feel.
The percentage of physicians who own their own practice has dipped below half for the first time. In 1983, 76.1% of doctors were practice-owners. In 2016, only 47.1% of physicians held equity in their practices. Most physicians still worked in practices wholly owned by doctors.
A medical degree gives a physician the right to envision owning a private practice. Key advisers that physicians rely on are an attorney and accountant. Experienced private-practice physicians in Wisconsin shared insights on common hassles.
With a doctor’s office, the doctor owns their office. Most owner GPs earn at least an extra $100,000 a year profit. According to Medscape, self-employed physicians made an average of $359K a year.
Doctors who start their own practice enjoy control over their practice and decisions. Self-employed doctors take pride in knowing they are business owners contributing to local development.
Hospital Interest in Physician Practices
Why do hospitals buy physician practices? Hospital groups have started forming their own health insurance companies with their facilities and physicians as main in-network providers. This consolidation of health care appears a rational business response to the Affordable Care Act (ACA). Group practices offer scheduling flexibility that hospitals may not.
- An estimated 65% of private physicians are now employed.
- The average revenue each employed physician generated for a hospital was $1.56 million in 2016.
- When hospitals employ doctors, they negotiate higher payments with insurers.
- Physicians in hospital-owned practices were 30.5% in 2019, up from 26.7% in 2018.
But hospital-owned practices collect less money with greater costs than independent ones. Most practices distribute all profits, so no "fat" offsets the hospital’s loss.
The latest trend is the consolidation of physician practices by hospitals. Locally University of Miami bought Cedars of Lebanon for $285 million.
Prices most likely increase when hospitals buy practices rather than looser contracts. This study could prompt the Federal Trade Commission to challenge deals that raise prices.
Hospitals and equity funds look to acquire practices. Hospitals typically can’t pay as much as equity funds, which the federal government monitors for illegal inducements. Hospitals must pay a "fair market value and commercially reasonable" price.