Hospital Impact: 5 ways to level the playing field when negotiating the sale of your healthcare firm

Once your practice has a “for sale” sign on it, buyers will want to know your organization’s financial viability, history and goals for the future. (Getty/Feverpitched)
Luis de la Prida

“Do you want to be part of a hospital system?”

“How many people work for you?”

“Where do you see your practice five years from now?”

If you’re considering merging or selling your urgent care center, these are some questions you likely hear often. Why? Because right now, big urgent care providers like hospitals are purchasing smaller urgent care centers to bring in additional revenue and manage costs.

Hospitals frequently call on urgent care centers to see if they’re interested in selling or merging—and doctors often aren’t prepared to handle the call.

Before you start answering their questions, think about what information you want to convey. Merging or selling your urgent care center is a big decision and there’s no need to rush it.

Here’s how to get prepared:

Know thyself  

Once your practice has the “for sale” sign on it, buyers will want to know your organization’s financial viability, history and goals for the future. Great questions. But wait—do you know the answers?

Now is not the time to “get into the weeds.” Nevertheless, you need to understand your practice’s profitability, profile and staff continuity. Figure out if you want to be part of a hospital system or if you see your practice as part of a large group. If you’re nearing retirement age, are you ready to pack up the golf clubs and move to Florida? How much longer do you see yourself practicing medicine?

Pretend you’re doing an internal audit. We recommend that you spend time prepping before you sell. That way, you’ll know the ins and outs of what you're selling. And when it’s time to negotiate a sale, you don’t have to wait until somebody from the other side of the table tells you what you’re worth—you’ll already know.

Pay attention to paperwork

Now is the time to buddy up to your CFO or accountant. It’s important for you to understand what’s going on with your financial, legal and operational systems. You might not consider yourself a “numbers person,” but understanding the basics is key.

A good start would be to look at year-to-date financial statements, tax returns for the past three years, collections and payroll reports. You’ll also want to look at how much is being paid (salaries and fringe benefits) to practice owners and their immediate family members.

Don’t worry—you won’t have to spend days crunching numbers. Just spend a few hours familiarizing yourself with the articles of incorporation, shareholder agreements, employee benefits, facilities, claims, litigation, risk management, assets, financing documents and medical contracts.

Your CFO or accountant already knows the ins and outs of all these documents. All you need to know is that they exist and you have a general idea of what’s inside of them.

Assess the value of your equipment

Now that you’ve got the paperwork part down, do an inventory of what’s inside your center. You’ll want to note:

  • Medical equipment, such as X-ray machines
  • Furniture and fixtures
  • Computers and technology equipment
  • Medical inventory, such as vaccines

Once you’ve got your assets accounted for, it might be a good time to consider completing a formal valuation of your center.

Seek help if needed

A merger or acquisition has potential to be a complicated transaction. To make things easier, you’ll want to assemble a transition team. The short list: your accountant, attorney, financial advisers and healthcare M&A professionals.

Spend some time evaluating your team members. What are their strengths? Weaknesses? Do you all work well together? If you feel like you’re missing some important players or some key skills, now’s the time to do a little outside research and find the people who can help you make better, more informed decisions. 

Create a plan

We’re in the homestretch. Now that you’ve done all your research and assessment, it’s time to evaluate your goals and figure out how to proceed.

For starters, you’ll want to develop a detailed marketing plan that addresses the exceptional benefits your practice offers. Throughout M&A discussions, always stay focused on running your practice to the best of your abilities, especially with regards to patient care and employee relations. If you do this, you’ll increase the likelihood that multiple buyers will compete to be the right partner with you.

Luis de la Prida is a managing director at Vertess, where he helps clients navigate the complexities of acquiring or selling a business, exit planning and business valuation. Throughout his career, Luis has served as the chief operating officer of a multispecialty medical practice and gained valuable international experience in financial roles at JPMorgan and Credit Suisse First Boston.