How to Negotiate to Sell a Medical Practice

It is commonplace for a physician or group of physicians to sell their medical practice to a third party.  Regrettably, physicians often fail to take the necessary steps to protect their interests and to maximize the benefits of the transaction.  Medical practices are developed over many years, however, a slight miscalculation could have a substantial negative impact on the value of the practice.  Fortunately, physicians can take certain basic steps during the process of the sale of their practice to maximize the value of the practice. This article identifies some of these steps with regard to the sale of a practice to a third party. This article focuses on the sale of a practice to an unaffiliated third party and, although certain action items are applicable, is not intended to address the issue of taking on a “partner” with the eventual sale to that “partner.” We recommend the following regarding how to negotiate the sale of a medical practice.

  • Retain experienced advisors early in the sale process
  • Understand the goals of each selling physician
  • Use a confidentiality agreement
  • Use a letter of intent
  • Understand due diligence
  • Structure the transaction to take advantage of tax laws
  • Obtain adequate collateral
  • Understand restrictive covenants
  • Limit representations and warranties
  • Limit indemnification of the sellers and obtain adequate indemnification from the purchasers
  • Determine whether “tail” malpractice insurance is necessary
  • Consider including dispute resolution procedures
  • Consider estate planning

The above was excerpted from The Physician’s Comprehensive Guide to Negotiating’s chapter on Negotiating the Sale of a Medical Practice written by Peter Greenbaum, Esq.  and Michael Schaff, Esq. Peter Greenbaum, Esq., is a shareholder with Wilentz, Goldman, & Spitzer, P.A., and practices on the Business Law Team and the Healthcare Team.  His business law focus is on general corporate law and corporate counseling.  He has extensive transactional experience in stock and acquisitions representing both buyers and sellers.  He has expertise in contract drafting and negotiation and providing legal consultation and document review to business entities of all sizes, both publicly and privately held.  Mr. Greenbaum structures professional practices for healthcare professionals and provides healthcare-related advice.  He frequently lectures on behalf of the New Jersey Institute of Continuing Legal Education as well as to professionals and business owners at association meetings and organizations.  Mr. Greenbaum has had articles published in many periodicals, including the New Jersey Law Journal and New Jersey Biz Magazine, as well as chapters included in books such as Representing Physicians Handbook.  Michael Schaff, Esq.,is a shareholder and head of the Corporate and Health Care Departments of Wilentz, Goldman, & Spitzer, P.A., which maintains offices in New Jersey, New York, and Pennsylvania.  Mr. Schaff has lectured extensively on health care matters across the country.  He is the immediate past chair of the American Health Lawyers Association Physician Organization Practice Group, and a former chair on the New Jersey State Bar Association Health and Hospital Law Section.  Mr. Schaff, who has published extensively on various health care topics, including physician representation, has a BA, joint JD/MBA (specialization in finance), and an LLM (in taxation).  He is listed in Best Lawyers of America and is admitted to practice in New Jersey, New York, and Maryland.

Steven Babitsky, Esq. is a negotiating consultant and founder of SEAK, Inc., an ACCME accredited continuing education company.  Steve has trained thousands of physicians.  He is  the co-author of The Physician’s Comprehensive Guide to Negotiating and Never Lose Again, Become a Top Negotiator by Asking the Right Questions and is the presenter on SEAK’s highly-acclaimed DVD negotiating training program for physicians, Negotiating Skills for Physicians.