Seller/Physician staying on post acquisition

May 08, 2024

by a professional from Emory University in Atlanta, GA, USA

I am seeing a lot of medical practices for sale in which the physician is wanting to stay on as an employee post acquisition. Can anyone shed light on whether or not this is allowed if using SBA financing? Also, is there a way to partner with a physician in the practice their selling if the buyer is not a licensed physician but has experience in healthcare operations?

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Reply by a professional
from University of Michigan in Detroit, MI, USA

Hi ^redacted‌, under SBA rules, sellers can only stay involved in the target company for more than a year post close if the deal is structured as a stock transaction and the seller (here the physician) retains an equity ownership in the business.

The rules regarding the ownership and operation of a medical practice vary state-by-state. In states in which only physicians can own a medical practice, it may be possible to create a work around whereby a non-physician owned company is providing management services to the medical practice in exchange for a fee equal to e.g., net profits.

If you have a specific target company in mind, sit down with a lawyer and work through the details ahead of time. Let me know if I can help in anyway, and good luck with your search!

Reply by a searcher
from University of Wisconsin in Los Angeles, CA, USA

There is a lot of growth opportunity in phyisician providers but need to be aware of and address significant risk and complexities. In addition to the state licensing and compliance rules mentioned by Brad, you need to understand their billing practices to ensure no fraud, and the key man risk. At physician practices, most patients are tied to their practitioner so the physicians are very important. I have seen practices lose one practitioner and with them hundreds of patients (ouch). Some physicians can also be hard to work because they think they are right and are demanding on pay. This is a space where financial sponsors have both done very well and gotten burned.

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