Buying or Selling a Medical Practice in Ontario?

When contemplating whether to buy or sell a FHO practice, there are many things one has to take into consideration. These factors however, are dependent on which side of the transaction you fall into. Whether you are the buyer or seller, some of the key questions/issues you want to address are:

Sellers                                                           Buyers                                                                                                           

  • What is the “market value” of your practice today?
  • Do you have lease obligations as it relates to your office space?
  • Do your colleagues know you are planning to exit?
  • Do you have any partnership/cost sharing obligations with them?
  • MOHLTC Requirements: Are you familiar with the process for properly transitioning your patient roster, and your practice?

  • How much are you prepared to spend in order to step into a “full” medical practice immediately?
  • Are you prepared to add your name to an existing office lease agreement, or sign a new one?
  • What is the structure of the current expenses reimbursement at the medical office you are looking to join? Or is it a solo office?
  • The Ins and Outs of the FHO: How familiar are you with the business and administrative aspects of managing a FHO practice and roster?

For more information about your practice sale or purchase, contact us today for your complimentary consultation with a healthcare expert.

 

What is your Practice Worth?

For Sellers:

Attaching a value to your medical practice can sometimes be a difficult task as you may disagree with the market on its estimated worth of your practice. Ultimately its worth is dependent on how much a buyer is willing to pay.

That being said, if you are in a rush to sell your healthcare practice it is recommended to initially start with a lower asking price. However, if you’re in no rush and have time on your side to keep your practice on the market, you should begin with a strategically higher asking price. There is a distinct correlation between the asking price and the period of time one has before the need to sell. The smaller your time margin becomes, the lower your price should be.

Considerations in the Medical Office Lease for the Seller 

business, office, law and legal concept - picture of woman handThere’s so much at stake through the process of selling a family practice; it is imperative that you consider current obligations to your office lease and the assignment provisions within. Prior to completing your sale, it’s important to have the office lease properly reviewed to ensure that there are no hidden risks, and that the ‘assignment of the lease’ occurs properly, protecting the interests of both parties along the way. The best way to do this is by seeking help from healthcare leasing professionals like Cirrus Consulting Group for a professional, thorough review of the details in the office lease.

Also, consider whether you are in a solo medical office or with a group; it’s important to speak with your colleagues to ensure that they are aware of the upcoming changes. This is important so you may gain their support along the way with regards to group obligations. When it comes to the ministry, transitioning a healthcare practice has many steps involved. Make this process easier on yourself and look to professionals for help. Allow Cirrus Consulting Group to facilitate this process and take the burden off your shoulders.

For Buyers:

When thinking about starting a family practice, you must consider the substantial time commitment and cost involved. If this is a situation that doesn’t seem extremely promising, it may be the ideal time to examine the idea of instead, purchasing an already established FHO practice. Although there is an initial cost upfront, the long-term benefits far outweigh the short-term investment. Benefits such as a guaranteed income from day one when buying a practice, as opposed to having to start from scratch and build a practice with unpredictable income, make it clear that a short term investment is a fair price to pay.

While the FHO model is the most popular payment model within family medicine, it can also be the most complicated. It is critical to your practice’s success, if you decide to use the FHO payment model, to ensure you are familiar with the ins and outs of practicing and optimizing a FHO practice from day one.

Considerations When Buying a Medical Practice

  • Size of the Group: How many physicians are part of the group? How many after-hours shifts will you be responsible for? Can you pick your evening/weekend schedule or will it be decided based on the exiting physician?
  • Location(s): Is the FHO group in one location or spread across multiple family practice sites?
  • Access Bonus Performance: What is the group’s standing on access bonus? Is it positive or negative? Is there a payback policy in place for negative members? Is there a grace period for new physicians?
  • Governance Agreement: Does the group have one and if so, has everyone signed it? Ensure you are able to review a copy of the Governance Agreement before signing your agreement to join.

Considerations in the Medical Office Lease

doctor lease (flipped)As a physician looking to acquire a medical practice, it’s important to take proactive measures to ensure you’re protected from potentially dangerous language in the clinic lease.

Be sure to dig deep and ask the selling physician about their office lease obligations. One key question to ask is whether the office lease will be assigned to you or if you’ll have to sign a new one. It is also important to understand the expenses within the office, how these expenses are divided (if in a group dynamic), and what you will be responsible for on a monthly basis moving forward.

  • Term and Options to Renew the Lease: Does the medical office lease still have a long enough term and “options to renew” for you to use after you buy the medical practice? Are you sure those options to renew are available to you as the new tenant? Often these options disappear as soon as one tenant transfers the lease to another.
  • Clinic Renovations & Improvements: Does the clinic office lease give you the ability to make changes inside the office and upgrade the space? Will you have to remove all of those improvements at some point down the line when the time comes to exit the premises? This can easily cost a physician tens of thousands of dollars in demolition/constructions costs when the time comes to exit.
  • Protection & Security: Is there a “death and disability clause” present in the lease that will protect you and your family if something unexpected should happen resulting in your inability to practice? Who pays for your debt and rental obligations, you and your family?

The above are few of the many items to consider within the lease. It is recommended to have the office lease professionally reviewed before moving forward with your new practice venture to guarantee your protection while providing the most effective and efficient flexibility to continue to run and grow your clinic.

Questions? Call to speak to one of our expert healthcare consultants to start planning your practice sale or purchase today by dialing 1.800.459.3413!