Membership and Fellowship: How to Price Your Medical Practice

Find your next ob-gyn job at ACOG’s Career Connection.

By Angela Rose

There's been a great deal of talk the last few years about physicians choosing to leave independent practice due to declining reimbursement and rising costs.

A survey sponsored by CareCloud and QuantiaMD found that 11 percent of physicians were considering the sale of their practices, while 10 percent had already sold theirs. Others are contemplating consolidation or retirement. In fact, according to the Deloitte Survey of US Physicians, 60 percent of the doctors who responded believed more physicians—including ob-gyns—would retire earlier than planned in the next one to three years.

Whether you’re interested in a sale or a consolidation, are thinking about retirement, or plan to bring in a new partner, you’ll need to calculate the value of your ob-gyn practice.

Before you take any action, consider the following five steps:

1. Examine Practice Growth

While the revenue your practice brought in last year is important, showing a strong trend towards growth is even more so in the mind of an appraiser or potential buyer. Gather the numbers necessary to prove your existing revenue stream is steadily increasing or will at least be easy to maintain. The greater the likelihood of future profit, the higher the value of your practice today.

2. Examine Patient Loyalty

In any business, it costs less to maintain relationships with current customers than to find new ones, so loyal patients will have value in an appraiser or buyer’s eyes. Gather data on the number of patients within your practice, the average length of your relationship with them, the number of visits per patient, the revenue generated per patient, and anything else you can use to prove they’re satisfied with your service and likely to return.

3. Examine Practice Staff

Does your medical and administrative staff work well together? How frequently do you have to hire or fire new workers? An efficient, smoothly functioning team with a low rate of turnover is a valuable asset an appraiser or buyer should consider when pricing your medical practice. Of course, he or she will also look at your employee benefits package and other labor costs.

4. Examine Physical Assets

Calculate the value of your office furnishings and any equipment you own outright. If you still owe payments, an appraiser or buyer will likely deduct those from your practice valuation.

It’s a good idea to take the steps necessary to price your ob-gyn practice even if you have no interest in selling and are years away from retirement. In and of itself, the valuation process will help you identify potential issues in need of resolution—such as payroll expenses that are too high or operating inefficiencies that negatively affect patient loyalty—resulting in a better overall practice.

5. Start Succession Planning

Once you have determined the value of your practice, it’s time to start searching for the right person to take it over. Work your social network, post your practice on ACOG’s Career Connection, and start getting leads from interested buyers. Be sure to interview multiple candidates to make sure you find the right fit. Once you find the right person to sell your practice to, have your attorney look over your agreement, then consider transitioning your practice over time to ensure that both your patients and your replacement are comfortable with the future.

This article reprinted courtesy of HealtheCareers, ACOG’s trusted partner who operates the ACOG online career website, Career Connection.


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