[et_pb_section fb_built=”1″ _builder_version=”4.4.0″][et_pb_row _builder_version=”4.4.0″][et_pb_column _builder_version=”4.4.0″ type=”4_4″][et_pb_text _builder_version=”4.4.0″ hover_enabled=”0″]So let’s pretend you hear of a doctor or dentist retiring in your area and he/she wants to sell their practice. You’re thinking about starting a practice. Seems like a match. You go over to check out the office and the place doesn’t look half bad, it even looks like there’s some new furniture and the equipment works. The two of you start talking and the owner decides to get the practice appraised, to come up with a fair price. The appraisal comes back and you get some sticker shock. When you look at the breakdown of the price of a practice and you’ll almost always find “practice goodwill” as one of the elements, usually valued at some six figure amount. I have no idea where they come up with that number, I really think that they throw a dart at a board. Practice goodwill is supposed to represent the value of the practice in terms of patients that will transfer over to the new practice. But patients don’t always tranfser, and even when they do, it may have nothing to do with goodwill. Here’s three reasons you want to check twice before you pay for goodwill.
1. Check the payor mix. If it’s heavily based in one MediCal or Medicare plan, the vast majority of patients don’t choose the practice, they’re assigned to the practice by the health plan. You could set up shop next door and get the same patients assigned to you after the physician retires. So the value of the practice is really centered around how much it would cost to set up shop nearby, both in time and money, not the goodwill.
2. Check the surrounding area for practices similar to yours. If the practice you’re buying is the only kind in the area, that patient population isn’t all of the sudden going to drive 30 extra minutes to see their doctor/dentist. This is the case in a lot of small towns and rural areas.
3. Consider the type of practice you have and they’re selling. For instance, if you’re an OB, the patient goodwill doesn’t transfer easily from one provider to the next. If you have a specialty practice, your referrals are going to be based on your standing within the provider community, not the patient population. Referrals from your colleagues is going to be the value that drives in patients.
Am I saying that there is never a good reason to buy goodwill? No, of course not. There are a lot of practices that have top notch marketing programs, excellent policies and procedures, or a very well trained staff that willstay with a new doctor or dentist. They may have even created a really interesting patient community within their practice, all of those things have significant value.
What I am saying is, don’t be a sucker and pay a six figures for a practice where the patients aren’t going to transfer over. Patients aren’t lemmings and small practices are not built like a McDonald franchise; each one is a little different and take a closer look before you take the plunge.
Disagree with me? Want to talk about this more? Talk to me in Provider Legal’s Facebook group and we can hash out specifics.[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section]
