I hope that all of you are able to get back into your offices safely and get back to treating patients. There has been a lot of discussion around what is going to happen to practice transitions during this time and while there are no crystal balls, below are my thoughts.
For the last several months practice revenues have been significantly down and so financing for those practices will obviously take a hit, it’ll be tough to show that the practice has the same value that it did before. But at the same time, there are significantly more associate healthcare providers that have had their hours cut, been laid off, or generally not treated well by their employer. For those providers, I’ve talked with many that think this is a good time to start out on their own. For them, they don’t see the increased PPE requirements and procedures as a significant barrier and that because of revenue being down, there might be some good deals out there. I see two possible scenarios.
In the first scenario, Covid is largely managed and health departments are allowing business with looser and looser restrictions, that business will slowly come back to normal. In this scenario I think you’ll see more buyers out in the market pushing demand, looking for a deal. And on the seller’s side I think there will be significant supply. Those that are of retirement age and are dependent on the practice sale to fund their retirement will still be the same age, except now they’re at a higher health risk due to Covid. Practice values will take a hit but there will still be sales going on.
In the second scenario Covid spikes again and we have significant shutdowns again. In this scenario some practices may simply fold up, not willing to deal with the risk of starting again. By the same token, some buyers will see it as an opportunity to either take over some leases and do asset sales, or other practice arrangements.
In either scenario there are strategies to adapt to a changing marketplace. A seller can consider holding part of the note. If the seller owns the property you may break up the land and practice sale into two pieces over time. If you’re the buyer you may consider a partnership where you wouldn’t before or negotiate for more favorable terms than before.
In any event, there are going to be health providers that will buy or sell practices during this period and if you’re flexible, you can take advantage.
If you’d like to discuss how, set up a time to chat with me HERE.
See you next week!
Matt
