When contemplating a buy-in or partnership in the formation of a group medical practice, physicians must be armed with knowledge of the specific issues in buy/sell agreements so that such an agreement can be properly drafted as the group is formed. This important pre-planning step can save potentially tens to hundreds of thousands of dollars and a great deal of unneeded stress down the road. At Tinsley Medical Practice Brokers, pre-planning in buy-ins and partnerships is an invaluable part of our services.

A buy/sell agreement is a must for every group medical practice or medical partnership or practice with more than one physician or owner. Corporations and partnerships have similar buy/ sell agreements. 

This important contract spells out the transition of a current physician owner out of the practice and how a new doctor may be admitted into the ownership structure of the practice. History proves that once executed, many of these agreements are never looked at again until a buy out event, whether anticipated or not, forces it. Most agreements were drafted in times when indemnity insurance prevailed, reimbursement rates were good and physician incomes were robust. However, as the health care marketplace continues to reform and as managed care evolves, most buy/sell agreements are out of date and often grossly ineffective. 

Financial issues likely impact both the physician owner and the practice itself either positively or negatively. Events requiring a buy out including how buy out prices can be developed and paid for by the group practice along with valuation issues and related tax consequences are all important considerations.  

Buy/sell agreements must be reviewed and updated periodically to take into account ongoing changes in the health care industry since the last revision. Every group practice should have its agreement reviewed at least once a year, generally at the end of the practice fiscal or calendar year. Health care reform, the continued attacks on service reimbursements, adoption of the resource-based relative value scale (RBRVS) payment system by other payers and Medicare cuts are just a few changes that impact on buy/sell agreements. These issues have the ability to directly impact the value of an ownership interest in a medical practice.  

Are you forming a medical practice partnership? Are you currently in a partnership without an active buy/sell agreement in place? Is your current buy/sell agreement over a year old and therefore needs review? Call us today to make an appointment for a no obligation consultation.