Complete Guide to Buying a Medical Practice: What Buyers Need

Buying a medical practice is one of the largest financial decisions a physician makes, and it is usually the least familiar one. Years of clinical training cover very little about reading a practice's financials, structuring a purchase, or moving payer contracts into your name. This guide walks through the full process, from deciding whether ownership fits your goals to the first months after closing. It applies whether you are considering a solo primary care office, a specialty group, or a medical spa, and whether this is your first acquisition or your second location.

Key Takeaways

Buying a practice runs through eight stages and commonly takes six to twelve months from first conversation to closing.
Settle structure before price. An asset purchase and an equity purchase at the same number carry different liabilities, payer contracts, and tax results.
Value depends on what the practice earns after paying a market rate to replace the selling physician's clinical production.
SBA financing for a full change of ownership requires an equity injection of at least ten percent of total project cost, and it is expected to be your money.
A billing and coding review is the due diligence step generalist advisors most often skip, and the one most likely to produce a post-closing surprise.
Credentialing is a cash flow event, not paperwork. Plan roughly 90 to 120 days per payer and hold working capital to cover the wait.

How Do You Buy a Medical Practice?

Buying a medical practice generally follows eight stages: define your goals, arrange financing, search for available practices, value the practice, negotiate a letter of intent, complete due diligence, transfer licensing and payer enrollment, then close and transition. Most transactions take six to twelve months from first conversation to closing, and payer credentialing often continues past the closing date. The sections below cover each stage in order, along with the parts of the process that surprise first-time buyers most: valuation, payer enrollment, and cash flow in the first year.

What You Are Actually Buying

A medical practice purchase is the acquisition of a clinical business. That includes the patient base, goodwill, equipment, staff relationships, the lease, and in some cases the legal entity itself. How the deal is structured determines what transfers to you and what stays behind. There are two basic structures. In an asset purchase, you buy specific assets and leave the seller's entity, and most of its history, with the seller. In an equity purchase, sometimes called a stock or membership interest purchase, you buy the entity itself, and its contracts and liabilities come along with it.

Asset purchase compared with equity purchase
Consideration	Asset purchase	Equity purchase
What changes hands	Selected assets such as equipment, patient records, goodwill, phone numbers, and lease rights	Ownership of the legal entity, with everything it holds
Liability exposure	Generally lower, because most past liabilities stay with the seller's entity	Higher, because the entity's history follows the entity
Payer contracts and enrollment	Often require new contracting and enrollment in your name	Often continue in place, though payers still require notice
Tax treatment	Generally allows the buyer to allocate the price across assets and amortize goodwill	Generally no step up in asset basis for the buyer
Where it fits	The most common structure in independent practice sales	Used when contracts, licenses, or payer numbers are difficult to replace

Sellers often prefer equity sales for tax reasons, and buyers usually prefer asset sales for liability reasons. In an asset sale, how the price is divided among equipment, goodwill, and the non-compete changes what each side owes in tax, which is why allocation gets negotiated rather than assumed. Buyer and seller have to report the same allocation to the IRS, so it cannot be settled quietly after closing. Price and structure move together, so changing one almost always changes the other. Bring your attorney and CPA in before you sign anything, and handle tax structuring early rather than at closing.

Step 1: Decide Whether Ownership Fits Your Goals

Start by examining your personal and professional goals. Why do you want to own a practice? Are you seeking more autonomy, financial growth, or a specific vision for patient care? Consider your preferred work-life balance and your long-term career plans. Ownership also means becoming an employer. You take on payroll, hiring, compliance, vendor contracts, and the decisions that keep the doors open in a slow month. If you want the economics of ownership without the full operational load, a partial purchase or a staged buy-in or partnership may fit better. Both spread the cost and the responsibility over time.

Questions to Ask Yourself

What are my primary reasons for wanting to buy a practice?
What kind of work-life balance am I aiming for?
How much financial risk am I willing to take?
What type of practice environment suits me best?
What are my long-term career goals, and how does ownership fit into them?
How do I envision the ideal patient care experience in my practice?
Do I want to run the business myself, or share that load with a partner?

Step 2: Know What You Can Afford Before You Shop

Sellers and brokers take prepared buyers seriously. Arriving with a clear budget and a lender conversation already underway gives you a real advantage when a strong practice reaches the market, because good practices rarely sit for long.

How Buyers Usually Pay for a Practice

Conventional bank financing. Some banks run dedicated healthcare lending groups that understand practice cash flow and will lend against it.
SBA 7(a) financing. The most common route for independent buyers. The SBA caps 7(a) loans at $5 million, and acquisition terms commonly run up to ten years. A full change of ownership requires an equity injection of at least ten percent of total project cost, and that money is expected to be yours. A seller note can count toward part of it, but only under strict standby conditions that many sellers turn down. Program rules change, so confirm current terms with a lender before you build a budget around them.
Seller financing. The seller carries a portion of the price as a note paid over time. This is common, and it keeps the seller invested in a smooth handoff.
Earnout. Part of the price depends on the practice hitting agreed performance targets after closing. Useful when the two sides disagree about future revenue.
Staged buy-in. You purchase a minority interest first and acquire the rest on a defined schedule.

Most deals combine two or more of these. A lender's comfort with the structure matters as much as the seller's, so bring your financing options into the conversation early.

Costs That Sit on Top of the Purchase Price

Working capital to cover payroll and overhead for several months while receivables catch up
Attorney fees for the purchase agreement, lease assignment, and employment documents
CPA fees, an independent valuation, and in larger deals a quality of earnings review, which tests whether the reported profit is real
Lender fees and closing costs
Credentialing and payer enrollment support
Practice management or EHR transition costs
Lease deposit, signage, and any immediate equipment replacement
Malpractice coverage in your own name

Underfunding working capital is one of the most common reasons a sound acquisition feels like a bad one during the first year.

Step 3: Find Practices Worth Your Time

Once your goals and budget are clear, the search begins. Think about the environment where you will thrive: the independence of a solo practice, the shared responsibilities of a group, or the focused nature of a single specialty. Publicly advertised practices are only part of the market. Many owners will not list openly, because word of a pending sale can unsettle staff, patients, and referral relationships. Those quiet opportunities usually reach buyers through brokers and professional networks, which is one reason working with a broker widens what you actually get to see. You can start with current medical practice listings, including primary care practices, specialty practices, and medical spas. When you screen an opportunity, look past the asking price and ask how the practice earns its money:

Patient volume over the last several years, and the direction it is heading
Payer mix, and how much revenue depends on any single payer
How much production comes from the selling physician personally
Referral sources, and whether those relationships transfer with the practice
Staff tenure, compensation, and who is likely to stay
Lease terms, remaining years, and renewal options
Local competition, demographics, and population growth

Market conditions differ by state, and so do licensing rules, ownership restrictions, and buyer competition. If you are looking in a specific market, the local picture matters more than national averages. Tinsley works with buyers across markets including Texas, Florida, California, and others.

Step 4: Understand How the Practice Is Valued

A medical practice valuation estimates what the practice is worth based on its earnings, its assets, and comparable transactions. Appraisers generally use three approaches, and often more than one at once.

Income approach. The most common method for practice sales. Value is based on normalized earnings, expressed as seller's discretionary earnings for smaller practices or as EBITDA for larger ones, with a multiple applied.
Market approach. Value is benchmarked against what comparable practices in similar markets have actually sold for.
Asset approach. Value is built from the tangible assets, which matters most when earnings are weak or the buyer is mainly acquiring equipment and a location.

Normalization is where most of the negotiating happens. The goal is an earnings figure that reflects what the practice would produce under a new owner. That means adjusting for owner compensation above or below market, personal expenses run through the business, one-time costs, and rent paid to an entity the seller owns. Ask to see how every add-back was calculated, because add-backs the seller cannot document should not be in the price. One adjustment matters more than all the others. The selling physician's clinical production has to be replaced, and the earnings figure should reflect paying a physician a market rate to do that work. A practice that looks highly profitable because the owner pays themselves modestly may hold much less value once a replacement salary comes out. This is the most common reason a buyer's offer and a seller's expectation sit far apart, and it is worth working through before you negotiate rather than after. Goodwill usually makes up a large share of the value in a healthy practice, and it comes in two forms. Practice goodwill attaches to the business: the location, the name, the systems, the staff, and the patient base. Personal goodwill attaches to the selling physician. Personal goodwill is the part most at risk of walking out the door, which is why transition periods and seller non-competes are negotiated so carefully. Personal goodwill can sometimes be purchased from the physician directly rather than from the entity, which changes the tax result for both sides. Whether that treatment is available depends on the facts and the entity structure, so raise it with your CPA rather than assuming it. One more point matters, and it is easy to miss. If the seller will continue referring patients to you, or you will be in a position to refer to them, the purchase price needs to be supportable as fair market value and commercially reasonable. Federal laws including the Stark Law and the Anti-Kickback Statute govern this territory, and the analysis is fact specific. The same fair market value standard applies to whatever the seller is paid after closing, whether that is an employment agreement, a consulting role, or a medical directorship. Have healthcare counsel review the structure rather than relying on a general business attorney. An independent medical practice appraisal gives you a defensible number to negotiate from and a document your lender will ask for. For a closer look at how valuation plays out in a specific market, see our guide to valuing a medical practice in California.

Step 5: Put the Deal in Writing

When you and the seller agree on the broad terms, those terms go into a letter of intent. The LOI is usually non-binding on price, with the confidentiality and exclusivity provisions binding. It typically sets out the purchase price and structure, any deposit, the exclusivity window during which the seller stops talking to other buyers, the due diligence timeline, and the conditions that have to be met before closing. A clear LOI saves money, because it surfaces disagreements before both sides start paying attorneys to draft a full agreement. The definitive purchase agreement that follows covers far more ground:

Allocation of the purchase price across asset classes, which drives the tax outcome for both sides
Representations and warranties from the seller about finances, billing, compliance, and litigation
Indemnification, and whether part of the price is held back in escrow to cover problems that surface later
A non-compete and non-solicitation covenant from the seller
The seller's transition role, including how long they stay, what they are paid, and what they are expected to do
Treatment of accounts receivable earned before closing, including whether the seller keeps them and you collect on their behalf for a fee, or you buy them at a discount based on aging and actual collection history. Receivables are almost never worth face value
Staff, including who is offered continued employment and on what terms
Lease assignment or a new lease, plus landlord consent
If the seller owns the building, whether you are buying it, leasing it, or taking an option, and whether the rent in the financials reflects the market
Conditions to closing, such as financing, licensing, and payer approvals

Non-compete enforceability varies by state, and the rules in this area have shifted in recent years. Do not assume a covenant will be enforced as written. Ask counsel licensed in the state where the practice operates. The same goes for state-specific ownership rules, including corporate practice of medicine doctrines that limit who may own a clinical practice. For a broader view of deal structuring options, see our medical practice acquisition strategies.

Step 6: Do Due Diligence That Actually Protects You

Due diligence is where you verify what you have been told, and where you find problems while you can still do something about them.

Core due diligence review areas
What to review	What you are looking for
Financial statements and tax returns	Whether reported earnings reconcile to filed returns and bank deposits
Production and visit data by provider	How much revenue depends on the departing physician
Payer mix and contracted rates	Concentration risk and whether rates transfer to you
Accounts receivable aging	Collectible revenue versus receivables that will never arrive
Coding and billing patterns	Practices that would not survive a payer audit
Compliance history	Audits, refund demands, licensure actions, and open investigations
Malpractice and claims history	Risk that follows the providers, not just the entity
Staff roster and employment agreements	Who stays, who leaves, and what that costs
Equipment, leases, and vendor contracts	What is owned, what is borrowed, and what is about to expire
Patient records and privacy practices	Who becomes custodian, what the state requires for retention, and how records transfer
Real estate lease and landlord consent	Whether you can keep the location on terms you can afford

Pay closest attention to billing and coding. It is the review that generalist advisors most often skip. If the practice has been billing in a way that would not hold up under review, that exposure can become yours depending on how the deal is structured. Bring in someone who audits medical claims for a living. Our breakdown of what buyers look for during due diligence goes deeper on this stage.

Red Flags Worth Slowing Down For

Financial statements that do not reconcile to tax returns
Revenue concentrated in a single referral source, employer contract, or payer
A steady decline in patient visits that the seller attributes entirely to lifestyle choices
Coding patterns noticeably out of line with specialty norms
Key staff who intend to retire alongside the seller
A lease near expiration with no renewal option
Reluctance to provide documentation you have specifically requested

None of these automatically kills a deal. Each one changes the price, the structure, or the protections you need in the agreement.

Step 7: Plan for Licensing, Payer Enrollment, and Credentialing

This is the stage that surprises first-time buyers, and it is where preventable revenue gaps happen. You can own a practice and still be unable to bill for the care you provide. Build these items into your timeline well before closing:

State licensure and DEA registration in the practice state, plus any state-specific facility, laboratory, or ownership registrations
Medicare enrollment. Federal change of ownership rules determine whether the existing provider agreement carries over to you or whether you enroll as a new applicant. Accepting assignment of the seller's agreement can preserve billing continuity, but it can also carry forward exposure for the seller's prior overpayments. Asset purchases more often mean fresh enrollment. Work through this with healthcare counsel and your Medicare Administrative Contractor rather than assuming either outcome.
Medicaid enrollment, which follows separate state-by-state rules
Commercial payer credentialing and contracting. Plan for roughly 90 to 120 days per payer, and understand that some run longer. Do not assume the seller's contracted rates come with the practice. During diligence, ask to see each contract's assignment language and current fee schedule, and confirm the panel is open in your specialty and area, because a closed panel can leave you unable to join at all. Ask each payer about effective dates and whether retroactive billing is available, because the answer varies and it shapes your first-quarter cash flow.
Malpractice coverage, including a new policy in your name. If the seller carries a claims-made policy, get it in writing who pays for the tail coverage on prior acts, because that cost is real and it is negotiable. An occurrence policy does not require one.
Hospital privileges, if your specialty requires them

The takeaway is simple. Start credentialing paperwork as early as your agreement and the payers allow, assume it will take longer than quoted, and size your working capital so the practice can operate while applications sit in a queue.

Step 8: Close, Then Manage the First Ninety Days

A well-executed transition protects the value you just paid for. Most of what makes a practice worth buying, meaning patient loyalty, staff stability, and referral relationships, can erode quickly if the handoff is handled poorly. A few things hold true in almost every deal:

Talk to the staff before they hear it elsewhere. Meet the team early, listen to their concerns, and be specific about compensation, roles, and what is not changing.
Send a joint letter to patients. A notice co-signed by the departing physician carries far more weight than an announcement from a name patients do not recognize.
Keep the seller visible for a defined period. A transition window where the seller introduces you to patients and referral sources transfers goodwill better than any marketing.
Resist the urge to change everything at once. Give yourself a few months to understand why things work the way they do before you rebuild workflows, switch systems, or renegotiate vendors.
Watch cash weekly, not monthly. Receivables, credentialing status, and collections deserve close attention through the first year.

Buyers who want structured support through this period can work with advisors on practice transition consulting and pre and post-transaction services.

How Long Does It Take to Buy a Medical Practice?

Most acquisitions run six to twelve months from first conversation to closing. A small, clean, single-physician deal with financing already lined up can move faster. The ranges below are typical, and several of them overlap in practice.

Typical timeline for a medical practice acquisition
Stage	Typical duration
Goal setting and financing preparation	Two to six weeks
Search and initial practice review	One to six months
Valuation and letter of intent	Two to four weeks
Due diligence	Thirty to sixty days
Definitive agreement, financing, and closing	Thirty to sixty days
Payer credentialing and enrollment	Ninety days or more, often running past closing

Mistakes That Cost Buyers the Most

Negotiating price before understanding structure. An asset deal and an equity deal at the same headline number are not the same deal.
Accepting add-backs without documentation. Every undocumented add-back inflates the multiple you are paying.
Skipping a billing and coding review. It is the single diligence item most likely to produce a post-closing surprise.
Treating credentialing as paperwork. It is a cash flow event, and it belongs in the financial model.
Underfunding working capital. A profitable practice can still run short of cash during a transition.
Using advisors without healthcare experience. A capable general business attorney will not catch what a healthcare attorney catches.
Changing the practice too quickly. Patients and staff often leave over how a transition felt, not over the transition itself.

Frequently Asked Questions About Buying a Medical Practice

How much does it cost to buy a medical practice?

There is no standard price. Most practices are valued using a multiple of normalized earnings, adjusted for specialty, location, payer mix, and how much production depends on the selling physician. Beyond the purchase price, budget for working capital, legal and accounting fees, lender costs, credentialing, and insurance in your own name.

Can you buy a medical practice with no money down?

Rarely. On a full change of ownership, SBA lenders generally require an equity injection of at least ten percent of total project cost, and that money is expected to come from the buyer rather than from borrowed funds the practice would repay. A seller note can cover part of it under strict standby terms. Almost every lender expects the buyer to have real money at risk.

How are medical practices valued?

Appraisers use three approaches. The income approach applies a multiple to normalized earnings and is the most common for practice sales. The market approach benchmarks against comparable completed transactions. The asset approach values tangible assets and matters most when earnings are weak. An independent appraisal gives you a defensible number and satisfies your lender.

Should I buy an existing practice or start one from scratch?

Buying an established practice gives you immediate patient volume, trained staff, existing payer contracts, and revenue from day one, at a higher upfront cost. Starting from scratch costs less initially but can take years to reach profitability. Most physicians who want income stability during the transition choose to buy.

Do patients stay when a medical practice changes hands?

Most do, provided the transition is handled well. Retention depends heavily on a defined transition period with the selling physician, a joint letter to patients, continuity of familiar staff, and restraint about changing systems and policies in the first months of ownership.

What is the difference between an asset purchase and a stock purchase?

In an asset purchase, you buy selected assets such as equipment, records, and goodwill, and most of the seller's past liabilities stay with the seller's entity. In a stock or equity purchase, you buy the entity itself, so its contracts, payer numbers, and liabilities come with it. Buyers usually prefer asset purchases and sellers usually prefer equity purchases.

How long does payer credentialing take after buying a practice?

Plan for roughly 90 to 120 days per commercial payer, and expect some to take longer. Timelines vary by payer, specialty, and state. Start applications as early as your agreement permits, confirm effective dates with each payer, and hold enough working capital to operate while approvals are pending.

Do I need a broker to buy a medical practice?

You are not required to use one, but a broker who specializes in medical practices gives you access to opportunities that are never publicly listed, comparable sale data to negotiate against, and coordination across the attorneys, lenders, and accountants involved. Buyers working without that support often spend longer searching and pay more for less information.

About the Author

Reed Tinsley, CPA is a medical practice broker, physician CPA, medical practice valuation analyst, and Certified Healthcare Business Consultant with Tinsley Medical Practice Brokers. He works with physicians, medical groups, and investors on practice acquisitions, mergers, buy-ins, and sales, and his background as a physician CPA covers the financial and operational side of practice ownership as closely as the transaction itself. Reed is the author of Valuation of a Medical Practice and Performing an Operational and Strategic Assessment of a Medical Practice, both published by John Wiley & Sons, along with Medical Practice Mergers and Negotiation of Managed Care Contracts, published by the American Medical Association. His articles have appeared in the Journal of Medical Practice Management, the MGMA Journal, Hospital Physician, and the American Bar Association Health Law Journal, and he serves on the editorial board of Medical Group Practice: Legal and Administrative Guide. He is a past president of the National Society of Certified Healthcare Business Consultants and a member of the American Health Lawyers Association. Read Reed's full biography.

Working With a Broker Who Knows the Buy Side

Buying a medical practice rewards preparation. The buyers who do best are the ones who understood the real earnings before they made an offer, verified the billing before they closed, and started credentialing before they needed the revenue. Tinsley Medical Practice Brokers helps buyers do exactly that, from valuation and financing through due diligence and transition. Learn more about our approach to buying a medical practice, or contact Tinsley Medical Practice Brokers to talk through what you are looking for.