Fall 2007 issue of Horizons

INDUSTRy u

Health care

Life Cycle of a Health Care Practice Part 3 – To Retire Or Cut Back This article is the third in a series of three articles dealing with the life cycle of a health care career. Every health care professional at some time must decide if it is better to open a practice or go to work for an existing practice. After that decision is made, the solo doctor must decide if and when to bring in “The New Doctor.” Once there is more than one doctor, the practice must create the “The Best Compensation System.” Eventually, every practice must face the fact that the mature doctor may want “To Retire Or Cut Back.” The complete health care practice series is available at http://www.rubinbrown.com. It is never too early to think about moderation or retirement at some time in the future. Various studies say that more than a third of the physician population is over 50 years old. The motivations we see for physicians to moderate hours or retire are as follows: • Able to save enough to allow for retirement without a change in lifestyle • Prefer less hours, cutting back to work a 40-hour week or only a few days a week • Just fed up with the malpractice insurance rates, red tape and regulations • Desire to shed the practice responsibilities and practice medicine without having to worry about the administration aspects • The workload and overhead are growing, while revenue shrinks each year • Health may force a decision to retire or cut back

Whatever the reason for considering retirement, there are certain issues to face when considering closing or leaving a practice. If you are a sole practitioner, you will want to consider the following: • Do you have a marketable practice? Consider the startup cost of a similar practice and the investment needed to build a similar practice as the base cost that a purchaser of your practice may be willing to pay. • Also consider the success of your practice. Is your bottom-line income above average for your peer group? • The location of the practice and the status of the health care profession in the area also will affect the marketability of the practice. As in everything, timing is the key when looking for a buyer and/or seller. Deciding not to sell may result in leaving a nice sum of dollars that could be realized from the sale of the practice. On the other hand, as long as revenue continues while slowing down the practice, eventually closing it, you may be dollars ahead. If health permits you to work for a while longer and the practice is allowed to shrink, with the eventual goal of closing it down, the following factors, among others, need to be considered: • Arrange for the collection of accounts receivable. • Arrange for the maintenance of the medical records for a legally prescribed period of time. • Look at real estate, automobile and equipment lease options. • Lease or sell all owned property. • Dispose of controlled substances legally, filing the proper documentation and obtaining clearance from the authorities. • Communicate with patients regarding the termination of services and possibly recommend a replacement. • Obtain tail insurance. Some plans offer tail insurance if the practice has been insured for a while. However, some insurers require a substantial fee.

27 u winter 2007 issue