The Practice Manager's Guide to Buying a Practice - McMasters ...

The phrase "buying a medical practice" should be interpreted not only as buying a practice outright,but also to include buying a share in an existing practice. This can be either as an associate buying aright to practice, a partner buying a share of a partnership's assets, or as a shareholder buying sharesin a practice company. It also assumes the purchaser will take over any rights to providemanagement services to the practice, which are commonly owned by a separate service trust, andthis is included in the assets being sold with the practice.Further readingMcGilvray A, 2008, Australian Doctor, Securing your Future, 3 July 2008What Assets are Being Purchased?The first thing to consider is what assets are being bought. Typically they will include:The practice's goodwill. This generally includes patient lists and records, the benefit of expectedrepeat business from those patients, the benefit of the reputation and name built up by thepractice, and the benefit of the relationships established by the practice's owners and staff withpatients over the years;The practice's plant and equipment. A detailed schedule of plant and equipment should beprepared. The vendor should be asked to confirm he has good title to these items, and they arenot subject to any charge or other encumbrances that restricts his ability to deal with them. Ifsuch an encumbrance exists, the vendor should be asked to arrange for it to be lifted as acondition of the sale proceeding.AssetsPurchasedGoodwillPlant andEquipmentCare needs to be taken with leased equipment. When buying leased equipment it is necessary toensure either:Part of your purchase price should be forwarded directly to the leaser as payment of the amountowed on the lease; orThe amount of the purchase price should be reduced by the amount of the lease liabilityresponsibility is being assumed for; andMedical supplies and other supplies. The value of supplies will vary greatly between specialties,and where applicable to general practice will vary upon the size of the practice.Staff Contracts and ProvisionsThe practice is also purchasing the benefit of the staff contracts. Normally the purchaser agrees totake over all liabilities owed to staff, including any sick leave, annual leave or long service leave, andan estimate of these liabilities is deducted from the agreed sale price. In one recent sale McMasterssaw the value of these liabilities exceed the value of the goodwill, which meant the purchaser was inthe unusual position of receiving a cheque from the vendor on settlement day.6