Buying a medical practice is a major financial and professional decision for healthcare professionals.
With the U.S. healthcare industry valued at over $4.3 trillion, private practices play an important role in patient care. However, purchasing an existing practice is not just about taking ownership; it involves assessing financial health, patient retention, legal liabilities, and operational stability.
A successful purchase requires asking questions to see potential risks and opportunities. This guide provides a medical practice due diligence checklist, assuring that buyers make a well-informed decision.
Below, we outline 15 questions every buyer should ask before finalizing a purchase.
Understanding the Significance of Buying a Medical Practice
Purchasing a medical practice comes with several benefits:
- Established Patient Base: Eliminates the struggle of building a practice from scratch.
- Existing Infrastructure: Comes with trained staff, equipment, and administrative systems.
- Insurance Contracts: Existing agreements with insurance providers simplify billing.
- Brand Reputation: A well-known practice attracts more patients compared to a new one.
However, not all acquisitions lead to success. Without thorough research, buyers risk inheriting financial debts, operational inefficiencies, or legal liabilities.
15 Questions to Ask Before Buying a Medical Practice
1. What are the Seller’s Reasons for Selling the Practice?
Understanding the seller’s motivation is crucial. Are they retiring? Relocating? Facing financial difficulties? If the seller is eager to sell due to declining patient numbers, legal troubles, or financial instability, this could be a red flag. A well-performing practice is usually sold for reasons unrelated to business struggles.
2. What is the Seller’s Role in Daily Operations?
Some practice owners are actively involved in patient care, while others focus on administrative and management tasks. If the seller is a primary healthcare provider, their departure could lead to patient loss. A practice with multiple experienced doctors and a strong support staff is a more stable investment.
3. Will the Lead Provider Stay Involved After the Sale?
A simplified transition is essential for patient retention and staff stability. Will the seller stay on for a transition period, or are they leaving immediately? Ideally, the seller should continue working for at least six months to maintain continuity.
4. How Frequently Do Patients Visit the Practice?
Understanding patient visit frequency helps evaluate the practice’s financial health. Does the average patient visit once a year, twice a year, or more frequently? Practices with high patient retention rates are more financially stable, while those with declining visit numbers may indicate patient dissatisfaction.
5. What are the Top Revenue-Generating Treatments?
Every practice has key services that generate the most income. Buyers should identify the top five treatments or procedures bringing in the highest revenue. If these require specialized skills, additional training or hiring may be necessary.
6. How Many Patients Have Visited in the Last Twelve Months?
The active patient count is one of the most critical indicators of business health. A thriving practice will have a steady or growing number of patients in the past twelve months. A declining number suggests patients are leaving, possibly due to poor service, competition, or other issues.
7. What is the Average Reimbursement Per Patient?
The financial success of a medical practice depends not just on the number of patients, but also on how much each patient spends. Buyers should ask:
- What is the average reimbursement per visit?
- Are patients paying out-of-pocket or using insurance?
- Is there an opportunity to increase revenue by offering additional services?
8. Who are the Top Revenue-Contributing Payors?
Does the practice rely heavily on a few dominate insurance plans? If 20% of payors generate 80% of the revenue, losing just a few of them could impact the business. A practice with a diverse payor mix is a safer investment.
9. How Large is the Email Subscriber List?
A strong email marketing list helps in patient retention, appointment reminders, and promotions. Buyers should assess:
- How many active subscribers does the practice have?
- Are emails regularly sent out?
- How effective is email marketing in engaging patients?
10. What is the Email Engagement Rate?
Even a large email list is useless if patients don’t open the emails. Buyers should ask about open rates and click-through rates. A high engagement rate means patients are interested in the practice’s communication, while a low rate suggests a need for better patient outreach strategies.
11. How Many Social Media Followers Does the Practice Have?
A strong social media presence can increase patient engagement and brand awareness. Buyers should check:
- The number of followers on platforms like Facebook, Instagram, and LinkedIn.
- The growth rate of social media accounts over time.
- The types of content posted and how well they perform.
12. How Engaged are Social Media Followers?
Having a high follower count is not enough, engagement matters more. Do patients like, comment, and share posts? A highly engaged audience is more likely to schedule appointments and recommend the practice.
13. How Much Time Is Left on the Lease?
If the practice operates from a rented space, buyers must check the remaining lease term. A short lease means the new owner may have to negotiate a renewal or relocate soon. Unexpected lease changes can disrupt business operations.
14. Can the Lease be Extended?
A long-term lease ensures location stability. Buyers should confirm with the landlord if the lease can be extended on favorable terms. If not, moving the practice could lead to patient loss and increased expenses.
15. What is the Status of Medical Equipment Ownership?
Does the practice own all its medical equipment, or is it leased? Buyers should verify:
- The age and condition of the equipment.
- Whether replacement or upgrades are needed.
- If leased, what are the terms of the rental agreement?
Having fully owned, and well-maintained equipment adds value to the acquisition and reduces additional costs after the purchase.
Final Thoughts
Buying a medical practice is a complex and high-stakes decision. Asking the right questions helps buyers evaluate the practice’s financial strength, patient base, operational efficiency, and long-term sustainability.
Working with medical practice business brokers like Strategic Medical Brokers can simplify the acquisition process, but conducting thorough due diligence is essential to avoid hidden risks.
By following this acquisition guide and using a medical practice due diligence checklist, buyers can make a confident investment in their future success.
