Don't Let Loan Debt Strangle Your Practice

Greg Freeman , April 3, 2013

This article originally app eared in the April 2013 issue of Managed Care Contracting Reimbursement Advisor.

With physician practices squeezed today like never before, every dollar of revenue helps. But holding on to those dollars and not wasting them through inefficiency or poor business practices also is important.

Physician practices often focus so much on increasing revenue that they don't take the time to look at where they might save more of the money they've already earned, says Jason Biro, a 15-year veteran of the lending industry who now heads up medical finance for Bank of America. He says many physicians are throwing money away each month in one commonly overlooked area: their loans and leases.

"The financing is overlooked and their equipment loans, or a combination of loans, can be so out of balance that it creates too much debt at the end of the month," Biro says. "We focus on consolidating debt so that they're in a better position at the end of the month and not so strapped for cash."

Many practices take out multiple loans, lines of credit, and equipment leases only to find themselves treading water in no time, Biro says. He offers this example: Dr. X had a loan for his practice, two equipment leases, two zero-interest loans, a business line of credit, and two business credit cards.

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1 comments on "Don't Let Loan Debt Strangle Your Practice"

Michael J. Parshall (4/3/2013 at 11:14 AM)
While most of Mr. Biro's advice is well taken, I have to differ with his assertion that owning real estate makes a practice more attractive to buyers. In my 20+ yrs experience in practice sales transactions, I have found that sellers that attempt to sell their practice and practice real estate to the same buyer usually find themselves discounting the practice sales price for the following reasons. Real estate values are fairly easily obtained through a search of public records. Medical Practice values are not that easily researched and can differ substantialy depending on the appraiser;the final price is usually the result of negotiations between the sellers and the buyers. Most buyers have limited funds and are primarily interested in purchasing the practice. If the buyer has to buy the real estate, there is very little wiggle room in the price which eats up much of the buyer's funds, leaving the buyer with much less money to pay for the practice which leads to lower practice valuation. Owning practice real estate also confounds practice consolidation and relocation, which are often the buyer's motives. Thus, if the buyer has a choice between two similar practices, one with real estate and one without, the buyer will always save money and have more flexibility in moving the practice by buying the practice without real estate.




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