Before Selling a Physician Practice, Weigh Tax Risks Carefully

HealthLeaders Media Staff, for HealthLeaders Media , October 15, 2013

The worst outcome from selling a practice would be a sale of assets by a C corporation without considering the tax implications, Riley says. The double taxation could be a ruinous surprise after the deal is done.

"We've seen practices in that situation. They didn't plan in advance for the potential sale of their practice, or there may have been certain components of the practice that were sold," Riley says. "If they had a cath lab in the practice under a C corp and sold that lab to a hospital, they could be subject to double taxation."

But as important as tax considerations are, they should not be the biggest driving force when negotiating a sale, says Neil S. Maxwell, JD, a partner with the law firm of Kurzman Eisenberg Corbin & Lever in White Plains, N.Y. The sale of a practice requires extensive planning and research, so you should plan to devote a full year to this preparation before signing a contract, he says. In addition to research and contract negotiations, you should spend that year getting the practice in the best shape possible so that you get a top-dollar offer.

"If you see that hospitals are buying out the physician practices in your area, don't wait until someone comes to you with an offer," Maxwell says. "Get started now with your assessment. Do your own valuation. Know your strengths and what kind of deal you want before they come to you and express an interest."

Besides, while an actual purchase of the practice might be what a hospital is looking for, it might not be the best choice for the physicians, he says.

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