Medical practice survey: Why build when you can buy?

By John Murphy, MDLinx
Published September 20, 2016

Key Takeaways

More physicians are purchasing a partnership or buying into an established practice instead of starting one from the ground up (39% vs. 37%), according to a new survey, conducted by TD Bank, of more than 340 small U.S. medical practices.

This practice trend is only expected to grow, as fully one-half of doctors surveyed either have considered or would consider purchasing, buying into, merging, or selling their practice. Of these, 73% expect to do so in the next four years.

“We are seeing a growing trend of more healthcare providers buying into practices with a partnership or purchasing an existing practice because they are seeking added financial security and well-established businesses,” said Dan Croft, Head of Healthcare Practice Solutions at TD Bank, based in Cherry Hill, NJ. “The survey findings reflect a shift in the industry because of the rising cost of doing business—from technology to insurance.”

Indeed, 46% of respondents who are going this route said it’s simply too expensive to run a practice these days.

Women owners

Meanwhile, another shift is occurring: More women are becoming practice owners. Overall, the average length of practice ownership is 16 years; but 47% of women reported owning their practices for less than 10 years, while 47% of men have been in practice for more than 20 years.

Revenue growth

Also, many physicians are optimistic about their practices’ revenue growth, with 43% of respondents expecting it to rise in the next two years. This is particularly true among women (56%), Millennials (75%), and Gen Xers (53%).

Financing preferences

Lines of credit and cash top the list of methods for financing a practice’s needs (such as equipment, computers, practice management software, practice acquisitions, practice buy-ins, etc.). More than half (53%) of Millennials prefer lines of credit, while 40% of Baby Boomers choose cash for these finances, and 31% of Gen Xers opt for credit cards.

Other noteworthy findings:

  • Among the many challenges physicians face, 52% said their chief concern is receiving timely reimbursements, while 51% said their greatest challenge is the cost of overhead. Nearly half (48%) of Millennials report that hiring and retaining staff is one of their biggest worries, while 41% of Baby Boomers fret about keeping up with the latest technology.

  • Nearly half (48%) of respondents said that their practice’s primary investment during the next few years will be in new technology, while 33% anticipate hiring more staff, and 26% expect to spend more for training and education.

  • When asked about the upcoming November elections, more than half (56%) of physicians said they are very or extremely concerned that a new President or Congress will make changes to the health care system.

  • When they retire, more than half of physicians (56%) expect to pass their practices to partners or colleagues. About the same percentage (55%) also expect retirement to be a gradual transition during which they will cut back their working hours.

“It is understandable why many near-retirement age physicians plan to cut back on time in the office, but this is not the best strategy. Decreasing hours or patient load can negatively impact practice or partnership value, thereby affecting retirement plans,” Mr. Croft said. “While most physicians said they are confident they will have enough money to retire, that’s not always the reality, and often it is due to the fact that they made changes in their schedule or practice that derailed their plans.”

Interestingly, 56% of Millennials hope to retire before age 65, while 76% of Baby Boomers expect they won’t retire until after age 65. Overall, 3 in 10 physicians foresee that they’ll retire later than they had originally planned.

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