Insights On Buying An Older Podiatry Practice

Start Page: 82
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Author(s): 
Kevin McDonald, DPM

   I was sitting in my recliner one evening when the phone rang. It was a very experienced podiatrist who lived in a town 20 miles away. He wanted me to buy his part-time practice so he could retire.

   I told the retiring podiatrist that I was too busy. I suggested that he call another podiatrist — one we both knew — who had an associate with time on his hands. The retiring DPM said he had already tried that option and several others with no luck. His voice had a pleading quality. I reluctantly told him that I would look at his practice. I was quite surprised when I ended up buying the practice.

   As part of the deal, I gave the retiring DPM a $1,000 down payment and agreed to send him a modest check every month for six years. In return, I received the following things from his practice.

   In regard to equipment and supplies, I received five treatment chairs with stools, an X-ray machine and processor, an autoclave, two computers, two printers, two desks, a photocopier and a credit card machine. The office had multiple filing cabinets and treatment cabinets, various other office tools, and a copious amount of podiatric instruments and medical and office supplies. The retiring DPM’s practice also had a furnished reception room with nice artwork.

   In regard to patient charts, there were 2,000 active patient charts and two sets of mailing labels.

   The deal included a covenant in which I paid him to promise not to come out of retirement and set up another practice nearby.

   I also paid the retiring DPM to stay at the office as a consultant for two weeks after the sale for patient introductions and operations management training.

   Goodwill is often a part of practice sales. My accountant advised me on the appropriate amount of the purchase price to attribute to goodwill.

Key Factors To Assess In Evaluating The Value Of The Practice

   The retiring DPM was the first podiatrist in his town and he is well liked in the community. The physician had no known liabilities, legal issues or pending malpractice claims. The retiring doctor did not participate with several popular insurance plans. He did little marketing or advertising.

   The retiring doctor did not do anything particularly unusual in operating his practice that would make it difficult to carry on in a similar fashion after he left.
The office was located in a visible and convenient location. There was good parking and a large exterior sign. The lease had a flexible ending and the monthly rental rate was unbeatable.

   As far as the start-up expense goes, this office needed updating but virtually everything needed to operate a part-time practice was included in the deal. I computed that if the practice collections stayed the same, the overhead expenses dedicated to running this practice would be less than 50 percent of collections.

   Office staff is a factor in the sale. Ideally, it would be nice if the staff of the former podiatrist stayed on for at least several months after the practice sale. In this case, after four weeks, the staff of the former doctor retired as well.

   The seller provided open access to the practice financials. I evaluated a few key parameters.

   Patient visits. An analysis determined that this practice could be adequately covered by two half-day sessions per week. The average monthly new patient visits were 19 and the average monthly total patient visits were 115, with a sporadic schedule.

   Collections per patient visit (PPV). The “gross collections divided by total patient visits” number (PPV) for this practice was $67, which is well below average.

   Coding analysis. The retiring doctor was taking very few X-rays and giving relatively few injections. Most new patient visits were coded 99201. There was little surgery being performed and the retiring doctor dispensed few Durable Medical Equipment (DME) items and over the counter products.

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