Jack Stewart, MD, a Tacoma, Wash.-based orthopedic surgeon subspecializing in hand surgery, discusses why he decided to sell his practice to a hospital and finalizing the transaction.
Q: What factors swayed your decision to sell your practice to the hospital?
Dr. Jack Stewart: The biggest factor is that we were in a town that had two major hospital corporations that had bought up a large section of the primary care practices. Due to the manner in which health insurance is set up, these primary care doctors hold much of the power since it is up to them which orthopedic surgeons to whom they refer their patients. Therefore, these corporations increasingly told their primary care doctors to refer patients to orthopedic surgeons owned by the corporations. As those two corporations built up their orthopedic practices, we decided we needed to make a move while we still had a strong bargaining position. Otherwise, we would slowly be pushed out of the orthopedic market.
Q: What steps did you take from a business and legal perspective when selling the practice?
JS: We hired an attorney who deals specifically with buying and selling medical practices as well as the business of doctors signing contracts with hospital corporations. Hiring him was probably the most important step that we took.
Q: What were the most challenging aspects of selling the practice?
JS: After being in private practice for so long, the most challenging aspect was the negotiations associated with the sale. However, the brunt of these negotiations was taken on by our attorneys. Post-sale, adjusting to the idea of being an employee and being a part of a bureaucratic culture has been something very different than when we previously experienced as a private practice. Moreover, despite the fact we are lucky to hold recession-proof jobs, we are ultimately now at the mercy of our employer.
Q: What was the most surprising thing you encountered during the process?
JS: The most surprising aspect was how long the process took. It took a full two years from the time they first approached us before finally closing the deal.
Q: Now that the practice is sold, what is your role within the hospital setting?
JS: My role hasn't changed in that I remain an orthopedic surgeon specializing in the hand, and I still operate at all of the hospitals in our area, including those of the competitor corporation. I still remain in full control of my schedule, the number of patients I take on, and the number of surgeries I take part in each day. However, I also don't need to take on any of the business side of operations, such as keeping up to date on the best small business credit cards for our team, which has saved me a significant amount of time and stress.
Q: Have you seen any advantages in your new situation?
JS: The biggest advantage is that I don't need to deal with the business or finance side of things anymore. For example, we no longer have to deal with keeping track of and monitoring IRS Schedule C tax deductions for a small business, which can sometimes be extremely time consuming and frustrating. And having a regular paycheck instead of one that fluctuates makes it much easier to budget and plan for the future. Along those same lines, worrying about generating positive cash flow as a company is no longer an issue that I need to tackle on a monthly and annual basis.
Q: What words of advice would you have for orthopedic surgeons just beginning the process of selling their practice?
JS: Get a good lawyer who has experience in this area. Without a lawyer, you might very well find yourself in big trouble and agreeing to a contract that isn't as secure or as lucrative as you expected.
Thank you to Money Crashers, one of the top personal finance blogs, for coordinating this interview.
Related Articles on Orthopedic Practices:
5 Points on Integrating Spine & Sports Medicine Into One Orthopedic Group
Physicians Pioneering the ACO: 5 Thoughts From Dr. Gene Lindsey of Atrius Health
10 Tips for a Prosperous Merger Between Orthopedic Groups
Q: What factors swayed your decision to sell your practice to the hospital?
Dr. Jack Stewart: The biggest factor is that we were in a town that had two major hospital corporations that had bought up a large section of the primary care practices. Due to the manner in which health insurance is set up, these primary care doctors hold much of the power since it is up to them which orthopedic surgeons to whom they refer their patients. Therefore, these corporations increasingly told their primary care doctors to refer patients to orthopedic surgeons owned by the corporations. As those two corporations built up their orthopedic practices, we decided we needed to make a move while we still had a strong bargaining position. Otherwise, we would slowly be pushed out of the orthopedic market.
Q: What steps did you take from a business and legal perspective when selling the practice?
JS: We hired an attorney who deals specifically with buying and selling medical practices as well as the business of doctors signing contracts with hospital corporations. Hiring him was probably the most important step that we took.
Q: What were the most challenging aspects of selling the practice?
JS: After being in private practice for so long, the most challenging aspect was the negotiations associated with the sale. However, the brunt of these negotiations was taken on by our attorneys. Post-sale, adjusting to the idea of being an employee and being a part of a bureaucratic culture has been something very different than when we previously experienced as a private practice. Moreover, despite the fact we are lucky to hold recession-proof jobs, we are ultimately now at the mercy of our employer.
Q: What was the most surprising thing you encountered during the process?
JS: The most surprising aspect was how long the process took. It took a full two years from the time they first approached us before finally closing the deal.
Q: Now that the practice is sold, what is your role within the hospital setting?
JS: My role hasn't changed in that I remain an orthopedic surgeon specializing in the hand, and I still operate at all of the hospitals in our area, including those of the competitor corporation. I still remain in full control of my schedule, the number of patients I take on, and the number of surgeries I take part in each day. However, I also don't need to take on any of the business side of operations, such as keeping up to date on the best small business credit cards for our team, which has saved me a significant amount of time and stress.
Q: Have you seen any advantages in your new situation?
JS: The biggest advantage is that I don't need to deal with the business or finance side of things anymore. For example, we no longer have to deal with keeping track of and monitoring IRS Schedule C tax deductions for a small business, which can sometimes be extremely time consuming and frustrating. And having a regular paycheck instead of one that fluctuates makes it much easier to budget and plan for the future. Along those same lines, worrying about generating positive cash flow as a company is no longer an issue that I need to tackle on a monthly and annual basis.
Q: What words of advice would you have for orthopedic surgeons just beginning the process of selling their practice?
JS: Get a good lawyer who has experience in this area. Without a lawyer, you might very well find yourself in big trouble and agreeing to a contract that isn't as secure or as lucrative as you expected.
Thank you to Money Crashers, one of the top personal finance blogs, for coordinating this interview.
Related Articles on Orthopedic Practices:
5 Points on Integrating Spine & Sports Medicine Into One Orthopedic Group
Physicians Pioneering the ACO: 5 Thoughts From Dr. Gene Lindsey of Atrius Health
10 Tips for a Prosperous Merger Between Orthopedic Groups