5 Things to Do Before Buying a Healthcare Practice

If you’re thinking about purchasing a medical, veterinary, or other healthcare business, you don’t want to skip these five crucial steps.

(Updated August 2019)

1. Review the Books

Before you buy a practice, you’ll need to evaluate all liabilities and assets. This helps you understand how much business is necessary to sustain the practice, how adequately (or inadequately) employees are compensated, whether patient accounts are sent to collections, and whether the practice is something in which you want to invest.

With the books in front of you, ask yourself how you will grow the business. Will you hire more providers, contract with more insurance companies, or switch-up the practice model? How patient will you be with the practice’s financial growth?

Knowing the books can also help you assess how the business might be impacted if a third-party payor lowered their reimbursement rates, an important vendor raised their monthly rates, or a popular provider left the practice.

The books also offer important clues about the practice’s operations. If you feel like the providers are under-compensated, then you may suffer greater employee turnover or dissatisfaction. A practice with an aging workforce may experience unique challenges with the departures of those who know the business best and the inconsistency brought on by considerable new hires.

When guiding clients through the process of purchasing a practice, we counsel clients about how legal or regulatory changes might impact the practice. For example, an independent rehabilitative medicine practice may see a slight downturn in patient visits if physical therapists succeed in obtaining direct access. Conversely, increased regulatory scrutiny over independent laboratories may increase the profitability of a medical practice’s in-house lab.

If you thoroughly review the books, you’ll better understand where the practice earns its money and where it spends those earnings.

2. Evaluate the Practice’s Patients

If the current owner practices at the clinic, critically evaluate what percentage of the patients will be lost because of her departure. (Hint: This number is never zero.)  

What portion of the practice’s patients does the owner personally treat? Also consider whether some of the practice’s other popular providers might leave with the current owner, and evaluate the impact of such departures on the practice’s financial health.

Your review of the practice’s operations should also consider the patients’ insurers. Many providers in Illinois have struggled to obtain Medicaid reimbursements during the State’s budget impasses. For those operating practices with heavily Medicaid-dependent patient populations, this creates a substantial burden.

Conversely, if the practice primarily serves Medicare beneficiaries and your municipality has approved construction of a high-rise senior housing complex across the street, you may soon experience an influx in patients.

While some of these details are speculative, so is the fact that the practice is worth anything. Remember that you are considering buying an existing practice instead of starting a new one because of the patients, providers, goodwill, vendor relationships, real estate, and reputation that the practice has accrued. If any of those categories of value are seriously deficient, it can impact the overall value of the practice and may negate the benefits of purchase.

3. Review the Practice’s Compliance with Healthcare Laws and Regulations

Small established practices have often neglected their legal and regulatory compliance. In contrast, mid-sized to larger practices are sometimes the most compliant, as they’re keenly aware of what was required to build their practice and view compliance as something that cannot be compromised (these are the practices most likely to use corporate counsel services too).

If you’re looking at buying a practice, an experienced healthcare attorney can work with you to evaluate the practice’s compliance. This information can be used to negotiate the purchase price, but it also gives you lead-up time to remedy the deficiencies before you purchase the practice and land yourself personally responsible for its ongoing compliance.

Consider this like the inspection you have performed before you purchase a house. Most new practice owners — in recognition of the substantial investment involved with purchasing a practice — have low risk tolerance and want to ensure the practice is compliant. We frequently identify the following deficiencies:

Formation

The practice’s corporate form (e.g., LLC, corporation) is not one that can be operated for practicing the professional services offered at the practice. This is a common issue that arises when a business was started by a tax professional, a healthcare provider, or an online service. Healthcare businesses are subject to very specific rules, so this often requires correcting before the practice can be sold.

HIPAA Policies and Procedures

The practice does not have compliant HIPAA policies and procedures. This means that it does not perform risk assessments annually (or more frequently, as required), and it does not maintain written policies addressing all aspects of HIPAA’s privacy, security, and breach notification rules.

Employment Policies

The practice lacks a single governing employment document — most commonly an employee handbook — by which all employees are uniformly hired, promoted, paid, disciplined, or terminated. The absence of such policies can create increased liability in employment claims and lawsuits.

Without clear guidance, hiring professionals might collect legally-prohibited information, employee disciplinary sanctions may be inadequately documented, or employees may engage in social media-related misconduct.

4. Obtain an Independent Valuation of the Practice

This will require the current practice owner to open up the books for your valuation consultants. Often, sellers are more willing to do this when a third party requests the information, and it’s easier for a third party to request supplemental information and more details than for you to feel like you’re being a squeaky wheel.

With a third-party valuation of the practice in-hand, you’ll be in a better position to make an informed purchase offer or respond to counter-offers. Practice owners also commonly expend significant sweat equity on their businesses, and a neutral third party can take some of the emotion out of the negotiation and help quantify the practice’s true value.

Finally, the valuation can help you secure a loan to purchase the practice — much like a home appraisal can help establish a property’s value when you’re seeking a home loan.

When a client wants to sell their established practice, we also recommend that they obtain an independent valuation of their practice. The information gathered from such an analysis can help to set a list price, negotiate offers, and draft counter-offers.

5. Make a Transition Plan

Many practices are purchased by a provider who is currently employed by the practice. This can make for either a very smooth or a challengingly rocky transition.

The primary challenge? Your current coworkers will soon be your employees, meaning you’ll be charged with paying, disciplining, and supervising them. Think carefully about the transition, and consider how these changes will be perceived by your workforce. You may also want to carefully consider the timing and manner in which you’ll announce your new ownership to the practice.

It’s also common for an outsider to purchase a healthcare practice, particularly if the current owner is retiring. While this transition sidesteps the stressors associated with a former employee suddenly becoming the boss, it carries its own challenges. Namely, the new owner is unfamiliar with the practice’s operations and culture. This can be an asset — particularly if the practice needs a rejuvenation of energy, capital, or structure — but a cautious introduction of the new leadership to the workforce is important to ensure that employees remain motivated and optimistic about the change.

Whether you’re buying it as an insider or an outsider, we find that this is a crucial juncture for introducing changes to the employee benefits structure, practice culture, or other policies. These details are all addressed in our healthcare employee handbooks.

As a new owner, the best way to set the stage for your leadership is to present your workforce with a fresh employee handbook that explicitly outlines your expectations, employees’ rights and responsibilities, and grievance procedures. Read more about our healthcare employment services here, or schedule a free consultation with one of our attorneys.

Ready to get started? Schedule a free consultation with one of our attorneys today.

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It seems like every corner of the internet is overstuffed with ads for vitamins, herbal remedies, fat-loss supplements, muscle-building shakes and sleeping pills. 

As someone who's worked in the health fitness industry for years, I know that much, if not most, of it is just clutter. It's charlatans and hustlers trying to make a quick buck off of your pain points. It's great marketers who know that phrases like "lightning fast weight loss" and "banish cellulite forever" sell products that may or may not be straight-up flimflam. 

In the largely unregulated supplement industry, many products are ineffective, full of fillers or undisclosed ingredients. Some are downright dangerous. Who can you trust? How do you know which supplements are best for you? What products are actually effective -- and safe to take? 

I want to preface the rest of this article with two very important disclaimers:

First, it's impossible to cover everything you need to know about choosing safe and effective supplements in one article. If you want to learn more, you should read official information from the Food and Drug Administration (FDA), the Office of Dietary Supplements (ODS) and the US National Library of Medicine. While I cite many primary studies in this article, you can browse the PubMed database for more information on specific supplements, their uses, benefits and risks. 

Second, although I have training in nutrition, anatomy and physiology, I am not a registered dietitian nor a doctor of any sort. If you are interested in taking supplements for a particular symptom or medical condition, please, please, please consult a registered dietitian or your doctor before doing so. 

Now onto what you should know about supplements before you waste your money. 

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1. Supplements aren't strictly regulated by the FDA or the USDA 

Currently, the supplement industry is largely unregulated, especially compared to the food and drug industries. The FDA still uses an act passed nearly 20 years ago -- the Dietary Supplement Health and Education Act of 1994 (DSHEA) -- that only has one real stipulation: "Manufacturers and distributors of dietary supplements and dietary ingredients are prohibited from marketing products that are adulterated or misbranded."

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This means the manufacturers themselves are responsible for testing the safety and efficacy of their products, as well as for labeling their own products. The FDA can crack down on a supplement after it hits the market if it's incorrectly labeled or unsafe, but by that time, damage may already be done. 

You can learn more about what's required of supplement manufacturers by reading the FDA's FAQ on dietary supplements. However, FDA Commissioner Scott Gottlieb did announce in a February 2019 statement that he plans to implement stricter regulations, so things are definitely looking up for the supplement industry. 

Nonetheless, here are a few examples of what has happened in the past because of the low-level regulation:

• Companies have sold highly concentrated caffeine powder and liquid in bulk to consumers. The FDA has since ruled that an illegal and unsafe practice.
• A supplement brand sold products with dangerous hidden ingredients. The FDA has announced warnings to both consumers and the company.
• Supplement companies illegally claimed to treat opioid use disorder. The FDA posted warning letters to the companies.
• Nearly 20 supplement brands sold products with unlawful claims about treating Alzheimer's disease. The FDA sent warning letters to all of the companies.

2. You shouldn't take the same supplements as everyone else

Personalized vitamins are better than taking whatever you find on the shelf, but you should still consult a doctor or dietitian about supplements for particular concerns. 

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If your diet, lifestyle, fitness routine, sleep habits and health status aren't the same as anyone else's, why would it make sense to take the same supplements as everyone else? 

For some supplements, this is obvious: You probably wouldn't feel inclined to take a calorie-dense, high-protein and high-carb post-workout shake if you weren't trying to build muscle. You also probably wouldn't reach for sleep aids if you don't have trouble sleeping at night. 

For other supplements, the disconnect isn't so conspicuous. Everyone needs vitamins, right? 

Yes, everyone does need vitamins and minerals and other certain nutrients (here's a very helpful PDF chart from the FDA on the main nutrients, their functions and RDAs), but not everyone needs the same amount of the same nutrient. 

Take vitamin B12 as an example: People who eat a vegan or vegetarian diet may benefit from supplementing with B12 because this vitamin is found primarily in animal products or fortified products. If you eat eggs, dairy products, chicken, seafood or steak, you likely don't need additional vitamin B12. 

If you're interested in learning more about which vitamins you actually need, I highly recommend reading The Vitamin Solution by Dr. Romy Block and Dr. Arielle Levitan, two doctors who founded Vous Vitamin, a personalized multivitamin company. 

I found this book to  lay out all of the essential knowledge on vitamins, minerals and other supplements in a way that's easy to understand and can help you determine which supplements are best suited to you -- or at least open up a helpful discussion with your doctor.

3. Supplements don't replace whole foods

Supplements will never be as good as eating whole, nutrient-dense foods like fruits and vegetables.

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It's unfortunately a myth that taking vitamins and supplements can replicate a healthy diet. Just like you can't "out-exercise" a poor diet, you can't "out-supplement" one either. Vitamins can certainly help bridge the gap between what you get from your diet and what you don't, but using supplements as a way to "fix" your diet won't work. 

There are so many nuances at play here. For example:

• Taking fat-soluble vitamins but failing to eat dietary fat may mean that your body doesn't adequately absorb the vitamins
• Taking a daily multivitamin but disregarding fruits and vegetables means you don't get the antioxidants or fiber found in plant foods
• Drinking protein shakes but not eating meat could present vitamin B12 deficiency over time (if you don't supplement B12 accordingly) 
• Taking a vitamin D supplement without getting enough calcium might negate the supplement's beneficial effects on bone health

That list is far from comprehensive, but you can see that vitamins and supplements don't just magically undo poor eating habits. Scientific conclusions vary greatly -- from "we don't need vitamins at all" to "the benefits outweigh the risks" -- but the general consensus seems to be that vitamins and supplements can help prevent nutrient deficiencies in certain populations and when taken correctly and support health in conjunction with a nutritious diet.

4. Yes, you can overdose vitamins and supplements

Taking too many vitamins can result in dangerous side effects, so be careful to check the Recommended Daily Allowance (RDA) for each vitamin you take. 

Care/of

One common vitamin myth is this: "If I take too many vitamins, it's fine, because my body will only keep what it needs and get rid of the rest as waste." 

This is a pervasive mindset but a dangerous one. You can, in fact, overdose on vitamins. The term is "vitamin toxicity" and it can happen with any vitamin. For almost every vitamin, there is an established Recommended Daily Allowance (RDA) or Adequate Intake (AI), as well as a Tolerable Upper Intake Level (UL). 

The RDA or AI signifies an ideal daily intake while the UL indicates the high end of what's safe to consume. RDAs, AIs and ULs are all values under Dietary Reference Intakes (DRIs), the set of reference values assigned to foods and supplements for consumption.

Recently, experts have seen an increase in vitamin D toxicity, likely related to the touting of vitamin D's benefits on immune function, bone health and mood. 

It's not just vitamins that can be toxic either: Minerals taken in high doses can be toxic, as can electrolytes, herbs and sports supplements. Zinc, for example, a mineral known and loved for its immune-boosting properties, can actually cause immunosuppression in extremely high doses.

Pre-workout supplements high in caffeine can cause abnormal heart rhythms and severe overdoses can be fatal. Potassium, a well-known electrolyte found in foods such as bananas and spinach and in sports drinks, can also cause toxicity. Called hyperkalemia, this condition can lead to muscle weakness, fatigue, nausea and, in severe cases, life-threatening heart arrhythmias. 

Surpassing the UL of any vitamin, mineral, electrolyte or other supplement can cause harm, so be careful to do your research on any supplements you intend to take. 

5. Supplements may dangerously interact with medications you take

Some supplements can reduce the effectiveness of certain medications or result in side effects -- talk to your doctor about supplements if you take medications. 

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If you currently take prescription or over-the-counter medications regularly, you should talk with your doctor about drug-nutrient interactions. 

A drug-nutrient interaction is any reaction that occurs between a vitamin, mineral, antioxidant, electrolyte or other nutrient and a medication. A drug-supplement interaction is any reaction that occurs between a supplement and a medication. 

Good intentions to supplement your diet with vitamins, minerals and herbs can backfire and cause complications. Take these examples:

How to choose the right supplements for you

Supplementing smartly can optimize your health and fitness, but supplementing poorly can potentially be dangerous.

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If you're generally healthy and want to take supplements for overall health, I think the best bet is to use a personalized multivitamin service, such as Vous Vitamin, Baze or Persona Nutrition. This isn't as good as going to a doctor or dietitian, but it's still better than just swiping the first multivitamin bottle you see into your cart at the grocery store. 

Some of these companies have more thorough personalization processes than others, but in general, with a personalized multivitamin, you can feel confident that you're not getting too much of a specific vitamin or consuming a vitamin that may be necessary or actually harmful to you. 

If you don't go that route (and even if you do), you should always (always!) look for signs that a supplement is legitimate. By legitimate, I mean it's undergone third-party testing and/or evaluation, and it is certified not to include any ingredients other than what's on the label (aka it doesn't have any shady fillers). Those signs are: 

• National Sanitation Foundation (NSF) certification. The NSF is a third-party evaluation agency for food and dietary supplements. When a supplement sports the NSF-certified label, it means it has undergone a scrutinous safety and risk assessment, and continuously undergoes "regular on-site inspections of manufacturing facilities and regular re-testing of products to ensure that they continue to meet the same high standards required to maintain certification over time." 
• US Pharmacopeia (USP) Verified Mark. The USP is a nonprofit, independent organization that vets medications, foods and dietary supplements to determine their safety and efficacy. The USP Verified Mark on a supplement means that supplement meets four critical components, which you can read about on the USP standards for supplements page.
• Good Manufacturing Practices (GMP) certification. This is the one FDA-related certification for supplements. The FDA has established Good Manufacturing Practices for supplement production, and dietary supplements that have this certification meet the FDA's guidelines for production.

Even better yet, look for a nutrition facts label versus a supplement facts label. A nutrition facts label means the product is sold as a food product, not a supplement, which means it has been evaluated and approved by the FDA for human consumption. A whole-food supplement with a nutrition facts label, an NSF certification, a USP Verified Mark and GMP certification is the best of the best.

To avoid vitamin toxicity, check the labels of every supplement you take. If you take multiple supplements every day and also get vitamins from food, you can put yourself at risk for vitamin toxicity -- for instance, if your protein shake is fortified with vitamin B12 and your multivitamin contains 250% of the DRI for vitamin B12, you may want to alternate them or choose a different protein shake that isn't fortified. 

Finally, I'll end with the same sentiments I opened with: Please consult your doctor or a registered dietitian if you're interested in taking vitamins or supplements for a specific symptom or medical condition. 

Not only can supplements dangerously interact with medications you may be taking already, it's important to rule out any medical conditions that may need to be treated with prescription medication.