8/6/2019

1

EXPLORING THE PATH OF PRIVATE PRACTICE MEET YOUR MEDICAL PRACTICE PARTNERS

ALEXANDRA KOHRS

BANK OF AMERICA

PRACTICE SOLUTIONS

JEREMY BURROUGHS

CARR HEALTHCARE

REALTY

PRACTICE MANAGEMENT TRACK

LECTURE 1 : EXPLORING THE PATH OF PRIVATE PRACTICE – 10:15AM-11:45AM

LECTURE 2 : GUIDE TO TRANSITIONING STRATEGIES – 1:15PM – 2:45PM

MEET THE EXPERTS BREAKFAST & LEARN: 7:45AM BOOMER ROOM

Q & A SETTING

Don’t miss out on your opportunity to ask the real estate and banking experts any question. We will start with most common questions and provide an open platform for a panel discussion. Come have breakfast with us on try to stump the experts!

PRACTICE OWNERSHIP TIMELINE

8/6/2019

2

Positives

• Build a practice the way you want it built

• Normally a fast growing company and developing area (less/no competition)

• New equipment and fixtures

• Hire and train your own staff using your business and service philosophies

• Patient selection matches your personality strengths and weaknesses

Negatives

• Stress of building, managing and running an office

• No patient base

• You have to deal with growing pains, i.e. staff, billing, benefits, pay plans, scheduling, to name a few,

• You will have to continue your current employment until the practice can support itself

SHOULD I START A PRACTICE FROM SCRATCH?

WHAT DOES THE PROCESS LOOK LIKE? START UPS

8/6/2019

3

7

Doctor

Banker

Business

Office Equipment

Maintenance

Technology Rep

HR Consultant

LawyerMarketing Website Design

Investment

Equipment Specialist

Medical Specific

Accountant

Space Finder

Contractor

Insurance

DO YOU HAVE YOUR START UP TEAM?

Positives

• CASH FLOW!

• Have a patient based already established

• Staff understands their roles and are trained

• The practice has been marketed and maintains a consistent flow of new patients

• Established insurance relationships

Negatives

• You are buying someone else’s philosophy, flow, treatment planning, staff training, systems, etc.

• Possible loss of patients in transition

• Existing staff salary is already established

• Staff may resent new owner and leave the practice

• The equipment and office may be old and worn which will require additional economic investment

SHOULD I BUY AN ESTABLISHED PRACTICE?

Practice Specialty

Cash Flow

Revenue Trend

Expenses• Hiring/firing employees• Staff wage costs• Adjusted overhead costs

Last Cosmetic Update

Technology• Digital X-Ray• Computer systems

WHAT DETERMINES THE PRICE?

8/6/2019

4

WHAT DOES THE PROCESS LOOK LIKE? ACQUISITIONS

11

Doctor

Banker

Lawyer

Marketing Website Design

Investment

Equipment Specialist

Medical Specific

Accountant

Space Finder

Practice Broker

Insurance

DO YOU HAVE YOUR ACQUISITION TEAM?

12

Doctor

Banker

Lawyer

Marketing Website Design

Investment

Equipment Specialist

Medical Specific

Accountant

Space Finder

Contractor

Insurance

DO YOU HAVE YOUR EXPANSION TEAM?

8/6/2019

5

13

• Credit worthiness

• Capital (liquidity)

• Character (financial position)

• Capacity (cash flow)

• Collateral (business)

THE FINANCIAL PIECE

14

- Trade lines and accounts:

- Public record and derogatory information :

- Hard vs. soft inquiries

- Contact information, employment history, aliases & notes

Getting your credit in order - Your Credit Bureau file includes

How are Credit Scores calculated?

Payment History

Credit Useage

Inquries

Account Types

Age of Accounts

15%

31%

14

10

30%

STUDENT LOANS HOME

AUTOMOBILE

CREDIT CARDS REVOLVING LINES

OF CREDIT

#1 DEBT QUESTION- WHAT IS GOOD AND BAD DEBT?

8/6/2019

6

PURCHASE RESPONSIBLY

-keep short and long term plans in

mind

Do you KNOWEXACTLY

where you will purchase or start

a practice?

Does it MAKE MORE

SENSE to purchase or rent?

BUYING VS RENTING BEFORE A PRACTICE?

Specialty Lenders Local Banks Seller Financing

Term Rates Fees Pre-Payment

Down Payments

ApprovalFlexibility

Personal Guarantees

Residential Guarantees

Approval Time

Life Insurance

DisabilityInsurance

MalpracticeInsurance

KNOW THE LENDING OPTIONS

SBA

18

• Develop your “Why”…Why am I doing what I’m about to do?

- The “Why” becomes your driving force behind your decision

• Create an experienced TEAM

- Successful Opening, Speed & Savings (Time and Money)

• Have a plan

- Know exactly what you want to do

- Commit to the plan

- Execute the plan with your TEAM

• Develop a project list

- Organize and prioritize your “To Do” items

Identified issues that are coming (ahead of time)

Reduces stresses – by being proactive vs. reactive

• Don’t take shortcuts

• It’s never too early to start looking at your options

-Work on Personal Situation if Need be

-Find the right space/ practice takes time

SUCCESS TIPS

8/6/2019

7

• Not becoming a practice owner sooner

• Location - Poor visibility and signage - Trying to negotiate your own lease terms - Poor demographics

• Financial/Budgeting mismanagement

• Practice Homework

• Lack of marketing

• Not hiring the right staff

• Non Compete concerns

• NOT HAVING THE RIGHT TEAM IN PLACE

MOST COMMON PITFALLS

35428

LECTURE 2 : GUIDE TO TRANSITIONING STRATEGIES

1:15PM – 2:45PM

MEET THE EXPERTS BREAKFAST & LEARN: FRIDAY, 7:45AM BOOMER ROOM Q & A SETTING

Come have breakfast with us on try to stump the experts!

Bank of America, N.A. provides information from speaker topics for your discussion and review purposes only. Please consult your tax advisor, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice. AR: AR9SRJ9D

The Path of Private PracticeSession 1

8/6/2019

8

Types of Real Estate Transactions

• Start-Ups

• Lease Renewals

• Expansions

• Relocations

• Additional Offices

• Purchases (Land/Building)

• Practice Transitions

The Importance of Real Estate to Your PracticeSecond-Highest Expense

• Your office is typically the second-highest expense after payroll

• After years of lease escalations, most offices are significantly overpaying for their lease

• You typically get only one chance every 5-10 years to reduce this expense. Don’t Miss the critical opportunity!

How does real estate impact your practice?

8/6/2019

9

Commercial Property types

• Office (condo/ stand alone)

• Retail

• MOB

• Hospital Campus

• Land/New Construction

Pros and Cons• Signage

• Exposure

• Access

• Parking

• Synergy of Other Tenants

• Costs

• Natural light/windows

• Amenities

Understand Your Lease Type

• Full Service, Modified Gross, or NNN

• Base Year vs. Expense Stop

• What is a CAM?

• Utilities and Janitorial Included?

• Office park fees

8/6/2019

10

Everything is Negotiable (almost…)

• Lease rate and annual escalations

• Build out period

• Improvement allowance

• Free rent

• Signage, Parking, Exclusivity, etc.

Purchase vs. Lease• Is it always better to own?

• How does it affect your cash flow?

• Short term vs. long term

• Principal pay-down and equity

• Tax implications

• Exit strategy

Leverage Your Opportunity Through Representation

8/6/2019

11

Negotiation StrategyAppropriate timeframe

• New Lease or Purchase: 9-12 months

• Renewal: 12 months

• Land Purchase: 18-24 months

• Practice acquisition: 30-60 days

Posture is mandatory

• Understand what is really at stake

• Renewal Scenario

Negotiation Strategy (Cont.)

Negotiation Strategy (Cont.)

Whoever has the most viable options wins

• If the landlord believes you can’t move or aren’t willing to move…

8/6/2019

12

Key Players and Their Roles

• Real Estate Broker

• Lender

• Attorney

• CPA

• Architect

• Equipment and Technology

• Contractor

Closing • Real estate dramatically impacts

your practice

• Understand the market and your top options

• Maximize your opportunity through representation

• Create a team of trusted professionals

Jeremy Burroughs405-410-8923

jeremy.burroughs@carr.us