Purchasing a health care practice can be a lucrative endeavor, but it is a huge decision that requires careful planning and consideration. For instance, you must understand the legal and financial aspects of the process to facilitate a smooth transition and long-term success.
Here are some essential tips to guide you through your purchase.
Understand the corporate practice of medicine
Texas law prohibits non-physicians from owning or controlling medical practices. This doctrine, known as the Corporate Practice of Medicine (CPOM), ensures that medical decisions are made by licensed health care professionals. Familiarize yourself with Texas CPOM regulations to avoid legal complications.
Conduct due diligence
Thoroughly investigate the health care practice’s financial health, patient records and history of legal compliance. You should also review financial statements, tax returns and any pending litigation. Proper due diligence helps identify potential risks and allows you to make an informed decision.
Draft a letter of intent
A letter of intent (LOI) outlines the preliminary terms of the purchase and serves as a starting point for negotiations. The LOI should include critical details, such as the purchase price, payment terms and contingencies. A well-drafted LOI clarifies key terms, facilitates smoother negotiations and helps identify potential deal-breakers early in the transaction process.
Negotiate the purchase and sale agreement
The purchase and sale agreement (PSA) is a legally binding document that outlines the terms of the transaction. It should cover the purchase price, payment schedule, asset and liability transfers and any non-compete clauses.
Experienced legal guidance can fill a critical role in negotiations, leading to fairer terms and clear agreements, and assist you in completing other necessary steps of a health care practice purchase.