This article is part of our complete legal guide to selling a medical practice.
What do buyers review in a medical practice sale?
| Area | What buyers look for |
|---|---|
| Billing and coding | Coding accuracy, documentation, audit history, overpayments, and refund practices |
| Payer contracts | Assignment and change-of-control terms, reimbursement rates, and termination rights |
| Enrollment and licensure | Medicare and Medicaid enrollment, state licenses, DEA registrations, CLIA certificates, and facility permits |
| Compliance program | Policies, training, HIPAA practices, business associate agreements, and any past investigations |
| Physician and staff agreements | Employment terms, restrictive covenants, compensation arrangements, and independent contractor classification |
| Referral relationships | Leases, medical director agreements, and other arrangements reviewed under Stark and the Anti-Kickback Statute |
| Real estate | Lease term, renewal, assignment, and any physician-owned real estate |
| Malpractice | Claims history and how tail coverage will be handled |
| Financials | Quality of earnings, normalized physician compensation, and accounts receivable |
How can physicians prepare?
- Run a coding and documentation review before buyers do, so you can address issues on your own terms
- Collect payer contracts and identify which require consent to assign or change control
- Confirm every license, enrollment, and registration is current and in the right entity's name
- Organize physician and employee agreements and confirm restrictive covenants are signed
- Review leases and other arrangements with referral sources for fair market value documentation
- Work with your CPA on clean financials and a clear explanation of physician compensation
- Plan patient notice for the transfer of records. Virginia, for example, requires notice to current patients by mail or electronically, plus newspaper publication, before records are transferred in a practice sale (Va. Code § 54.1-2405)
Many of these issues also affect value. See our guides to medical practice valuation and Stark and the Anti-Kickback Statute in a practice sale.
What happens if the buyer finds a problem?
Most findings change the deal rather than end it. Common responses include a price adjustment, a larger escrow or holdback, a special indemnity for a known issue, a closing condition, or a requirement to fix the problem before closing. Potential Medicare overpayments need prompt attention. Under current rules, an overpayment is identified when it is knowingly received or retained, and it generally must be reported and returned within 60 days, with a suspension of up to 180 days only for a timely, good-faith investigation of related overpayments (42 C.F.R. § 401.305). Findings from pre-sale diligence cannot simply be held until closing.
Related guides
- Selling a Medical Practice: The Complete Legal Guide (start here)
- 7 Common Mistakes Physicians Make When Selling a Practice
- Selling Your Practice to Private Equity
- What Is an MSO?
- How to Value a Medical Practice
- The Corporate Practice of Medicine in a Practice Sale
- Stark Law and the Anti-Kickback Statute in a Practice Sale
- Letters of Intent When Selling a Medical Practice
- Rollover Equity: What Physicians Should Know
- Your Employment Agreement After Selling Your Practice
- Non-Competes After Selling a Medical Practice
- F Reorganizations in a Medical Practice Sale
- Selling to a Hospital, Private Equity, or Another Physician
About Med Contract Law. Med Contract Law is a focused practice group of McCormick Law & Consulting dedicated to physicians. We represent physicians and physician-owned practices in practice sales, private equity and MSO transactions, and hospital acquisitions. In these matters, we represent the physician side, not hospitals or health systems, so our focus is always on the physician's side of the deal.
If you are thinking about selling in the next year or two, a pre-sale legal review can identify issues while there is still time to fix them. Schedule a confidential consultation to talk through your situation.
Unfamiliar with a term? See our physician contract and practice sale glossary.
Frequently asked questions
How long does due diligence take in a practice sale? It varies with the size of the practice and how organized its records are. Preparation shortens the process.
Will buyers audit my billing? Usually. Billing and coding are central to a buyer's review, and many buyers sample claims and documentation.
Do payer contracts transfer automatically? Not always. Many require consent or notice for an assignment or change of control, which can affect timing and structure.
Should I fix problems before selling? Where practical, yes. Issues you identify and address yourself are usually less costly than issues a buyer finds.