Letter Of Intent For Selling A Medical Practice

Quick answer: A letter of intent (LOI) for a medical practice sale sets the headline price, deal structure, rollover equity, post-closing compensation, and exclusivity before anyone spends money on due diligence. Most of the business terms are usually non-binding, but exclusivity and confidentiality usually are. Once you sign, you generally cannot shop the practice, so the terms that drive your real economics need to be settled in the LOI, not left for the purchase agreement.

This article is part of our complete legal guide to selling a medical practice.

Signing an LOI before the important terms are locked is one of the most common mistakes physicians make when selling a practice. The LOI is short, often friendly in tone, and easy to treat as a formality. It is where your leverage is highest.

What should an LOI for a practice sale include?

Term	Why it matters to the physician
Price and how it is calculated	Most private equity offers are based on a multiple of adjusted earnings. How physician compensation is normalized can change the price significantly.
Cash at closing vs. rollover	The split between cash now and equity in the buyer's platform determines how much risk you keep.
Escrow, holdback, or earnout	Deferred or contingent amounts reduce what you actually receive at closing.
Post-closing compensation	Your new pay model, term, and productivity targets often matter as much as the price.
Management services terms	In MSO deals, the management fee and control rights shape your income for years.
Restrictive covenants	Non-compete scope and length across the purchase, employment, and equity documents.
Exclusivity	How long you are off the market and what lets you terminate it.

For background on how buyers structure these deals, see selling your practice to private equity and what an MSO is.

Which LOI terms are binding?

Most LOIs state that the business terms are non-binding and that no deal exists until a definitive agreement is signed. Exclusivity, confidentiality, and expense provisions are usually binding. The document should say clearly which is which. Courts look at the actual language, not the label, so vague phrasing such as "the parties agree" in the business terms can create disputes about whether a contract was formed.

How does physician compensation affect the price?

Buyers typically value a practice on earnings after resetting physician compensation to a new, lower level after closing. The difference between what you are paid today and what you will be paid afterward is part of what the buyer is paying for. That makes the post-closing compensation model and the price two sides of the same negotiation, and both should appear in the LOI.

How long should exclusivity last?

Long enough for the buyer to finish diligence and financing, and no longer. Physicians should look for a defined end date, a right to terminate if the buyer reduces the price or stops making progress, and no automatic extensions.

Attorney insight: We tell physicians to read the LOI as if it were the final deal, because in practice it usually becomes the final deal. Once exclusivity starts and the practice has invested months in diligence, reopening the price or the compensation model is very difficult.

Related guides

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 have received an LOI or indication of interest, review it with physician-side counsel before you sign. Schedule a confidential consultation to talk through your situation.

Unfamiliar with a term? See our physician contract and practice sale glossary.

Frequently asked questions

Is a letter of intent binding? Usually only in part. Exclusivity and confidentiality are typically binding, while price and structure usually are not, but only if the LOI says so clearly.

Can the price change after I sign the LOI? Yes. Buyers often adjust the price after due diligence. Preparing before you sign and limiting the grounds for adjustment helps.

Should post-closing compensation be in the LOI? Yes. Your new compensation model is tied directly to the price the buyer is willing to pay and is difficult to negotiate after exclusivity begins.

How long does exclusivity usually last? It is negotiated deal by deal. It should match a realistic diligence timeline and include clear termination rights.

Letters of Intent When Selling a Medical Practice: What Physicians Should Lock In