Transitioning My Clinic

Before and After the Sale
Q. & A. Session of the Most Commonly Asked Questions in Selling a Clinic

By Sam Reader
Compliments of S. G. Reader & Associates, Inc.

Q. Is it okay to let the new doctor take over the clinic prior to funding?

A. No, Absolutely not! If anything and everything can go wrong prior to closing it usually does. Call it “Murphy’s Law”. There are always unforeseen “hic-ups” along the way. For example, the landlord becomes difficult in signing the land lord waiver (see article, Avoiding Mistakes in Selling My Practice) mandated by the funder. The landlord wanting to raise the rent (substantially) to the new doctor. The buyer comes up short with his/her down payment to the funder and/or grows cold (disinterested) on the clinic due to family emergency or spousal dissatisfaction of area. The co-signer forfeits/retracts signature for the buyer due to so called, “other emergency business matters.” Most importantly, the honeymoon period is violated. In other words, the buyer gets to drink the milk before he/she buys the cow and doesn’t like the milk. Although it is important for the buyer to do their due diligence (verification) on the clinic prior to purchase, this does not translate into clinic take-over and jeopardizing seller’s position with staff and patients prior to funding.

Q. When do I tell my staff?

A. In most cases the staff is informed on the day of funding prior to the new doctor taking over. The take over date is usually the day following funding. Some sellers’ believe its okay to inform the staff after the purchase sale agreement has been signed between both parties (usually weeks prior to funding), just remember, the purchase sale agreement is not the finish line, the funding is! The purchase sale agreement can be broken at any time. For example, the funder may find damaging information on the clinic and/or buyer and pulls the plug; or the buyer grows cold and/or family emergency, pulls out and looses his/her earnest deposit.

If you feel compelled to tell your staff prior to funding, make sure that in addition to the purchase sale agreement that all landlord issues are signed off, docking papers are signed and you are just a day or two from designated funding date.

Q. How do I tell my Staff?

A. In most cases the doctor will take his/her staff to lunch. The dialog might go like this: Susan, Karen, Pam; I have some good news and better news. Which would you like first? The good news is I’m retiring or I’m moving on to something new and different in life. The better news, you will have a new doctor taking my place, Dr. Smith. He/She is enthusiastic, energetic and on purpose. You have been a wonderful team. If you continue to provide the new doctor with the same team spirit and skills you have shown me, along with Dr. Smith’s skills and enthusiasm, this clinic will soar. Change is good. You will be happy.

We have found in most cases although staff members are a little startled and reluctant at first, they quickly become excited about the change and anticipate new energies and opportunity with the incoming doctor.

Q. When and how do I tell my landlord?

A. The funder will request the landlord waiver as well as a newly signed lease prior to you receiving the docking papers for funding. Make sure the purchase sale agreement is signed and that you receive a written approval from the funder that the buyer is qualified and has been approved by the underwriter. A non-refundable deposit is also important. This deposit (no less than $5,000.00 for small clinics) secures the buyer position and loyalty throughout the process. Most non-refundable deposits are contingent on financing and/or a review of the books and records unless drafted up otherwise.

Your dialog might go like this: Mr. Smith, this is Dr. Jones, your tenant on 1st Avenue. I am in the process of completing the sale of my practice and would like to introduce you to the doctor taking my place. The funder is requesting a new lease between you and the new tenant, Dr. Smith. Our tentative closing date is set for Monday, January 5th, are you available to meet (phone contact) Dr. Smith this week?

If this is a cash only deal no funders involved, it is still important to get your name off the lease.

Q. How do I transition the patient?

A. There are two schools of thought. The older and/or traditional method is to have the new doctor follow and observe for the first week. The second week, role reversal. The new doctor treats while you follow and observe. By the third week the new doctor is somewhat solo in the treatment room while you are just an earshot away.

The other method which has worked extremely well is where new doctor treats on day one. Obviously you are in the treatment room with the new doctor to introduce and observe. Any instructions or treatment protocols in behalf of the patient is discussed prior to treatment. This method will diminish the odds of loosing any patients. With the traditional method patients have been known to walk out the door thinking to themselves, “I don’t know if I’m going to like that new doctor. I don’t know if I’m going to come back”. This an unfortunate scenario, the patient drew a conclusion without giving the new doctor a chance, whereas the new method has proven when the patient walks out that door they say, “Wow! I like how that new doctor treated me. I think I’m going to like him/her.” Under this scenario we cast out all doubt in the patient’s mind on day one. Patient recapturing has proven to be much higher under this new method.

Q. How do I introduce the new doctor to the patient?

A. Mrs. Brown, I have some good news and better news! Which would you like first? The good new is I’m retiring or I’m moving. The better news is after a long and difficult search I have finally found the ideal doctor to replace me. May I formally introduce you to Dr. Smith? I feel extremely fortunate to have found Dr. Smith. He/she is qualified and will be a wonderful compliment to the clinic and community. I have reviewed your case thoroughly with Dr. Smith and he/she is prepared to treat you today.

Q. How do we transfer HMO/PPO panels to new doctor?

A. The new doctor should have his/her own EIN and/or Medicare number. Transitional letters and/or instructional calls should be placed with the panels at day of close. If buyer insists that calls are made to the PPO insurance panels prior to closing, make sure all closing requirements (safeguards) are in place. This step in the transitional phase should be exercised with sensitivity and merits professional counsel. This is not a “one size fits all” procedure.

Q. How do I collect my receivables?

A. If you sold your receivables this becomes a non-issue. If you do not sell your receivables you may need to work out an agreement with the new doctor to have your old staff collect and report your money for a percentage fee. You may also collect on your own at your new location. This can be confusing to the insurance company and distraughtful to the doctor if his/her checks are accidentally going to you or visa versa. Although the billing dates on the E.O.B.’s provide clarity there is still an element of trust between both parties. This can be a fairly simple procedure or one filled with heartache and headache most definitely meriting professional counsel.

Q. Should we have a clinic party and introduce everyone to the new doctor?

A. Sure! Why not? The more patients we can draw out and introduce to the new doctor the better. This is a great time to re-activate the old timers. Some doctors have held parties out in their parking lot typically on Saturday from 10:00 a.m. to 1:00 p.m. Flyers are mailed to the house list, an ad is placed in the paper, the cost absorbed by the new doctor. This is typically a barbeque. A few rented shade tents, folding chairs and live music – it’s all good. This is strictly a social gathering – no treatment. Exams are optional.

Q. Do I need to mail a transitional letter to my patients?

A. Yes. Please see enclosed sample

Enjoy!!

SAMPLE TRANSITIONAL LETTER

January 5, 2004

Dear Patients and Friends,

As some of you have heard, there are a lot of changes going on here at Jones Chiropractic. For starters, I’ve decided to retire! How’s that for news? Now before you cry too hard, there’s some good news to go along with this. I’ve found an excellent doctor to continue your care. Dr. Terry Smith.

I’ve been thinking about this change for a while now. After twenty-five years of service, I’m feeling the need for some rest, relaxation and rejuvenation. I also want you to keep getting the same caring treatment you’ve always received here at Jones Chiropractic. With this in mind, we’ve looked far and wide and interviewed quite a few Doctors and when we finally found Dr. Smith, we knew we had the right Doc for you!

Dr. Smith immediately moved his wife and two children from Denver down here to Phoenix. They are thrilled to be involved in the community. Dr. Smith may even be your child’s soccer coach!

We’re very excited for all of you to meet him/her and his/her family and we want an opportunity to see you all again, so we’re throwing a big party next Saturday, January 10th from 11a.m. to 2 p.m. at our office. There’ll be food, music and lots of good cheer.

And me? I’ll start taking that time out for rest, some travel and giving more of my attention to my family. In the next few weeks I’ll be working along with Dr. Smith introducing him/her to all of you. Some of you have already had appointments and have met him/her in the office. The response has been overwhelmingly enthusiastic.

I want you to know what a privilege it’s been to work with each of you. You’ve put you trust in me and we’ve worked together to allow natural healing to occur. You’ve sent your family and friends and let me into your lives, showing me such kindness. Whether we were successful in assisting you to overcome a heath problem or helping you maintain good health, I always felt like we were a team. I want this same teamwork of healing to continue and I feel confident that you’ll love Dr. Smith.

Sincerely,