Buying a Cardiology Practice

[beth928]

Complete_newbie wrote:

Good to know you are still negotiating. Play hardball and I’m sure you can close this.

People discount the fact that it is hard and a slow process to build a practice. At a 500k premium you get plug and play immediate cash flow. Can’t beat that. Mostly I am encouraging this because no one talks about this , it’s all about run run run save save and worry about withdrawal rates. In reality this could be a great small business move for you that very few physicians now a willing to risk. And this seems lol reasonable risk. Typing on phone but quick thinking about 500k loan at 8% 5 yr amortize is 10k (?) Per month with 425k net your still make 25k.

Working as employee to PP is a sucker game. Its academic or solo PP in this age (my opinion).

Click to expand...

I spent 535k to open new.  Initially was 6.5% for 12 years and then refinanced to 4.5%.  I am paying it off early and will have the loan done at about 8 years after initially taking it out.  Depending on how the practice purchase is made, the refi and early payoff may not be available if the loan is from the current owner. He/she may also not give as favorable terms as the bank.

It certainly is hard to build.  It was not especially slow, though.  Within 18 months of opening, I was at full capacity and where I want things to be.  As a matter or fact, I started decreasing insurance participation at 2 years in order to decrease the amount of work I had.  The key is to choose where you open wisely.

The choice to open new or to purchase is going to come down to a difference in philosophy.  You can either start with an empty cup and work towards filling it. Or you can start with a 3/4 full cup and initially work to keep it from emptying further.  Then you can start the work involved to fill it more.  Don't discount the initial decline that will likely occur when taking over for someone else.  Don't discount that you do not have new equipment, furniture, etc.  You will be looking to replace them sooner than if you had started from new.  In the long run, it might turn out to be more money to purchase than to open new.

I totally agree that the way to go is solo practice if you have decided academic is not for you.  Do not work for someone else for more than a short term, temporary gig.

[q-school]

but the last survey had 80%ish cardiologists in the employed model.  almost unheard of to be in solo practice.

perhaps there are some differences in the field?

 

[Complete_newbie]

beth928 wrote:

Complete_newbie wrote:

Good to know you are still negotiating. Play hardball and I’m sure you can close this.

People discount the fact that it is hard and a slow process to build a practice. At a 500k premium you get plug and play immediate cash flow. Can’t beat that. Mostly I am encouraging this because no one talks about this , it’s all about run run run save save and worry about withdrawal rates. In reality this could be a great small business move for you that very few physicians now a willing to risk. And this seems lol reasonable risk. Typing on phone but quick thinking about 500k loan at 8% 5 yr amortize is 10k (?) Per month with 425k net your still make 25k.

Working as employee to PP is a sucker game. Its academic or solo PP in this age (my opinion).

Click to expand…

I spent 535k to open new.  Initially was 6.5% for 12 years and then refinanced to 4.5%.  I am paying it off early and will have the loan done at about 8 years after initially taking it out.  Depending on how the practice purchase is made, the refi and early payoff may not be available if the loan is from the current owner. He/she may also not give as favorable terms as the bank.

It certainly is hard to build.  It was not especially slow, though.  Within 18 months of opening, I was at full capacity and where I want things to be.  As a matter or fact, I started decreasing insurance participation at 2 years in order to decrease the amount of work I had.  The key is to choose where you open wisely.

The choice to open new or to purchase is going to come down to a difference in philosophy.  You can either start with an empty cup and work towards filling it. Or you can start with a 3/4 full cup and initially work to keep it from emptying further.  Then you can start the work involved to fill it more.  Don’t discount the initial decline that will likely occur when taking over for someone else.  Don’t discount that you do not have new equipment, furniture, etc.  You will be looking to replace them sooner than if you had started from new.  In the long run, it might turn out to be more money to purchase than to open new.

I totally agree that the way to go is solo practice if you have decided academic is not for you.  Do not work for someone else for more than a short term, temporary gig.

Click to expand...

Those loan terms are much better than I quoted which were shorter term and higher interest, he was still coming out ahead. If he can get your numbers then even better.

Again, roughly (im on my phne) he's laon servicing at 10K a month so his practice numbers need to decline by 75% to break even. Doubtful. If he takes 2 yrs to be at capacity, at current numbers he has already made 800k+ in net money here just by buying this practice (you can say atleast 400K more if your startup is generating 150+250K each year initially). That just made up for purchase price but you slept better at night on a running business.

True regarding practice building but IMHO buying business at reasonable price (not cheap but fair to slightly expensive) >> startig new.

[beth928]

Complete_newbie wrote:

beth928 wrote:

Complete_newbie wrote:

Good to know you are still negotiating. Play hardball and I’m sure you can close this.

People discount the fact that it is hard and a slow process to build a practice. At a 500k premium you get plug and play immediate cash flow. Can’t beat that. Mostly I am encouraging this because no one talks about this , it’s all about run run run save save and worry about withdrawal rates. In reality this could be a great small business move for you that very few physicians now a willing to risk. And this seems lol reasonable risk. Typing on phone but quick thinking about 500k loan at 8% 5 yr amortize is 10k (?) Per month with 425k net your still make 25k.

Working as employee to PP is a sucker game. Its academic or solo PP in this age (my opinion).

Click to expand…

I spent 535k to open new.  Initially was 6.5% for 12 years and then refinanced to 4.5%.  I am paying it off early and will have the loan done at about 8 years after initially taking it out.  Depending on how the practice purchase is made, the refi and early payoff may not be available if the loan is from the current owner. He/she may also not give as favorable terms as the bank.

It certainly is hard to build.  It was not especially slow, though.  Within 18 months of opening, I was at full capacity and where I want things to be.  As a matter or fact, I started decreasing insurance participation at 2 years in order to decrease the amount of work I had.  The key is to choose where you open wisely.

The choice to open new or to purchase is going to come down to a difference in philosophy.  You can either start with an empty cup and work towards filling it. Or you can start with a 3/4 full cup and initially work to keep it from emptying further.  Then you can start the work involved to fill it more.  Don’t discount the initial decline that will likely occur when taking over for someone else.  Don’t discount that you do not have new equipment, furniture, etc.  You will be looking to replace them sooner than if you had started from new.  In the long run, it might turn out to be more money to purchase than to open new.

I totally agree that the way to go is solo practice if you have decided academic is not for you.  Do not work for someone else for more than a short term, temporary gig.

Click to expand…

Those loan terms are much better than I quoted which were shorter term and higher interest, he was still coming out ahead. If he can get your numbers then even better.

Again, roughly (im on my phne) he’s laon servicing at 10K a month so his practice numbers need to decline by 75% to break even. Doubtful. If he takes 2 yrs to be at capacity, at current numbers he has already made 800k+ in net money here just by buying this practice (you can say atleast 400K more if your startup is generating 150+250K each year initially). That just made up for purchase price but you slept better at night on a running business.

True regarding practice building but IMHO buying business at reasonable price (not cheap but fair to slightly expensive) >> startig new.

Click to expand...

I think this is one of those cases where there is no wrong decision.  Both buying the practice and opening your own are good choices.  The main thing is to be your own boss and not to spend your career working to earn someone else money.

 

[Zaphod]

Complete_newbie wrote:

beth928 wrote:

Complete_newbie wrote:

Good to know you are still negotiating. Play hardball and I’m sure you can close this.

People discount the fact that it is hard and a slow process to build a practice. At a 500k premium you get plug and play immediate cash flow. Can’t beat that. Mostly I am encouraging this because no one talks about this , it’s all about run run run save save and worry about withdrawal rates. In reality this could be a great small business move for you that very few physicians now a willing to risk. And this seems lol reasonable risk. Typing on phone but quick thinking about 500k loan at 8% 5 yr amortize is 10k (?) Per month with 425k net your still make 25k.

Working as employee to PP is a sucker game. Its academic or solo PP in this age (my opinion).

Click to expand…

I spent 535k to open new.  Initially was 6.5% for 12 years and then refinanced to 4.5%.  I am paying it off early and will have the loan done at about 8 years after initially taking it out.  Depending on how the practice purchase is made, the refi and early payoff may not be available if the loan is from the current owner. He/she may also not give as favorable terms as the bank.

It certainly is hard to build.  It was not especially slow, though.  Within 18 months of opening, I was at full capacity and where I want things to be.  As a matter or fact, I started decreasing insurance participation at 2 years in order to decrease the amount of work I had.  The key is to choose where you open wisely.

The choice to open new or to purchase is going to come down to a difference in philosophy.  You can either start with an empty cup and work towards filling it. Or you can start with a 3/4 full cup and initially work to keep it from emptying further.  Then you can start the work involved to fill it more.  Don’t discount the initial decline that will likely occur when taking over for someone else.  Don’t discount that you do not have new equipment, furniture, etc.  You will be looking to replace them sooner than if you had started from new.  In the long run, it might turn out to be more money to purchase than to open new.

I totally agree that the way to go is solo practice if you have decided academic is not for you.  Do not work for someone else for more than a short term, temporary gig.

Click to expand…

Those loan terms are much better than I quoted which were shorter term and higher interest, he was still coming out ahead. Again, roughly (im on my phne) he’s laon servicing at 10K a month so his practice numbers need to decline by 75% to break even. Doubtful.

True regarding practice building but IMHO buying business at reasonable price (not cheap but fair to slightly expensive) >> startig new.

Click to expand...

In general. The issue here seems to be a very specific one to cards and int cards. The game is controlled by larger players and revenue streams can lock you out, lots of equipments, etc...There are many specialties that dont rely as heavily on facilities or relationships, this does not seem to be one.

[beth928]

Zaphod wrote:

Complete_newbie wrote:

beth928 wrote:

Complete_newbie wrote:

Good to know you are still negotiating. Play hardball and I’m sure you can close this.

People discount the fact that it is hard and a slow process to build a practice. At a 500k premium you get plug and play immediate cash flow. Can’t beat that. Mostly I am encouraging this because no one talks about this , it’s all about run run run save save and worry about withdrawal rates. In reality this could be a great small business move for you that very few physicians now a willing to risk. And this seems lol reasonable risk. Typing on phone but quick thinking about 500k loan at 8% 5 yr amortize is 10k (?) Per month with 425k net your still make 25k.

Working as employee to PP is a sucker game. Its academic or solo PP in this age (my opinion).

Click to expand…

I spent 535k to open new.  Initially was 6.5% for 12 years and then refinanced to 4.5%.  I am paying it off early and will have the loan done at about 8 years after initially taking it out.  Depending on how the practice purchase is made, the refi and early payoff may not be available if the loan is from the current owner. He/she may also not give as favorable terms as the bank.

It certainly is hard to build.  It was not especially slow, though.  Within 18 months of opening, I was at full capacity and where I want things to be.  As a matter or fact, I started decreasing insurance participation at 2 years in order to decrease the amount of work I had.  The key is to choose where you open wisely.

The choice to open new or to purchase is going to come down to a difference in philosophy.  You can either start with an empty cup and work towards filling it. Or you can start with a 3/4 full cup and initially work to keep it from emptying further.  Then you can start the work involved to fill it more.  Don’t discount the initial decline that will likely occur when taking over for someone else.  Don’t discount that you do not have new equipment, furniture, etc.  You will be looking to replace them sooner than if you had started from new.  In the long run, it might turn out to be more money to purchase than to open new.

I totally agree that the way to go is solo practice if you have decided academic is not for you.  Do not work for someone else for more than a short term, temporary gig.

Click to expand…

Those loan terms are much better than I quoted which were shorter term and higher interest, he was still coming out ahead. Again, roughly (im on my phne) he’s laon servicing at 10K a month so his practice numbers need to decline by 75% to break even. Doubtful.

True regarding practice building but IMHO buying business at reasonable price (not cheap but fair to slightly expensive) >> startig new.

Click to expand…

In general. The issue here seems to be a very specific one to cards and int cards. The game is controlled by larger players and revenue streams can lock you out, lots of equipments, etc…There are many specialties that dont rely as heavily on facilities or relationships, this does not seem to be one.

Click to expand...

That is really too bad.  How about all the orthopedic surgeons who got fed up with their hospitals and went out on their own?  Wasn't there a trend for them to build their own ambulatory centers? Perhaps the cards and interventional cards people could start to do something similar.

Maybe the answer in the short term is to go somewhere where there is a shortage.  If you are the only game in town at least you would be able to dictate better terms.

[SValleyMD]

Some interventional guys are branching out and stand alone or mobile cath labs are starting to pop up more in certain locations (or partnering with 1-3 specialties for a mini hospital) but that business from my experience is nearly all PAD, pacemaker and venous ablations based. Our local ones don’t even do coronaries.

As mentioned above the concept of a single solo private practice cardiologist is as rare as it gets. But I would love to get an update in a few years and wish you luck.

Also the concept of taking over a full practice would give me shivers as well. Nothing I hate more than getting bogged down with annuals, follow ups and the typically high maintenance pts, when New pts drive so much of the business. Obviously it comes down to availability for those news. Can’t even imagine the call burden. Imagine once things are going you’ll get some help with both of those

Good luck

[Complete_newbie]

Zaphod wrote:

Complete_newbie wrote:

beth928 wrote:

Complete_newbie wrote:

Good to know you are still negotiating. Play hardball and I’m sure you can close this.

People discount the fact that it is hard and a slow process to build a practice. At a 500k premium you get plug and play immediate cash flow. Can’t beat that. Mostly I am encouraging this because no one talks about this , it’s all about run run run save save and worry about withdrawal rates. In reality this could be a great small business move for you that very few physicians now a willing to risk. And this seems lol reasonable risk. Typing on phone but quick thinking about 500k loan at 8% 5 yr amortize is 10k (?) Per month with 425k net your still make 25k.

Working as employee to PP is a sucker game. Its academic or solo PP in this age (my opinion).

Click to expand…

I spent 535k to open new.  Initially was 6.5% for 12 years and then refinanced to 4.5%.  I am paying it off early and will have the loan done at about 8 years after initially taking it out.  Depending on how the practice purchase is made, the refi and early payoff may not be available if the loan is from the current owner. He/she may also not give as favorable terms as the bank.

It certainly is hard to build.  It was not especially slow, though.  Within 18 months of opening, I was at full capacity and where I want things to be.  As a matter or fact, I started decreasing insurance participation at 2 years in order to decrease the amount of work I had.  The key is to choose where you open wisely.

The choice to open new or to purchase is going to come down to a difference in philosophy.  You can either start with an empty cup and work towards filling it. Or you can start with a 3/4 full cup and initially work to keep it from emptying further.  Then you can start the work involved to fill it more.  Don’t discount the initial decline that will likely occur when taking over for someone else.  Don’t discount that you do not have new equipment, furniture, etc.  You will be looking to replace them sooner than if you had started from new.  In the long run, it might turn out to be more money to purchase than to open new.

I totally agree that the way to go is solo practice if you have decided academic is not for you.  Do not work for someone else for more than a short term, temporary gig.

Click to expand…

Those loan terms are much better than I quoted which were shorter term and higher interest, he was still coming out ahead. Again, roughly (im on my phne) he’s laon servicing at 10K a month so his practice numbers need to decline by 75% to break even. Doubtful.

True regarding practice building but IMHO buying business at reasonable price (not cheap but fair to slightly expensive) >> startig new.

Click to expand…

In general. The issue here seems to be a very specific one to cards and int cards. The game is controlled by larger players and revenue streams can lock you out, lots of equipments, etc…There are many specialties that dont rely as heavily on facilities or relationships, this does not seem to be one.

Click to expand...

Sure but its every where he goes. In that niche its a good deal. I get that employment et al is low risk, but reading btw the lines he is not happy. This is relatively cheaper price to pay to get immediate patient build. I'd assume atleast 60-70% will still stick (in fact this will fit Pareto rule and he'd get 80% patients).

 

Let us know @kkrm. I;m interested how this goes down.

[beth928]

I, too, am interested in how this works out. I think too many times people let fear and the naysayers hold them back. Sometimes you have to have faith in yourself and the courage to go your own way. Of course, other times you need to listen to reason. In this case, (keeping in mind I know nothing about cards although I do know about opening a new practice against the advice of many), I say go for it!

[Zaphod]

Keeping in mind I know nothing about cards, and having heard from many on here how incredibly difficult it is solo, I'd avoid. There's a difference between thinking you're unhappy and finding out what unhappiness really is. Some situations are obviously never going to net a positive. Have to look at the weight of things and truthfully assess.

If you dont control your revenue streams and can be locked out by hospitals and other practices and can't find other ways to make money, you're setting yourself up for a rough time.

There's a reason he wasn't bought out by anyone. He sounds awful, this is just the superficial layer and it gets worse, like a rotten onion.

The hospital probably doesn't care about you at all, and kn fact may be buddies with the other group and have a fairly simple plan to put you out of business with little effort. That's what anyone on the other side would do in such a winner take all kind of practice environment.

I'd be very skeptical, this could be many years of trouble. Have a plan, with contingencies, real ranges of outcomes, etc...I'm all for going it on your own but sounds like cards is not the best field for this, nor maybe this particular set up. Why here in this town, why not elsewhere? Often people get tunnel vision after starting a chat and try to force something to completion that wont work, easier to find something better from the start.

[beth928]

I agree that this opportunity to buy is not good.  If you don't totally trust the guy then there is no way you should enter a business relationship with him, even if it is transitory.  But that does not mean that the whole idea of solo practice is a bad one.  Expanding the search and seeing what else is available can't hurt.

[G-pathy]

I’m curious how it’s possible to be interventional cards in solo practice. Don’t you need a referral base from other cardiologists to have the appropriate volume of interventions?

[kkrm]

Ryan,

I agree with you. If he does not open his books to me, then I would not risk it. There are 2 major private groups who also work in 3 nearby hospitals (within 10-15minutes drive from his office) The hospitals may decide to start their own group in the future. I already make more as an employed physician than the operating profit, but I want my independence and ability to practice what I want. My current hospital does not want me to do peripherals which I am interested in. I have never considered the possibility of laying off long term employees. Thanks for bringing that up. I don’t want to do that, if I can avoid it.

Beth928,

Thanks for sharing your experiences. I am considering that option too. I like the idea of calling PCP`s before deciding where to start and will do it if I decide to go that route.

More than the furniture, I am more worried about the age of big ticket equipment and I think I will definitely need to replace them sooner rather than later. I love academics but the pay is usually much lower.

I want to be in a major city. Usually shortage in cardiology (or for that matter in any field) is in rural areas.

Complete Newbie, I like the numbers you summarized. I too like the idea of buying better than starting new, but if he does not share his books with me, then I will not buy. Also, I would assume any bank would also ask for the financials of the business before lending any money. I am assuming that at least 60-70% of patients will stay and I intend to start a second office like beth928 mentioned.

q-school, You are right. Most cardiologists are employed, esp by hospitals. It is just because they get higher payments from insurance as hospital based offices.

Zaphod, You are right that it is controlled by large players. I don’t mind large players, I think there will be more difficulty if hospitals have their own groups. The nearby hospitals at least do not have any hospital owned groups in cardiology so far, but that may change any time looking at current trends in general.

I am also looking at starting solo in another city. Should be able to decide which route I take in 6-8 weeks. Will keep you all updated.

SValleyMD, Many cardiologists are starting their own cath labs entirely for PAD. Another alternative is to tie up with existing private labs. There are 2 private cath labs within 30 minutes distance from his office. Almost all cardiologists do not do coronaries in their private labs. (for liability, risk and regulations in most states)

G-pathy, Whether in solo or group  practice, most interventional cardiologists still get most of their referrals from PCPs. When in fellowship, I was told by an attending that a cardiologist needs 10PCPs and an interventionalist needs 3 general cardiologists for referral. I have now realized that it is not always true. Even though my current practice has a large number of general cardiologists, I see that they seldom refer unless the patient is too sick. They are afraid that they may lose their patients to the interventionalist and prefer not to refer at all. 60-70% of my current interventional volume is from being on call, 30-35% is what I generate from my out patients and only 5-10% are from the other cardiologists in the group. In private practice, most interventionalists still do at least 80-90% of general cardiology

[Hatton]

There is one huge hospital group of cardiologists in my city.  I frequently refer to a much smaller non-owned group.  I like that the small group there is more of sense of doctor patient relationship.  In the large group the patients do not seem to know who their cardiologist is.  If I was a heart patient I would want some continuity.

[kkrm]

Update: I was in the middle of negotiations, but another cardiologist bought it for close to asking price as per seller.