DOGRA CPA LLC

Stepping In and Moving Out of Practice:

What Physicians Should Expect

Stepping in and Moving Out of Practice
Stepping in and Moving Out of Practice

Whenit comes to entering or leaving a practice that comprises of more than one physician, there are many choices that need to be made regarding theoverall financial aspects of this decision. Of course, whenever a physician enters practice, a financial agreement is drafted prior to theinitiation of that practice.

However,the particulars of entering and leaving a practice may not be mentionedin a written deed therefore, drafting an agreement that’s thorough and excessively detailed becomes an imperative task in this scenario.

A Physician’s Entrance
A few points to consider prior to the entrance of a physician within a practice are given below.

Status of beginning
Beforea physician initiates his or her practice, the status of employment should be clearly mentioned within an agreement i.e. whether the physician will begin as an employee or be directly interested in ownership.

Potential Status
Considerations should be made on the matter of attaining status of ownership by the physician within the practice.

Buying-in
Thoughtshould also be given to the physician’s ability of buying-in within thepractice. The allocation of existing receivables for example, may carryon for the purpose of compensation provided to the present owners. Thisprovides the physician with an opportunity to buy into the practice at alower cost.

Background of the Physician
Runninga background check on the physician will provide you with further information on his or her suitability for being accepted in the practice. And, for running a background check, an approval should be given by the physician.

A Physician’s Exit
For the exit of a physician from practice, the following factors are needed to be taken into account.

Evaluation of Dues
Collectionof the net receivables upon a physician’s exit is determined by factorslike the cost of assortment, expected period of collection, and bad debts. These receivables are effective as of the exit date.

Allotment of Receivables to an Exiting Physician
Theprovision of receivables should be taken into account whilst the physician leaves. A few possible methods of allocation are unambiguous identification, charges (percentage) taking place within a given period of time, stock ownership on a pro rata basis, etc.

Evaluation of Additional Assets
Fairthought must also be given to the market value of resources which is either based on the book value or the reasonable market value that’s been evaluated on the exit date. Recognition of any goodwill upon exit should be taken into account.

Settlement Method
Thedecision may comprise of compensation, interest liquidation partnershipor stock redemption, or a combination of both. Consequences like incometax and payment methods should also be kept into account.

Plans for Pension plus Profit-sharing
Factors regarding the physician’s outlook on retirement plans, if any, should also be considered.

Buy/Sell Arrangements
Agreementsdetailing the buy/sell arrangements for a physician must be specific and thoroughly studied by the attorney before any signing takes place. This agreement will also determine the physician’s ownership status uponexit. A buy/sell agreement benefits the physician who can find ready purchases whence he or she decides to exit the practice and there’s no need to search for new patients and practitioners as contacts with people working in various fields will already be made.

Studyingthe essentials of moving in and out of a practice can greatly benefit the physician as he or she will know exactly what to expect and do at the right moment.