Medical Practice Valuation

Medical practice disputes or divorces have consequences for patients and the doctor in the practice group. Both the individual doctors and the practice group as a unit must consider the financial consequences of a business divorce on the medical practice, and how it might affect the patients. Our discussion of the rights and obligations of departing doctors vis a vis patients and versus their medical practice group is here.

As to your rights as a departing doctor, if you are our client, we will want to know if you have been getting your fair share of the income from the practice that is equivalent to what the other partners are receiving, or according to your contractual agreement with the practice group. We will examine your Shareholder Agreement, Partnership Agreement, or an Operating Agreement that may address or control the rights of the respective partners, and what each partner should receive from the dissolution after all debts are paid.

Valuation of the practice as a financial asset is critical. Essentially the same factors must be evaluated in a medical practice divorce as in a personal divorce, because they affect the value of the practice.

• Where is the practice located?
• Has it been profitable?
• Exactly what kind of business entity is the medical practice?
• How long ago was it formed?
• By whom was it initially funded?
• Do the doctors have buy/sell agreements?
• What are the tangible assets (medical equipment, software, computers, office furniture, etc)?
• What are the financial assets (bank accounts, including receivables)
• What are the liabilities (bank or personal loans, credit lines, leases (real estate, cars, equipment, insurance, taxes, retirement contributions, etc)
• Is there any meaningful goodwill (an intangible asset)?

The parties must agree on a valuation and financial settlement or leave it to a court for determination. Sometimes expert witnesses are required if the parties cannot agree.

Other related issues may be whether the practice or its business entity actually owns the practice’s equipment, software, or if these assets are owned by and/or loaned to the practice by one or more of the member doctors individually. In a dissolving medical practice, the doctor members must determine which equipment items will remain with one doctor or a set of doctors, and if so, the other doctor or doctors may be entitled to credit or direct monetary compensation for the equipment value. As to Electronic Health Record (EHR) software, the doctors should determine what future access to patient documentation may required by all or any of the departing doctors, and when such access may be needed. If necessary, the EHR vendor should be consulted to divide patient files into separate accounts, and to facilitate download of patient files from EHR software to assure patient privacy and HIPAA compliance.

The medical practice attorneys at Lubin Austermuehle have over thirty years of experience defending and prosecuting disputes between physicians over ownership disagreements and non-compete covenants and unpaid wages and wide variety of other business dispute lawsuits arising between physicians in the same medical practice. As reflected, the reviews we have received from our physician clients, we are committed to fighting for our clients’ rights at both the trial and appellate court levels in in arbitration proceedings. We have successfully prosecuted cases for physicians that vindicated that positions and resulted in large six figure judgments or settlements. Conveniently located in Chicago and Elmhurst, Illinois, we have successfully medical practice related cases for our physician clients all over the Chicago area. To schedule a consultation with one of our skilled attorneys, you can contact us online or give us a call at 630-333-0333.