How to Sell a Medical Practice: A Guide for Physicians

Selling a medical practice is fundamentally different from selling most other businesses. Between regulatory complexity, payer contracts, credentialing, and the deeply personal nature of patient relationships, physicians face a unique set of challenges when it's time to exit.

Here's what you need to know.

What Is My Medical Practice Worth?

Medical practice valuations depend heavily on specialty, payer mix, and whether the practice is provider-dependent or has built institutional value.

General ranges:

• Primary care: 0.5x–0.8x revenue or 2x–3x SDE
• Specialty practices (dermatology, orthopedics, ophthalmology): 1x–2x revenue or 3x–6x EBITDA
• High-demand specialties (GI, pain management, cardiology): Can command premium multiples, especially from PE-backed platforms

The most important factor in medical practice valuation is transferability. If patients see you specifically and won't stay with a new provider, your practice value drops significantly. Practices with multiple providers, strong mid-level support, and brand loyalty (vs. physician loyalty) command the highest prices.

Who Buys Medical Practices?

Private Equity (MSO Model)

PE firms have been the most active buyers in healthcare over the past decade. They typically acquire practices through a Management Services Organization (MSO) structure — buying the non-clinical business assets while the physician remains a clinical employee. This structure preserves the corporate practice of medicine doctrine that exists in most states, including California.

PE-backed platforms are especially active in: dermatology, ophthalmology, dental, GI, orthopedics, pain management, and veterinary.

Hospital Systems and Health Networks

Hospitals acquire practices to build referral networks and secure patient volume. These deals often involve employment agreements with guaranteed compensation for 2-3 years post-close.

Physician Buyers

Individual physicians looking to acquire an existing practice rather than start from scratch. Often funded by SBA loans or practice-specific lending.

Group Practices

Larger group practices acquiring smaller ones to expand geographically or add subspecialties.

Key Considerations for Medical Practice Sales

Payer Contracts

Your payer contracts — Medicare, Medicaid, and commercial insurance agreements — are among your most valuable assets. Buyers need to understand your payer mix, reimbursement rates, and whether contracts are transferable. Some payer contracts require re-credentialing upon change of ownership, which can create revenue gaps.

Credentialing and Licensing

The new owner (or their employed physicians) must be credentialed with all relevant payers before they can bill. Credentialing can take 90-180 days, so planning for this transition is critical.

Stark Law and Anti-Kickback Considerations

The structure of your deal must comply with federal self-referral (Stark) and anti-kickback laws. This is especially important in deals involving referral relationships, ancillary services, or hospital affiliations. Healthcare M&A counsel is essential.

Patient Transition

Your patients need to be notified of the ownership change, and in many states, they have the right to access their medical records and choose a different provider. A thoughtful patient transition plan reduces attrition and protects the practice's value.

Real Estate

Many physicians own the building their practice operates from. Real estate can be sold with the practice, held separately with a lease to the buyer, or sold to a third party. Each option has different tax and financial implications.

Non-Compete Agreements

Buyers will almost always require a non-compete agreement. In California, non-competes in the employment context are generally unenforceable — but non-competes tied to the sale of a business are an exception under California Business and Professions Code § 16601. Expect a 3-5 year non-compete within a defined geographic radius.

Deal Structures in Medical Practice Sales

Asset Sale vs. Stock Sale

Most medical practice sales are structured as asset sales, where the buyer acquires specific assets (equipment, patient records, payer contracts, goodwill) rather than the legal entity. Asset sales are cleaner for buyers and allow for a step-up in basis for depreciation.

Earnouts

It's common for a portion of the purchase price to be tied to post-closing performance — typically 1-2 years of revenue or EBITDA targets. Earnouts help bridge valuation gaps and align incentives during the transition period.

Employment Agreements

In most practice sales, the selling physician stays on for a transition period (1-3 years) under an employment agreement. The terms of this agreement — compensation, schedule, autonomy — are often as important as the purchase price itself.

How to Maximize Your Practice Value

1. Build a multi-provider practice. Solo practices are the hardest to sell. Adding associate physicians or mid-level providers dramatically increases transferability and value.

1. Diversify your payer mix. Heavy dependence on a single payer (especially Medicare/Medicaid) adds risk. A balanced mix of commercial and government payers is more attractive.

1. Invest in systems and processes. Modern EHR, practice management software, documented clinical workflows, and trained administrative staff all reduce buyer risk.

1. Grow revenue consistently. Flat or declining revenue is a deal killer. Even modest growth (5-10% annually) signals a healthy practice.

1. Reduce your personal involvement. If you're the only physician, work toward building a practice that can operate with associate providers handling a meaningful share of patient volume.

The Timeline

Medical practice sales typically take 9 to 18 months from engagement to close — longer than most business sales due to credentialing, regulatory review, and payer contract transitions. Starting the planning process early gives you time to maximize value and avoid rushed decisions.

Talk to Someone Who Understands Healthcare M&A

Selling a medical practice is high-stakes and highly specialized. If you're a physician in California thinking about your exit, I'd welcome a confidential conversation about your options. Schedule a free call.