Physician Buy-Sell Agreements

Posted on June 14, 2008 by Dr. David Edward Marcinko MBA

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A Details Checklist

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All medical practice and other business agreements that dictate what happens to a physician’s property should be addressed in a document called a “buy-sell agreement.”  

Definition 

A buy-sell agreement stipulates what would happen to your medical practice should you die, become disabled, leave, or wish to retire. The agreement states that your partner or partners will buy your interest upon your death and stipulates that your estate will sell your interest. It is a binding agreement to both parties. 

Its’ structure with differing model types, has been addressed in the Executive-Post previously, by Lawrence E. Howes CFP™ and Joel B. Javer; CFP™. 

Link: https://healthcarefinancials.wordpress.com/2008/02/06/medical-practice-buy-sell-agreements

But now, the following check-list is submitted for consideration, as this very personal document is created after reviewing the following issues, and more: 

Checklist:

A buy-sell agreement should address at least the following events:

  • Death of doctor,
  • Disability of doctor,
  • Retirement of doctor,
  • Voluntary or involuntary termination of doctor,
  • Number of disability-months required for physician to give up ownership in the practice,
  • Age requirements to retire from the group (for example, to qualify for retirement, a physician must be at least 62 years old; otherwise the withdrawal is considered voluntary),
  • In the case of a voluntary withdrawal, agreement specifies how much notice is required,
  • In the case of a voluntary withdrawal, agreement specifies whether there will be penalties to the buy-out price if the owner forms a competing practice, joins a competing practice, or violates the employment contract,
  • In the case of an involuntary withdrawal, agreement specifies how much notice is required,
  • Agreement specifies the required vote to admit a new physician into the group,
  • Reasonableness of the buy-out price of an ownership interest has been reviewed,
  • If the buy-out price is to be based on an appraised value, the qualifications of the appraiser have been assessed,
  • Agreement specifies, based on the current practice environment, whether goodwill should be paid to a departing owner,
  • The manner in which the buy-out price will be paid has been established and reviewed,
  • The tax consequences of the buy-out provisions have been reviewed,
  • The buy-out amount has been calculated for each owner using the current formula in the agreement,
  • Each owner has reviewed the calculations,
  • All parties agree to the reasonableness of the buy-out amounts.

Assessment

What else should or could be included in the above checklist; please comment and opine?

Conclusion

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