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On Items NOT Purchased in the Sale of a Medical Practice

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Excluded – Not Included – Items

By Dr. Charles F. Fenton III JD

fentonMuch is written about the sale of a medical practice: price, taxes, terms, loans, negotiations and FMV etc; especially on this ME-P by Editor Dr. Dave Marcinko and his team. Excellent thoughts, all! But, little is written about items not purchased.

So, here is a different perspective.

Excluded Items

Items not purchased or “excluded items” often list the personal items of the parties – or of the employees of the parties. Such items would often include:

  1. All cash on hand or on deposit;
  2. All accounts receivable generated prior to the closing date;
  3. All prepaid expenses, utility deposits, tax rebates, insurance claims, credits due from suppliers and other allowances after Closing Date;
  4. The personal effects, including but not limited to; photographs, diplomas, uniforms, books, mementos, memorabilia, personally owned art objects and any other personal property owned by them;
  5. Life insurance, disability insurance, and disability buy-out insurance on seller;
  6. Motor vehicles used in connection with the practice;
  7. Any and all tangible and intangible assets used in conjunction with another practice of seller; and
  8. All other assets owned by seller other than those specifically described as items purchased.

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Assessment

The exact items transferred will often depend upon the prior negotiations of the parties.

For example, the parties may have agreed that the accounts receivable will be transferred with the practice. In such an instance, the accounts receivable will be listed as an item to be purchased.

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4 Responses

  1. Interesting Article and POV

    Most of these asserts total only a small portion of the final price. But, as an attorney, the devil is in the details.

    Sharon

    Like

  2. Finding a buyer for your medical practice
    [Tips to close the deal]

    Advertising, and realist pricing can increase the chances of finding a buyer.

    http://medicaleconomics.modernmedicine.com/medical-economics/news/finding-buyer-your-medical-practice-tips-close-deal

    Clyde

    Like

  3. Misrepresentation
    [Worse Case Scenario?]

    Let’s say a physician decided to sell his practice and move to another state. The value of the sale was based, in part, on the yearly gross of the practice. The physician accepted installment payment terms from the buyer and moved to the new state. The buyer began to practice medicine at his new office. Although he was busy, his gross never approached the gross of the prior physician. Eventually the buyer defaulted on the loan. The selling physician sued for the deficit. The defaulting physician performed in-depth evaluation of the seller’s practice. The buyer noticed some discrepancies in the billing patterns and practices of the seller.

    Considering these discrepancies to constitute Medicare and insurance billing fraud, the seller counter-sued the buyer on the grounds of misrepresentation, alleging the gross receipts of the practice purchase price, was grossly inflated.

    Therefore, the buyer determined that the seller had fraudulently misrepresented the potential of the practice. He also notified state and federal authorities and filed complaints of insurance fraud against the seller. The seller thought that he would move to the good life in the new state, but his old practice kept him in constant legal trouble.

    Chuck

    Like

  4. Items Purchased

    Items purchased often lists the tangible and intangible property of the seller which will be transferred to the buyer. Such items often include:

    1. A detailed inventory of the tangible assets to be purchased;
    2. A detailed listing of the inventory of the practice;
    3. The names and addresses of all of the patients of record treated by the seller;
    4. The patient medical records maintained by seller;
    5. The computer records maintained by seller;
    6. All licenses, permits, accreditation and franchises issued by any federal, state, municipal, or quasi-government authority relating to the use, maintenance or operation of the practice, running to or in favor of seller, but only to the extent that they are accepted by buyer;
    7. All of sellers’ right, title, and interest in and to all real estate and equipment leases, if any, services agreements, employment and professional service contracts relating to the practice but only to the extent that the foregoing are accepted by buyer;
    8. Assignment of lease should be attached and be incorporated to the agreement;
    9. All existing telephone numbers used in connection with the operation of the practice and all yellow page advertising of the practice; and
    10. The goodwill of the practice, which includes seller’s assistance and cooperation in transfer of all sellers’ rights and interests in the practice to buyer and any other intangible assets of the practice not listed in any other category.

    Certain items purchased, such as [paper or electronic] medical records, governmental licenses, fax, email, website and telephone numbers have special considerations as discussed below.

    Dr. Charles Fenton JD
    via Ann Miller RN MHA

    Like

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