DPC sale price

(Richard R. Samuel, MD ) #1

I am planning on retiring, and would like to put North Idaho Direct Primary Care up for sale to an interested family physician. I am working with a friend who is a recognized expert on the sale and purchase of medical practices, and he needs data on what the current market sale prices are for full member DPC practices nationally. If any of my Hint colleagues have experience in selling their DPC practice, or know someone that can help me come up with an appropriate sale price, please email me. Thanks…RRS

(Christopher Habig) #2

The good news is that DPC practices are similar to other industries with recurring revenue. You probably won’t have much luck with typical medical practice sales models as the doctor is the only value. DPC puts the value on the book of business, depending on your cash flows. Very easy to value by looking at historical cash flows, applying a growth rate for future years and then discounting the projections for present value.

For example, using an APV model, and assuming a few things on interest and borrowing rates, a business that has generated a net income of $100,000 for the past 10 years and can project 2% growth in the future has a value of about $1.3 mm. With a future growth rate of 6%, you’re looking at a little over $2 mm according to some models.

If you don’t have profits or you take them out of the business, use total revenues instead or EBITDA if you have interest or depreciation expenses.

Lots of variables involved, especially dealing with patient relationships. Lots of good info and models and spreadsheets available online.

(Richard R. Samuel, MD ) #3

Christopher…interesting perspective on calculating value. I was focused on finding successful sales prices of comparable DPC practices to come up with an appropriate market value, much like pricing a home in a real estate market. I will share you thoughts with my adviser…RRS

(Bruce Jung) #4

Christopher’s information is fine, however, there are so many other variables to consider that the value of the practice is probably much less than what he has indicated. For instance, how many people want to move to Idaho? How many people are willing to take a chance with maintaining the clients you already have in your DPC practice? DPC is a relatively new model for Health Care delivery in the United States. How many family physicians are willing to take a chance on it? Also, how much competition with Direct Primary Care is in your community? From my lunch conversation with Dr. Sartori last week, I understand there may be two other similar practices in your area? (We are friends and prior clients of Ken H.) If someone wanted to buy my direct primary care practice, I would be happy to get out of the sale the original investment (money borrowed) that I put into it. Happy to talk with you in person.

(Richard R. Samuel, MD ) #5

Thanks for your input. I agree that there are a lot of variables in coming up with an appropriate sale price. This is largely uncharted territory in our nascent movement. I ultimately want to employ and mentor a family physician who is interested in the direct care model, providing him/her with a competitive salary, and then selling the practice for an appropriate, agree-upon price. This transition would allow me to introduce the new physician to patients, increasing the retention rate. My main goal is continuity of patient care…RRS

(Robin Dickinson) #6

No advice but congrats on your retirement. I don’t think you’ll find a lot of historical DPC sales however DPC is gradually gaining ground so hopefully this is a good time to sell!

Best wishes!

(Christopher Habig) #7

Perfect, this is exactly what we advise to other DPC physicians. Use an “apprenticeship” program, physicians fresh out of residency are very excited about DPC, they know they don’t have the experience to set up their own practice and provide the excellence in standard of care. They also know they don’t want to work for big box medicine. Can be a great win-win.