Selling a Medical Practice

Key Takeaways

• Buyers assess sustainable practice earnings, practitioner arrangements, staff stability and the lease. Gross practitioner billings alone do not establish practice value.

• Goodwill is discounted where it depends on the owner-doctor. Spreading patient loyalty across the team can lift value.

• Review practitioner and service agreements before marketing, including assignment, consent and termination provisions.

• Tax, Medicare, privacy and accreditation requirements need advice relevant to the practice and sale structure.

• A structured handover with the outgoing doctor helps keep patients and billings in place after settlement.

Selling a medical practice involves its earnings, people and continuity of care. Buyers need to understand which income and operating arrangements will continue after ownership changes.

Clear agreements, reliable accounts and a planned transition make that assessment easier.

Potential purchasers may include existing practice operators, doctors and investor groups. Their requirements will depend on the practice model and proposed transaction.

What Buyers Look For

Prepare information on these areas:

• Patient base, including size, demographics, how many are active and whether they are loyal to the practice or to one doctor.

• Billings, including gross billings by practitioner, the billing model (bulk, mixed or private) and the trend over the past three years.

• Practitioner contracts, including how many doctors, how long they have been there and whether their agreements survive a sale.

• Staff, including an experienced practice manager and nursing team who will stay on.

• Systems, including practice management software, recall systems, clinical governance and documented procedures.

• Accreditation, including current general practice accreditation and a clean compliance history.

• Lease, including term remaining, options, rent relative to billings and the landlord’s willingness to assign.

How Medical Practices Are Valued

Maintainable practice earnings are an important valuation consideration, alongside assets, agreements and transaction evidence. The value attributed to goodwill, fit-out and specialised equipment varies by practice.

Goodwill and the Contractor Model

In the common contractor model, the practice entity does not employ the doctors. It provides rooms, staff, systems and administration, and charges each practitioner a service fee, typically a percentage of their billings.

The practice’s earnings are that service fee income less operating costs. Buyers value the practice on those earnings, so the number of consulting doctors, their billing levels and the service fee percentage drive the price directly.

Owner-Doctor Dependence

Where the owner generates a large share of total billings, a buyer may discount the goodwill, because that revenue may leave with the owner. The lower the owner’s personal contribution, the more transferable the goodwill and usually the higher the multiple.

Billing Model and Mix

Bulk-billed, mixed and private billing models produce different earnings profiles. The mix affects revenue per consultation and how exposed the practice is to changes in Medicare rebates and incentives, so buyers usually read the trend in billing mix alongside total billings.

Preparing the Practice for Sale

Allow time to prepare the information and resolve material issues before listing. Priorities include:

Financials

Buyers usually expect three to five years of financial statements, Business Activity Statement (BAS) lodgements and billing reports from the practice software. Reconciling the practice management data to the accounts matters, because any gap between the two is likely to surface in due diligence.

Separate owner-related costs from operating costs so the add-backs are clear. A free business appraisal at this stage can give a realistic price range and show which numbers need work before the practice goes to market.

Practitioner Agreements

Every practitioner should be on a current, signed service agreement that sets out the fee, term, notice periods and restraints, and it helps to know whether it can be assigned or must be re-signed at settlement. Verbal or expired agreements can stall a medical practice sale.

Compliance

Confirm accreditation is current and gather the evidence, including policies, infection control records, staff training and incident registers. Buyers also check registrations, insurances and any complaints history.

Keeping the Sale Confidential

Plan how and when the sale is communicated to staff, practitioners and patients. Uncertainty can affect continuity, so confidentiality needs to be balanced with contractual and legal obligations.

Use controlled information sharing, qualify buyers and arrange suitable confidentiality agreements. These agreements do not by themselves authorise the disclosure of identifiable patient information. Use de-identified information for initial assessments and seek privacy advice before releasing sensitive records.

Regulatory and Contractual Points

Medical practice sales carry more moving parts than a standard business sale. The main ones to plan for are:

• Lease assignment: which usually needs the landlord’s consent, with enough term and options remaining to protect the buyer’s investment.

• Medicare arrangements: confirm provider numbers, practice registrations and any notifications or new applications with Services Australia and advisers before settlement.

• Payroll tax: Queensland has exempted wages paid by a medical practice to general practitioners since 1 December 2024 under the general practitioner exemption, though payments to specialists and allied health practitioners can still be caught by the contractor rules.

• Patient records: obtain advice on lawful custody, access, disclosure, retention and patient communication. Do not assume that records can simply be transferred with the business assets.

• Restraints: have a solicitor assess any proposed restriction on the vendor or practitioners, including its scope and enforceability.

• Staff entitlements: confirm which employees will transfer and the treatment of service, leave, notice and other obligations. A purchase-price adjustment alone does not determine employees’ legal entitlements.

Rules differ between states and can change, so this list is a general guide. These points affect price, structure and tax. Many owners bring in an accountant and solicitor with medical practice experience before listing, so the sale structure and any small business capital gains tax concessions can be considered while there is still time to act.

Transition and Patient Continuity

Agree a transition that supports patient care and continuity of the practice. Where the outgoing owner will continue consulting, document the role and expectations.

Set the duration, hours, fees and exit arrangements to suit the practice. Do not assume a standard handover period will work for every sale.

Patient communication should accurately explain any changes to care, ownership and records management, following advice on the practice’s privacy obligations.

Staff usually take the news better from the owner directly, with clear information on their roles and entitlements. A stable team is one of the strongest reassurances a buyer can have.

Prepare for the Transition

Reliable records and clear agreements help both parties understand what is being sold. Resolve the material clinical, contractual and privacy questions before finalising the handover.

If you are weighing up selling a medical practice on the Gold Coast, the team at Bond Business Brokers can talk you through where your practice sits today.

Common Questions

Are patient billings the practice’s revenue?

Not necessarily. In a service-fee model, practitioner billings and the income retained by the practice are different. Reconcile the contractual arrangements and accounts before assessing earnings.

Can patient files be included in buyer due diligence?

Do not release identifiable patient information simply because a buyer has signed a confidentiality agreement. Obtain privacy advice and use de-identified information where suitable.

Does the owner need to keep consulting after sale?

That depends on the agreed transaction. Document any continuing role, hours, fees and end date, including how patient care and practitioner relationships will be supported.

This article provides general information only. Obtain advice from appropriately qualified advisers about your circumstances before entering into a transaction or relying on tax, legal or regulatory information.