Why I Sold

It’s all about the timing.

Where you are today is not where you were 10 years ago, and it is not where you will be 10 years from now. Your goals, vision, and passions change, as well as your health, family, and economics. Circumstances are unique, and what may be a great deal for you may not be for another. When making pivot-point decisions in life, it has to be from your perspective, not that of a best friend, professor, or mentor.

For me, after 22 years in practice and at 55 years of age, it made sense to sell. But would it have made sense 10 years ago? That is hard to say, as multiple issues arise in anyone’s life, and each must decide based on the current environment and the best information at the time. Last year was a banner year for my practice; my practice value was at a high, my office space lease of 20 years was expiring, and my building (the Water Tower, once the crowning jewel of Chicago’s Magnificent Mile) went into bankruptcy. A new office space requires a 10-year commitment and an $11-million-dollar personal guarantee. And this is all set against a predicted recession.

But perhaps the most compelling reason for wanting to enter a new phase of practice, was that I was being pulled away from what I love: taking care of patients, operating, and creating. The increasing burdens of managing labor, HR, and the current regulatory environment have swelled over the past 20 years. Meeting the demands of a young staff as well as navigating city, county, and state regulatory agencies was consuming a disproportionate amount of time and energy. And while it can be fun and energizing to nurture a team, speaking as someone with the experience of mentoring more than 500 employees—many of whom have gone on to exemplary careers—it can also be quite taxing. However, in today’s workplace culture, the needs of a current generation are probably better served by professionals who can devote standardized full-time resources. Other issues that were part of my decision were the escalating costs of goods, vendor services, and employee benefit packages, all of which were becoming cost prohibitive as a solo practitioner. Personally, after two decades in practice, and in a long-distance relationship, I started to wonder about an exit strategy. As much as I love operating, I also enjoy writing, teaching, and other passions. And I wasn’t getting any younger. Each year, the risk of a disabling injury compounds. Partnering or selling to a large platform allows for economy of scale; it sets a pathway forward and offers a hedge against potential setbacks.

But I am not the only one who thinks like this. Nearly 70% of doctors today are now employed by hospital systems, private equity, or health insurers.¹ This is a far cry from the 30% when I went into practice 20 years ago. Recent surveys reveal future generations of physicians may not be so interested in running their own practices. An Epocrates survey of more than 1,000 US medical students revealed that 75% plan to join group practices or hospitals. In contrast, just 10% were planning to go into solo or partnership practices.²

Being captain of your own ship may still be the perfect option for the highly motivated and driven physician who has a realistic assessment of the commitment and sacrifices required. Yes, it means you call all the shots, but it also likely means time away from family, friends, and other enjoyable activities. My first 10 years in practice, I missed a lot of soccer games, dance recitals, and barbecues because I was tending to patients and/or office issues. Today’s generation, seemingly smarter than my generation, is less enthusiastic to sacrifice personal time, and the financial promise for a solo practitioner today is probably not what it was a generation ago. For those who are dead set on being a solo practitioner, I would recommend finding a devoted, loyal businessperson and or family member with a vested interest in the practice’s well-being to run daily operations. If, however, you are in the majority now considering joining a larger group practice or platform, what is important to know?

For those with a history of practice it is important to get finances in order, and that is not an easy task for many small businesses. Corporate bean counters don’t look at things the same way as private practice physicians. It is important to get an accountant who knows how to best position the practice’s finances for a peek under the hood. Then decide whether to get a broker who can help prepare the practice and its finances and hone down the pitch to potential suitors. For some, a broker can be very helpful, especially for those wanting to delegate the process and the negotiations. Another option is to speak with other solo practitioners and try to put together a small group that can then pitch their combined revenue to a potential suitor. That may work for some. I tried both these routes but couldn’t find the right fit, so I decided to go at it on my own.

The next part is difficult: finding a partner that feels right. Of course, I needed assurance there was a financial upside that was equivalent to or better than what I could do on my own. I needed a tangible exit strategy. And I wanted to be part of something bigger—a group with a vision and a team I could respect yet would also consider my input. I wanted to contribute in a meaningful manner. Many of my first outreaches to platforms didn’t work out. In some cases, my naivety caused me to strike out and in other cases I couldn’t get comfortable with the group’s principles, leaders, and/or direction.

The issues that kept me up at night

The most important consideration for me was maintaining clinical control. I needed the authority and assurances I could do what I thought best for the patient and that my clinical decision making wasn’t going to be dictated. This was non-negotiable for me. Although more relative to non-aesthetic fields, I’ve heard horror stories of discordant interest between platforms and physicians.³ Other critical issues centered around my schedule control. I didn’t want to be sent somewhere geographically undesirable or forced to work more hours than is currently my standard. I also was concerned about how well my staff would be treated. If the deal wasn’t good for them then it wasn’t good for me.

Another issue that weighed heavily on my mind was what happens if the group fails? It is not unheard of. Could I get my practice back or do something in the same location if they folded? Also, what if they sell the whole platform in 5 years to a large consolidator—one that doesn’t sit on its own or have medical practitioner peers on its board—or a new CEO comes in and makes my life miserable? Also, I wanted to be reassured my name and reputation weren’t going to be dragged into a gutter. I was committed to protecting my hard-earned brand. But I also wanted to be part of a prestigious group that was intent on setting the standard in care. So, I wanted a lot and was willing to walk away if my key issues couldn’t be met.

My research processes had me reach out to trusted colleagues, the CEO, and board members within the groups of interest for frank discussions. I also called on other leaders in the industry and asked for their advice. And then I waited until I found the group I liked best. There is always a risk, as nothing is guaranteed regardless, whether I remained on my own or joined a larger platform. I realized there are a lot of smart experienced professionals behind many of these groups. If I could gain confidence that there was mutually aligned interest between me and the group, it then became worth it for me to pursue the next step, negotiating and signing a letter of intent (LOI). At this stage it is important that any key issues be openly discussed, agreed upon, and laid out clearly in writing. If not, they can get lost in next phases of the deal, the arduous and touchy due diligence/legal review period. I suggest relying on lawyers and accountants who specialize in health care mergers and acquisitions (M&A). The contracts are complicated and detailed and far beyond our scope as physicians or those who are not M&A experts. I suggest listening carefully to your advisors, but know what you want and why, and don’t be afraid to challenge or overrule your lawyers if you are certain on an issue. Lastly, money is a big part of this decision, that’s clear. However, being matched with a group that you’ll fit in with is as important if not more so.

I am now 6 months into my new partnership, and I can proudly say I am really happy. I like being part of something bigger. I like that I can rely on those who are better than me at managing HR and regulatory issues. I don’t have to answer every issue from COVID policy to handwashing to OSHA, HIPPA compliance, and more. I am not stuck managing every device contract, warranty, or office spat. I have a team I can rely on for office management, procurement, and vendor relationships. A large part of my decision making was finding a platform that was established and was fully built-out with all these functions. It gives me time to devote to patients as well as other passions in my life, and there is a clear horizon. It works for me. For a younger physician, the right group can offer stability, time to focus on patient care, and an opportunity for professional growth. Plus, not having the back-office burdens will grant precious moments to spend with family and on other passions.

My hunch is that the days of the solo practitioner are not over and fortunately never will be, but it will take a special person with an unmitigated drive plus a willingness constantly to sacrifice time and energy to the health of the practice. Also, as a practice gets bigger, HR, regulatory, and economic issues grow exponentially, and it will be important to find a village of like-minded individuals to support the solo practitioner. I counsel my residents and fellows who have a dream to go off on their own and are resistant to group think to follow their gut. I was that guy 22 years ago. There will be success in your future, I have no doubt. But for others in aesthetic medicine who have concerns regarding a work/life balance and a future that is more assured and are willing to compromise on decision making, then a platform may be in order. Regardless of what direction you pursue, I always suggest being open to a conversation with any interested party. Each time I talked to another group I learned more about my practice’s worth and the intricacies of private equity and group practices. Additionally, stepping outside my comfort zone forced me to question myself and my motives, and in the process, I gained a clearer picture of what I wanted and what is important to me. The value and benefits of that goes far beyond any monetary gain.

1. http://www.physiciansadvocacyinstitute.org/PAI-Research/Physician-Employment-Trends-Specialty-Edition-2019-2021)

2. https://www.mdedge.com/chestphysician/article/89535/practice-management/survey-med-students-disdain-private-practice

3. https://www.nbcnews.com/health/health-care/get-money-dermatologist-says-patient-care-suffered-private-equity-back-rcna9152

4. https://etactics.com/blog/physician-burnout-statistics