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General practice business

Buying in

Author: Amanda Lyons

Becoming part of an established practice can offer a more accessible option for GPs interested in ownership. 

 

Australian general practice was largely a ‘cottage industry’ until late in the 20th century, with most practices owned and run by solo practitioners, or GPs operating as partnerships or groups of associates.1 Since the 1990s, however, general practice has undergone a process of corporatisation1 and only about 25% of Australian GPs are currently principals or partners in their practice.2 

Recent evidence has found that, while many general practice trainees regard ownership with trepidation, many are still interested in the possibility.3 But a lack of training in practice management and the business side of ownership, as well as concerns it would prove a financial burden and have a negative impact on work–life balance, often serve to discourage this interest.3 

Dr Columbine Mullins, GP and sole practice owner, certainly found the concept intimidating early in her career. 

‘When I thought of running my own practice, I thought of the big corporate practices and [ownership] just seemed too unattainable,’ she told Good Practice. ‘I was always interested in it, but for a few years there it seemed like a huge task, especially for myself, who had no real business knowledge or any training.’ 

While the idea of starting a practice from scratch may understandably seem intimidating for many, there is another option: taking over or buying into an already established practice. 

‘In some ways, it’s so much less overwhelming than planning your own practice and figuring out where to go to try to get patients and things like that,’ Dr Mullins said. ‘[Buying an established practice] made it comparatively easy for me to step into.’

 

Benefits of ownership

Terry McMaster, an accountant and solicitor with almost 30 years’ experience working with GPs, believes the advantages of practice ownership are significant. 

‘Owning all or part of a practice is the best investment a GP can make,’ he told

Good Practice. ‘Some non-owners may underestimate the additional profitability and what it compounds to over 30 years of working life. 

‘[At my firm], we are often asked, “What should I do, buy a home or buy into a practice?” My answer has become, “If you buy into a practice, you can buy a home, too. The extra profit from the practice will more than pay for the home.”’ 

Dr Bryan Johnston is a Scottish GP who owned a practice in the UK before migrating to Australia in 2010. After gaining permanent residency, he bought into an established practice in Victoria and has found that ownership offers an increased level of financial stability on a day-to-day basis. 

‘Prior to buying in, when I didn’t work I didn’t get paid,’ he told Good Practice. ‘So when I went off on holiday, for example, there were two or three weeks when I wouldn’t have any income coming in. 

‘[Now] I get income from the practice in addition to what I’m earning as a GP, so there’s more financial certainty.’ 

Purchasing or buying into an established practice also offers a relatively high degree of investment certainty.

‘The bank could see the practice’s accounts and books over the previous two or three years and see that it was a stable and improving enterprise, so it was a no-risk investment,’ Dr Johnston said. ‘I had to take a loan out to buy in, but the bank was more than happy to lend the money.’ 

In addition, practice ownership provides a number of non-financial benefits.

‘It offers control, in the sense that you can actually run a practice that suits your lifestyle,’ McMaster said. 

Dr Mullins has particularly appreciated this aspect of becoming a practice owner. 

‘You can create the atmosphere and the environment that you want to be working in,’ she said. 

Dr Johnston also enjoys the greater depth of involvement offered by practice ownership. 

‘If you’re a partner in the clinic, you are able to get involved with the staff and change systems,’ he said. ‘I find it quite satisfying to be involved in the organisation, rather than just turning up to work, seeing patients and going home again.’

 

Expert advice

McMaster recommends that while most sales of established practices are relatively straightforward, it pays to have an experienced professional on hand to scrutinise the legal and financial details. 

‘Problems can come up,’ he said. ‘For example, if the practice is in leased premises, without adequate due diligence on the leasing contract the GP might find themselves without space at the end of the lease.’ 

In McMaster’s experience, most issues that arise in sales of this type are not of a ‘sinister’ type, in which the vendor is trying to mislead the buyer. 

‘But they are things that may not be obvious to the doctor, and that’s why you need to have a competent commercial lawyer who is experienced in buying and selling businesses,’ he said. 

McMaster advises aspiring GP–owners to, if possible, work in the practice they are thinking of buying before completing a sale. 

‘That is the best due diligence you can do because if you’ve been there you are going to know how busy the practice is,’ he said. ‘You’re going to know what the patients are like, if the place is growing or contracting, whether the founding doctor of the practice is a good or bad doctor, just by being there for a while.’ 

Dr Mullins took this course of action, working at her soon-to-be-new practice for two days a week while developing a plan for a transition of ownership between herself and the original owner. This process allowed her time to learn more about the business side of the practice, but also to familiarise herself with patients. 

‘Getting a whole heap of new patients is actually quite exhausting,’ Dr Mullins said. ‘So that was challenging just as far as the medicine goes, because everyone was new to me and I was having to sift back through everything to find out what [treatments] had been done before and what hadn’t. 

‘Having that lead-up period [before taking ownership] made it a lot easier.’ 

Dr Johnston had worked at his practice for several years before buying in, which also helped to make his decision an easy one. 

‘I knew the personalities in the clinic, I knew how the clinic worked,’ he said. ‘I was aware of the direction the clinic was going, so I was buying into a known entity and not having to set up afresh and hope things would work out.’ 

While it may be tempting to make sweeping changes as a new practice owner, McMaster advises that it is best to approach change carefully. 

‘Even if you don’t agree that the [existing processes represent] best practice, go slowly and cautiously,’ he said. ‘Staff will be on notice, so the whole idea is to reassure them and make any changes slowly.’ 

Dr Mullins appreciated the institutional knowledge provided by the existing staff members when she took over her practice. 

‘Having staff who have worked here for a long time has been fantastic, because they already know how the place works,’ she said. ‘That’s been really useful for me, because I can focus on clinical work a lot more.’ 

Dr Mullins also found that while she would have liked to change some aspects of the practice immediately, it was best to be more reticent. 

‘Where there’s change involved, that’s often hard for anyone,’ Dr Mullins said. ‘As a new boss, I didn’t want to be this person coming in with very limited experience and changing everything. So it’s really about trying to tread carefully and picking your battles. 

‘Certainly, I would have loved to have come in and changed the décor and done all that fun stuff. But I decided early on that the main thing had to be quality patient care; change what’s necessary to improve the quality and then the rest of it can change later.’ 

While the process of taking over an established practice and becoming her own boss has been challenging, Dr Mullins feels all of her efforts have been well worth it. 

‘It has added another element of interest to general practice,’ she said. ‘Even just being a bit more aware of resource allocation and areas like that, it adds another dimension that’s quite interesting. 

‘The practice becomes more special and important to you. I feel a lot more invested in it.’ 

While Dr Johnston acknowledges that practice ownership may not suit everyone, he has found it personally fulfilling. 

‘I just feel I can do more having bought in than otherwise; I feel more involved,’ he said. ‘And that just makes [general practice] a more rounded experience for me.’ 

References

  1. Medicare Financing and Analysis Branch, Department of Health and Ageing. State of corporatisation: A report on the corporatisation of general practices in Australia. Canberra: Department of Health and Ageing, 2012.
  2. Joyce C, McDonald H, Lawlor-Smith L. General practitioners’ perceptions of different practice models: A qualitative study. Aust J Prim Health, 2015;22(5):388–93.
  3. Sturgiss E, Haesler E, Anderson K. General practice trainees face practice ownership with fear. Aust Health Rev, 2016;40(6):661–66.
  4. McMaster’s Solicitors and Consultants. The practice manager’s guide to buying a practice. Melbourne, Victoria: McMaster’s. Available at www.mcmasters.com.au/2016/11/05/guide-to-buying-a-practice [Accessed 17 March 2017].
  5. Liedvogel M, Haesler E, Anderson K. Who will be running your practice in 10 years? Supporting GP registrars’ awareness and knowledge of practice ownership. Aust Fam Physician, 2013;42(5):333–36.