LMS President’s Message: Retirement is Not a Date, It is a Transition
By Khalil Rahman, MD, MBA
During the pandemic we realized that the life is short. We need time for ourselves and for our loved ones. Retirement, for some of us, is around the corner. We plan our retirement for a long time. Some were rushed into retirement due to a number of factors over the last decade such as EMR (Electronic Medical records), ever rising overhead expenses, high labor costs, and decreased revenues due to lower payments by insurance companies and Medicare. When COVID 19 hit us, there was a mass exodus of health care providers with a speed unknown to us before this time. Physicians in the past used to work until they died. Those days are gone, we must plan retirement. A retirement never happens on a fixed date. Think of retirement as not a date but a phased transition over time.
Physicians in private medical practices need to explore their retirement options in advance. You may want to sell your health care business before retiring or hire a future partner to pass over the services you have provided for a long time to your patients. If you plan to sell your practice, a physician should know its value or worth. You can calculate the value by calculating the assets, earning potential, and recent sale prices of similar practices in your area over the last 5-10 years. Consider hiring a healthcare broker to assess your medical practice value and negotiation with buyers.
Most satisfying to any physician is to see their patients in good hands after their retirement. The best advice is to hire another physician, most likely a future partner or partners, who will buy you out at your retirement. After hiring a new physician, a contract must be made on how to hand over the practice. By hiring a physician as an employee gives you enough time to clear you mind that you have the right person to care for your patients. You must be willing to slowly hand over the reins to the newcomer. This also gives time for the new physician to get prepared for the transition. The calculation for evaluation of the practice must be in a written contract from the start. This should contain a value of accounts receivables, fixed assets, and goodwill.
Some physicians find it difficult after a full retirement. My advice is to phase into your retirement. One way is to transition from running the practice to being an employee of the practice. This will require you to be prepare mentally as you are no longer in charge of the practice you helped build. This phase out period, agreed upon by you and your new employer, can occur over a number of years. During this transition period, a physician can enjoy both leisure time and work without hassle of running the medical clinic.
Another option can be to merge with another business. This merger could be another privately owned medical clinic, a hospital, or health care venture group. A merger can improve the patient experience and increase innovation. A merger with a multi-specialty privately owned group has some benefits. A merger takes away a lot of daily decision-making headaches, the cost is spread among many people, and the risk is markedly decreased. The con is the loss of control. If you are willing to step back and believe in the system, you will be at ease. Sell or merge your practice a few years before your retirement date because it gives you more leverage in contract negotiations.
In conclusion, if you are planning to retire in a few years, start the planning process now so you can enjoy a graceful departure, on your terms, with peace of mind.
Khalil Rahman, MD, MBA.