Is 2023 A Good Time To Sell My Medical Practice In California?

January 20, 2023
Health, Sell a Medical Practice

Are you a medical practice owner in California and asking:

“Is it a good time to sell my medical practice in California?”

If you are a physician looking to retire and exit your medical practice ownership in California, you might be wondering if now is a good time to do so.

The market for buying and selling medical practices in California will be particularly favorable for sellers, specifically in certain practice specialties, mainly:

Family Medicine
Internal Medicine
Pediatrics:
Obstetrics and Gynecology:
Dermatology
Cardiology
Surgery
Oncology
Psychiatry
Ophthalmology

Nonetheless, many other physician specialty practices are also popular in California.

California Physician Practice Landscape

The typical physician practice has a single location, 16 employees, and about $3.2 million in annual revenue.

There are over 210,600 physician practices in the US, generating approximately $504 billion in revenue and employing more than 2.5 million staff members.
Over 461,000 physicians are working in office-based practices.
Over 860 million patient visits are made annually to physician practices.
There are two types of physicians: MD (Medical Doctor) and DO (Doctor of Osteopathic Medicine). Both are qualified to perform all types of treatment, including surgery; however, DOs tend to emphasize the body’s musculoskeletal system, preventive medicine, and holistic care.
Education and training requirements for physicians include four years of undergraduate school, four years of medical school, and three to eight years of internship and residency. There are 143 accredited medical schools in the US for MD degrees and 41 accredited schools for DO degrees.
To practice medicine in the US, all physicians must pass either the United States Medical Licensing Exam (USMLE) for MDs or the Comprehensive Osteopathic Medical Licensing Exam (COMLEX) for DOs.

Source – Vertical IQ | NAICS: 621111 SIC: 8011

In California, as in the US, hospitals and health systems are increasingly owning physician practices.

A 2019 study showed that the share of primary care physicians in practices owned by hospitals and health systems increased from 24% to 42% between 2010 and 2018.

A more significant increase was observed among specialists, from 25% to 52%.

An analysis of California health systems using AHRQ’s Comparative Health System Performance database found increasing concentration in the most significant health systems, as shown in Table 1.

In 2018, the 10 largest systems accounted for 46.0% of all physicians in California, up from 30% two years earlier.

Explore the comprehensive study on California’s medical practice landscape, as covered in this report.

Nationally, based on the AMA Benchmark Study results, 49.1% of physicians were in practices wholly owned by physicians in 2020 — down from 60.1% in 2012.

The share of physicians in practices owned at least in part by hospitals increased from 23.4% in 2012 to 30.5% in 2020, while direct hospital employee/contractor relationships rose from 5.6% to 9.3%.

Private equity in California first appeared, accounting for 4.4% of physicians.

Rogerson Business Services has been brokering medical practices in California since 2015. We have sold many practices in various specialties. Most recently, we sold an urgent care medical practice in just 6 months on the market.

Please send an email to support@rogersonbusinessservices.com to obtain the complete list of practices that have been old.

The market is bullish in California, but certain factors can influence this market environment.

Let’s dive in…

5 Medical Practice Sales Outlook

First: Interest Rates Outlook

If you plan to sell your medical practice in 2023, listing it in the first quarter will increase the chances of a quick sale. Buyers, by law, must be licensed physicians in California and are looking to borrow capital while the rates are still attractive.

Interest rates are a significant factor for private equity firms. However, it is not so significant for strategic doctor buyers.

Second: Doctors Remain Bullish On Buying Medical Practices

The most attractive medical practice specialty to physicians’ bucket lists in California is:

Family Medicine
Internal Medicine
Obstetrics and Gynecology
Dermatology
Cardiology
Surgery

However, other practice types may experience a slowdown in demand, especially solo medical practices.

Third: Availability of Equity Capital

Capital is strongly available. Quality medical practices with good housekeeping, such as maintaining all records in a clear and organized manner, will undoubtedly support strong valuations throughout 2023. This is excellent timing for those looking to grow or exit their practice.

Fourth: Tax Implications

Medical practice sales appear to be much more at ease than they were in previous years. Capital gains tax in California can be complex and challenging to understand. One inevitable fact is that the current tax rate is significantly better than it was a year ago, a time when the Biden administration was considering new capital gains hikes.

Fifth: Timing of the Medical Practice Sale

Various external factors can influence the timing of a medical practice exit or capital raise in California; however, the personal timing of the physician may be the most significant consideration.

According to the Congressional Research Service, the average economic cycle lasts 6-7 years, suggesting that medical practice owners may need to wait until around 2028 for valuations to return to their recent strength.

As such, California business owners who are nearing retirement should evaluate whether they are willing to wait for the next economic growth cycle to pursue a liquidity event.

To maximize valuations, medical practice owners may wish to consider two options: evaluating the market in early 2023 for a potential sale or waiting 5-10 years for the market to recover.

Despite current cautionary signals, Rogerson Business Services has recently experienced a record buy-sell market in 2022 and predicts that 2023 will be even better. The factors contributing to the robust 2022 business trading climate remain in place and are expected to continue driving growth in the future.

2023 Will Be an Even Better Year to Sell your Medical Practice in California if the Timing is Right. Why?

Rogerson Business Services is a business brokerage firm specializing in the sale of medical practices.

Stronger cash flow multiples and higher prices, coupled with the aging “baby boomer” demographic, will likely motivate an increasing number of sellers to consider an exit.

At Rogerson Business Services, we anticipate that the 2023 buy-sell landscape will be even stronger, particularly for medical practices.

Medical practices can expect to see benefits such as higher cash flow multiples, larger pools of buyers pursuing deals, and a more efficient and smoother deal process.

Overall, we believe that 2023 presents a fantastic opportunity for Physicians and medical practice business owners in California to derive excellent returns from their hard-earned investments.

California is Poised to Overtake Germany

According to Bloomberg, California is poised to surpass Germany as the world’s fourth-largest economy, continuing to outperform the nation and other countries in terms of GDP growth, company market value, renewable energy, and more.

“While critics often say California’s best days are behind us, reality proves otherwise – our economic growth and job gains continue to fuel the nation’s economy,” said Governor Newsom. “California’s values and entrepreneurial spirit have powered this ascent to becoming the 4th biggest economy in the world, and we’ll continue doubling down on industries of the future, like renewables and clean energy. I feel tremendous pride in California’s resilience, leadership, and our formula for success.”

Here are some of the Top Takeaways From Bloomberg’s data:

“California outperforms the US and the rest of the world across many industries. That’s especially relevant with renewable energy, the fastest-growing business in California.”
“California’s trajectory is most transparent in the growing divergence between its 379 companies with a market value of at least $1 billion.n”
“California technology hardware, media, and software saw sales increase 63%, 95%, and 115% the past three years, boosting market valuations by 184%, 54%, and 58%”
“Job creation is a powerful area, with unemployment falling to 3.9% in July, the lowest since data was compiled in 1976 … California’s joblessness dipped below Texas”

UCLA Anderson Forecast

According to UCLA Anderson Forecast Director Jerry Nickelsburg.

Unlike the tech meltdown in 2001, when layoffs were concentrated among information technology jobs in the Bay Area, this year’s tech purging has had a minimal impact on the California economy.
Housing construction is an area where California is outpacing the rest of the country.
Defense spending is also helping the California economy
UCLA Anderson Forecast Director Jerry Nickelsburg projected employment growth of 1.1% in 2023 and 1.2% in 2024 for California if the state does not go into recession, and employment growth of .5% in 2023 and 1.3% in 2024 if it does

If you are looking to value and sell your medical practice in 2023, the fundamentals remain the same.

Selling Your Medical Practice Business in 2023

With a motivated buyer and seller, the deal will close smoothly.

Last year, Rogerson Business Services successfully assisted with the sale of a medical practice.

Currently working on closing a family care medical practice in California.

Every day, we receive numerous inquiries requesting assistance in selling a medical practice.

Positioning your medical practice business to capture the highest return on your investment

Whether you are in growth mode or reaping the rewards of an established, mature medical practice operation, it is essential to maintain a strong pulse on your medical practice’s business value and understand the factors that will enable you to build future value.

The goal of this article is to assist you in positioning your practice to capture the highest return on your investment—either through continued value creation or planning to maximize the value of your medical business when the time is right for a sale.

As always, thank you to Rogerson Business Services for reading. We stand ready to assist you in whatever challenges you face. As you will see, we are very bullish on the 2023 buy-sell medical practice trading landscape …

Next Step to sell your practice

What is the most confidential, profitable, expedient, and stress-free way for a medical practice owner to capitalize on this unprecedented trading climate in 2023?

Choose an experienced, trusted medical practice advisor who will help you: