Are you a medical practice owner and asking: “Is 2023 a good time to sell my medical practice in California?”
If you are a physician and looking to retire and exit your medical practice ownership in California, you might be wondering if now is a good time to exit.
The 2023 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, there are many other physician specialty practices that 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 with about $504 billion in revenue and over 2.5 million employees.
- There are over 461,000 physicians 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, but DOs emphasize the body’s musculoskeletal system, preventive medicine, and holistic care.
- Education and training requirements for physicians include 4 years of undergraduate school, 4 years of medical school, and 3 to 8 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, an increasing share of physician practices are owned by hospitals and health systems.
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.
An even greater 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 largest health systems, as shown in Table 1.
In 2018, the 10 largest systems accounted for 46.0% of all physicians in California, up from 30.7% just two years earlier.
Check out the full study about California’s medical practice landscape covered by this study.
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 appeared for the first time, accounting for 4.4% of physicians.
Rogerson Business Services have been brokering medical practices since 2015 in California. We have sold many practices in various specialties. Most recently, we just sold an urgent care medical practice in just 6 months on the market.
Send us an email to support@rogersonbusinessservices.com and get the full list of practices sold.
The market is bullish in California, but there are certain factors that can definitely influence this market environment.
Let’s dive in…
5 Medical Practice Sales Outlook: Factors in 2023
First: Interest Rates Outlook
If you are planning to sell your medical practice in 2023, listing your practice in the first quarter will improve the chance to get it sold quickly. 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 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 are:
- Family Medicine
- Internal Medicine
- Obstetrics and Gynecology
- Dermatology
- Cardiology
- Surgery
However, other practice types might see some slowdown in demand, especially solo medical practices
Three: Availability of Equity Capital
Capital is strongly available. Without a doubt, quality medical practices with good housekeeping of keeping all records aligned and organized will support strong valuations throughout 2023. This is excellent timing for those looking to grow or exit their practice.
Four: Tax Implications
Medical practice sales appear much more at ease than they did in previous years. Capital gains tax in California can be doubting to understand. One certain fact, the current tax rate is much better than it was a year ago. A time when Biden’s administration was thinking of new capital gains hikes.
Five: Timing of the Medical Practice Sale
The timing of a medical practice exit or capital raise in California can be influenced by a variety of external factors, but personal timing for the physician may be the most significant consideration.
According to the Congressional Research Service, the average economic cycle lasts 6-7 years, which suggests that medical practice owners may need to wait until around 2028 for valuations to be as strong as they have recently been.
As such, California practice 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 for 5-10 years for the market to pick up again.
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. Factors contributing to the robust 2022 business trading climate are still in place and are expected to continue to drive 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, we are pleased to report that the financial performance of businesses in 2022 is expected to drive higher pricing in the buy-sell market.
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 smooth 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 overtake Germany as the world’s 4th largest economy, continuing to outperform the nation and other countries in GDP growth, companies’ 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”
- “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 particularly strong 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 little effect 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.
Selling your Medical Practice Business in 2023
The sale of a medical practice in California only occurs when there is a motivated buyer and a motivated seller with all details fully disclosed to both parties.
Last year, Rogerson Business Services was able to successfully assist with the sale of a medical practice.
Currently working on closing a family care medical practice in California.
Every day, we receive many inquiries requesting help to get started on selling a medical practice. If you are looking to get started, here is where you can leap through the process.
Positioning your medical practice business to capture the highest return on your investment
Whether you are in growth mode or just reaping the rewards that come from an established, mature medical practice operation, it is important to always have a strong pulse on your medical practice business value as well as 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 your timing is right for a sale.
As always, Rogerson Business Services thank you for reading and stand ready to assist you in whatever challenge you are facing. As you will see, we are very bullish on the 2023 buy-sell medical practice trading landscape …
Next Step
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 navigate the complexities of the business valuation, highlight your medical business value in a compelling marketing package, identify and qualify buyer prospects (while protecting your confidentiality), and assemble a professional deal team that will deliver a successful closing that delivers on your exit goals.
Also helps you avoid pitfalls when selling your medical practice.
Articles and Videos Worth Checking Out
1) 2023 Market Policy and Outlook
2) Baby Boomers Infrastructure & 2023 Outlook
3) Physician Practice Benchmark Survey
4) California’s Physician Practice Landscape
5) Five Shifting Trends Affecting ASC, Physician Practice Valuation
Are You Ready To Sell Your Medical Practice?
Rogerson Business Services are medical practice brokers who created a comprehensive summary with every step of the selling process explaining the steps of the selling process, including what you can expect in establishing the proper price for your practice.
Get in touch today for a free consultation and let us learn a few things about your practice. Get Started
