Article: How to pass the torch to the next generation of healthcare practice owners

ArticleJuly 16, 2024

How to pass the torch to the next generation of healthcare practice owners

Purposeful succession planning can prepare the next generation of healthcare providers for ownership while setting current owners up for retirement.

By: Dr. Amrita Patel, DDS

In an industry focused on precision, care, and patient trust, transitioning a healthcare practice from one provider to another can be exciting and challenging. Retirement and succession planning for healthcare practice owners involves financial considerations, the continuity of patient care, and the preservation of a professional legacy. As today's established practice owners prepare to pass the torch to the next generation, careful planning, communication, and a commitment to upholding the highest standards of care can ensure a seamless transfer of responsibilities, patient relationships, and practice management.

The continuity of patient care
Succession planning is crucial for several reasons. First and foremost is the continuity of patient care. Patients often develop long-term relationships with their doctors, built on trust and familiarity. A smooth transition ensures that these relationships are maintained and patients continue to receive the same level of care they have come to expect. Moreover, it allows for the transfer of specialized knowledge and expertise from experienced doctors to their successors, ensuring that clinical standards are upheld and advancements in healthcare technology are effectively integrated into practice.

Mentoring and training the next generation
From a business perspective, succession planning minimizes disruptions to a practice’s operations and financial stability. It involves identifying and preparing potential successors well in advance, whether they are existing associates within the practice or external candidates. Succession planning includes mentoring and training the next generation of providers in clinical skills and practice management, leadership, and patient communication. This mentorship also instills ethical values and professional standards integral to healthcare. By fostering a culture of continuous learning and improvement, retiring providers contribute to the long-term success and sustainability of the profession.

Financial considerations
Succession planning involves a comprehensive approach to financial management tailored to the unique needs of healthcare providers. Practice owners often have high income potential while balancing practice expenses, student loans, and personal financial goals. Therefore, a retirement plan typically includes the following:

Investment strategies: Doctors benefit from diversified investment portfolios that balance risk and return over the long term. Professional financial advisors can help tailor investment strategies to align with retirement timelines and risk tolerance.
Practice transition: Selling a healthcare practice can be a complex process that requires careful valuation, legal considerations, and negotiation skills. Practice owners nearing retirement must plan for this transition well in advance to maximize the practice’s value and ensure a smooth transfer of ownership.
Insurance coverage: Comprehensive insurance coverage, including disability and malpractice insurance, is essential to protect providers’ income and assets throughout their careers and into retirement.
Tax planning: Minimizing tax liabilities is critical for preserving retirement savings. Providers can benefit from tax-advantaged retirement accounts, such as 401(k) plans, individual retirement accounts (IRAs), and health savings accounts (HSAs) to maximize savings and reduce taxable income.

Using your network
Leveraging external expertise can facilitate a smooth transition. Professional healthcare-specific advisors, including legal experts, practice brokers, financial planners, and management consultants, can provide valuable guidance and support in navigating complex issues, such as practice valuation, contract negotiations, and regulatory compliance.

Putting it all together with effective communication
Practice owners should ensure patient care remains the top priority throughout the transition process. Some team members may be resistant to change, as they may have concerns about maintaining practice profitability during transition periods, in addition to facing emotional impacts. Effective communication is key to overcoming these challenges. Practice owners should engage in open and honest discussions with their team and patients about the transition process, addressing concerns, and emphasizing the continuity of care. Clear timelines, milestones, and communications plans should be established to guide the transition, helping to ensure all stakeholders are informed and involved throughout the process.

About the author: Dr. Amrita Patel, DDS, is a general dentist in private practice in Westchester County, New York, and an adjunct faculty member in the Dental Hygiene program at the University of South Dakota. She graduated from the NYU College of Dentistry in 2011 and completed a general practice residency immediately afterward. From 2018-2020, she chaired the New Dentist Committee of the New York State Dental Association and served as the new dentist member on the American Dental Association (ADA) Council on dental benefit programs in 2021. She was the recipient of the New York State Dental Association Bernard P. Tillis Award for Excellence in Dental Writing, the ADA 10 Under 10 Award in 2021, which recognizes 10 new dentists from around the country for excellence in their work and inspiring others, and a Denobi Award in 2022. Dr. Patel is a national lecturer who focuses on student, resident, and new dentist engagement. Her areas of expertise include wellness, time management, and conflict resolution for dentists and dental team members, and demystifying dental benefit plans for early career dentists.

This content is for informational purposes and does not constitute the rendering of legal, accounting, tax, or investment advice, or other professional services by neither Provide, its affiliates, nor Fifth Third Bank, and it is being provided without any warranty whatsoever. Please consult with appropriate professionals related to your individual circumstances.