Succession Planning for Medical Professionals Doctors & Dentists
After long years of serving your community as a doctor or dentist, you may consider stepping down or retiring from the practice. However, one thought that you would probably have in mind is, what comes after that?
When you’re starting to think about retirement, one of the first major crossroads you’re going to face is leaving your practice. You’ve probably spent years building up a client base, medical equipment, and functional operations. It’s important to exit properly to avoid paying unnecessary taxes and other expenses.
There are generally 2 ways you can transition your practice, internally, whereby the practice is transitioned to an associate already working in the practice or externally, whereby the practice is sold to an external party, usually another professional.
This is what succession planning comes in, which is the process of identifying and preparing your successor to take on your role in the clinic.
Creating a successful succession planning model is not only critical for protecting the legacy of your practice but also for the patient's well-being, so keep on reading to find out how to create a successful healthcare succession plan.
Benefits of Succession Planning
A healthy business thrives on proper planning, even if your plan involves changing leadership and finding your successor.
In this section, we’ll take a quick look at the wide range of advantages that this proactive approach offers to your business:
1. Reduces Distributions That Affect the Flow of Business
Having a well-developed plan ensures a smooth handover of responsibilities when you leave your post as the primary doctor/dentist of the clinic.
By identifying and nurturing a potential successor, you’ll have a candidate ready to step in seamlessly whenever you’re ready to leave.
Also, when employees and patients are aware of that potential candidate, it severely limits the confusion following your departure, which allows the business to flow as smoothly as possible.
2. Maximizes Cost Savings
A smooth transition with a prepared successor doesn’t only minimize disruptions in schedule and patient care, but it also gives you more options while choosing a candidate.
For instance, early succession planning will give you enough time to invest in the development of internal candidates, which translates to significant cost savings.
This is because you won’t have to allocate extra money to fund external headhunting and recruiting.
Additionally, with the right guidance and ample time, your legal advisor will recommend the best approaches to minimize the fees required to complete the succession process.
3. Retains Knowledge and Expertise
As an experienced professional in your field, having a well-thought-out succession plan will help you pass down your accumulated knowledge and skills to your successor.
When you’re aware of your succession plan, you’ll document best practices, protocols, and procedures to create a knowledge base that your successor can easily access and rely on when you retire or move on.
4. Enhances Employee Loyalty
If you’re a healthcare professional with several doctors or dentists working under their supervision, setting a succession plan can motivate them to develop their skills to earn the opportunity of becoming your successor.
This also applies to family businesses if you have multiple children who qualify for the role of becoming your successor.
5. Encourage Long-Term Planning
A lot of medical professionals wait until retirement is only a few months away to start thinking about succession. This severely limits their options and forces them to pick certain pathways that they may have otherwise avoided.
However, with succession planning on your mind for a long time, you’ll always keep your plans in mind while making professional decisions.
Long-term planning develops a strategy for valuing the practice while ensuring both your and your successor’s financial security.
6. Maintains Professional Values and Reputation
Patients heavily rely on expertise, consistency, and trust when choosing their healthcare providers. A rushed succession plan may result in a poor choice when picking a successor for your practice.
This is often a problem when a key healthcare provider leaves suddenly, so they end up naming a successor who doesn’t align with their established values.
On the other hand, taking your time to prepare your successor assures patients that their care will remain in good hands, even after you retire.
7. Facilitates Financial Security for the Departing Professional
Lastly, in many cases, you remain a shareholder even after you retire, which is why making sure your practice remains successful is essential for your financial security.
If you carefully execute your succession plan to ensure a smooth handover of responsibilities and expertise, you’ll indirectly enhance your chances of achieving financial security for years to come.
Succession Planning for Group Practices
Planning for a successor in a group practice can vary significantly from a solo one, as you have other partners to consider. In this section, you’ll have a brief overview of the process in a group setting.
Identifying Potential Successors Among Existing Partners
The first step of succession planning is to find the most suitable candidate for the leadership role. In a group practice, you usually start by identifying the most talented and ambitious individuals within the existing partnership.
Look for those who demonstrate a strong balance between clinical excellence and reliable leadership skills, while staying committed to the current practice values.
You can also do regular performance evaluations and conduct patient surveys to gather supporting data while making your decision.
Establishing Clear Guidelines for Ownership Transfer
A critical element of succession planning is setting a clear and methodical process for ownership transfer.
This one should cover the outline of the process as well as the timeline and details of the new agreement. Keeping everything well-defined at this point clears out confusion and reduces potential disputes down the line.
Addressing Potential Conflicts
Speaking of disputes, you should understand that conflict of interest is always expected between existing and incoming leadership.
That’s why it’s important to anticipate and prepare for these potential conflicts through open communication and discussing these points upfront with your partner.
Seeking the Help of an Intermediary
Even if there’s a unanimous agreement on who should be your successor in the clinic, you should keep in mind that succession planning involves a lot of complex agreements and documentation.
Seeking the guidance of a qualified professional, such as a lawyer or a consultant specializing in succession planning, especially medical practice, can make the whole process a lot smoother.
Succession Planning for Solo Practices
If you have a solo practice, your challenges and goals will differ significantly. Here’s a quick look at what to expect and consider in this situation.
Identifying Potential for Family Succession Planning
Running a solo practice offers autonomy and control, but it also raises unique questions when considering the future successor.
In most cases, qualified family members would be your top priority. In this case, exploring options for early mentorship and training can help you shape your future successors exactly how you envision them while keeping the business within the family.
Finding Alternate Successor Through Qualified Buyers or Mergers
If family succession isn't an option, your next best option would be identifying qualified external successors. This could involve selling your practice to another doctor or exploring a merger with another solo practitioner or small group practice.
Early planning will help you explore and evaluate your options to ensure a smooth transition while getting the best deal out of the agreement.
Establishing Fair Sale Price
When selling your clinic is an option, you need to determine a fair sale price for your practice. You must consider several factors like your patient base, reputation, location, and equipment.
A succession planner will connect you with an appraiser specializing in healthcare practice to give you an accurate estimation of your practice value.
Managing Patient-Doctor Relationship During Transition
The patient-doctor relationship is critical for solo practice, so make sure that you inform your patients in advance of any potential changes.
This maintains trust and allows you to introduce your successor while ensuring a smooth flow of the process.
Critical Considerations for Succession Planning
A Planned Locum Agreement: to provide professional services to patients to maintain operations
A Contingency Plan: to plan whether your practice continues, closes, or is transferred in the event of a premature death
A Will: to outline instructions regarding your corporation
A Power of Attorney: to give someone the power and authority to act on your behalf
Minimize Double Tax Exposure
How to Create a Successful Succession Plan
Now that you know more about succession planning for healthcare practice, here’s a simple guide that shows you how to create a reliable plan.
Define Goals and Timeline for Succession: Set a realistic timeframe for transitioning your practice as well as the several objectives representing your goals and milestones, such as finding a successor, training, retirement, selling your business, etc.
Evaluate Staff and Identify Potential Successors: If you don’t have a particular successor in mind, start by assessing the staff's skills and long-term aspirations. Look for motivated individuals who could take on leadership roles and withhold your practice’s core values.
Consult a Qualified Expert: Proceedings and negotiations are always smoother when you have professional guidance to help you along the way, whether you’re in solo or group practice.
Prepare the Future Leadership for Their Role: Start preparing your successors to take on your roles by providing them with the necessary knowledge through mentorship and training.
Communicate the Plan with Any Stakeholders: Inform key parties like clinic employees, patients, and potentially your family about your succession plans and consider their valuable insights.
Establish Legal and Financial Agreements to Outline the Process: Formalize the ownership transition procedures through legal and financial agreements, which can be streamlined by having a reliable consultant during this process.
TL;DR
Succession planning may seem like a daunting task, but it's a crucial step in ensuring the smooth continuation of your healthcare practice and the well-being of your patients.
Early planning and adjusting your procedure based on the type of practice is also essential to avoid unexpected surprises or limited options.
Parr Business Law will provide you with the expertise and knowledge you need to make an informed decision while planning your healthcare practice successor.
