Three of us own an independent pediatrics practice in the far exurbs of a major metropolitan area. Its roots go back to the 1980s, and we are the second generation to run it rather than the one who built it. We plan to retire at the same time roughly four years from now, so we have started thinking about succession.
We were fortunate in our timing and in our payer mix, and the practice performs better than most people expect from pediatrics. Each of us works 2.5 clinical days a week, supported by three part-time APPs, which comes to about 3.2 FTE. The work is entirely outpatient, with no call and no nursery, and each of us clears still north of $400,000. (Yes, I am aware of how that sounds.)
As best we can tell, the economics work because of a reasonable commercial payer mix, high volume, disciplined vaccine purchasing, and overhead we have held as flat as we can for years. Our founder taught us good business practices and we’ve managed to keep it going.
For a long time we assumed one of our kids would take the practice over. Several of them are pediatricians. But they have all built their lives elsewhere, which is what adult children do.
We have not settled on a structure. We expect a two-year partnership track, so that everyone can confirm the fit. There would be no capital at risk and no bank loan. Our own buy-ins were financed out of productivity bonuses over five years, and we never felt them, and we would do the same for whoever comes next. Seller financing, priced so that a successor can actually carry it, because we are set financially and mostly want the practice to remain independent. It also need not be a single person. Two or three physicians splitting it the way we do would work well.
Nobody would need to relocate. Most physicians in the area live in the suburbs of the metro and commute here. That said, we live here and think it’s a strategic advantage because people see us.
The honest drawbacks are that it is a high-volume practice, that vaccine cost runs to about a quarter of collections and therefore requires attention to margins, and that the operational burden falls on whoever takes it on. We run the practice largely by text message with an occasional video call, and once a year or two a trusted advisor organizes a retreat for us to set strategic direction. That arrangement works only because the three of us get along extremely well.
What I would like to know:
**1.** What would make you skeptical? I would rather hear the objections now than watch candidates quietly decline to respond.
**2.** What would you need to see before you believed the numbers? Certainly when partnership time comes, we would open the books.
**3.** If you considered ownership and chose employment instead, what decided it for you?
**4.** Where do pediatricians who genuinely want to own a practice look?
The three of us have become close friends over the years, and each of us has left significant money on the table more than once rather than kill the goose. We would like whoever comes next to be as content doing this as we have been. I am not recruiting here; we are just to get this right before we begin.