Do you have a succession plan for your medical practice? In my experience, too many physicians wait until close to retirement age to begin developing a plan to transition out of practice. Given the volatility of the healthcare market, you should certainly not assume that there will be a ready and willing buyer for your practice if and when you decide to slow down or retire.

If your local hospital, or another practice or physician in your community is not interested in purchasing your practice, you could be out of luck. Without someone to take over the practice, your only option is to close your doors and liquidate your assets. If you’re lucky, you may find a local physician who will take custody of your medical records, but if not, you will need to pay to store these to the extent required by law.

To ensure against the possibility that there may be no external market for your practice, consider developing an internal succession plan pursuant to which junior physicians will, over a period of years, develop greater involvement in the practice affairs and ultimately be in a position to assume the practice and buy you out. Bear in mind, however, that finding and training the right candidate(s) – not only those capable but also willing – to take over your practice may take several years. Accordingly, it is important to begin practice succession planning well before you are ready to transition out of practice.

Keys to a successful practice succession plan will include the following:

1. Physician candidates who are both capable and willing you to become practice leaders and ultimately owners. Not every physician is cut out to own or manage a medical practice. Just because someone is willing to take on additional responsibility does not necessarily make them the right person to do so. In addition, the idea of owning a medical practice is alluring to many junior physicians but very few receive any kind of business training in medical school or residency. Accordingly, several years of on-the-job training may be necessary before a junior physician is ready to take leadership responsibility.

2. A "buy-in" and "buy-out" mechanism which attracts the right candidates and creates incentives to follow through with the succession plan. The buy-in and buy-out formulas should make sense and be explainable. If either the buy-in or buy-out is perceived to be too costly, otherwise qualified junior physicians may balk at taking on the responsibility of practice ownership.

3. Realistic expectations regarding practice values and transition timing. Senior physicians must be willing to acknowledge that in order to attract and retain qualified junior physicians, the cost and timeline to become an owner must be realistic. Similarly, junior physicians should acknowledge that few physicians will be capable of running a medical practice only one or two years out of training.