Investing in a surgery center can be an intriguing opportunity for young physicians, but it's crucial to ask some essential questions first.
When your new partners or older colleagues are all talking about "this new investment," it can be so tempting to simply follow their lead, but here are four simple yet critical questions every doctor should consider before buying into a surgery center:
First, determine who owns the surgery center and who calls the shots. Is it run by doctors, hospitals, or outside investors?
Knowing if doctors have a say in how things are run is vital. This doesn't mean the physician ownership group always needs to be in the majority, but it's imperative to know who the other business partners are and whose vote counts the most.
Before diving in, take a good look at the finances. How much money will you need to invest? What's the expected return on investment?
Make sure you understand the financial side of things, including costs and potential earnings. Often, you'll be given a "pro forma," an official-looking record of financial projections. Understand that a pro forma is just a guess of what might happen and includes a lot of assumptions.
Ask what assumptions were used and think critically about what risks could threaten those assumptions.
Quality care is crucial. Ask about the center's track record for patient safety and satisfaction. Are they following all the rules and regulations?
Also, find out what they're doing to improve care over time. You want to invest in a center committed to giving patients the best care possible.
Lastly, make sure you understand the plan for the profits. Do the majority of owners want to accelerate debt repayment? Do they plan to distribute the profits to all the owners?
Understanding this is crucial if you expect to finance the buy-in through a loan. There can also be confusing tax implications if the profits are used to pay off surgery center debt instead of shared with owners.
Investing in a surgery center can be a great opportunity, but asking the right questions is critical. By understanding who's in charge, the financial details, how they ensure quality care, and how it fits within your personal financial picture, doctors can make a wise investment that benefits both their practice and their patients.
You may want a second opinion. Consider discussing your investment strategy and buy-in opportunities with your financial advisor. If you don't have a trusted resource, our team of financial planners specializes in physician-specific financial planning and investment strategy.
Schedule a complimentary discovery call to see if buying into a surgery center is right for you.
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Shane Tenny is the managing partner of Spaugh Dameron Tenny. Along with hosting the Prosperous Doc® podcast, Shane has a true passion for behavioral finance, helping clients and audiences understand how to develop successful strategies based on their unique temperaments. An accomplished and highly engaging speaker, Shane is regularly interviewed for television and podcasts, is actively involved in the Financial Planning Association®, and contributes to industry advisory boards.
