Patient Charts Equity Value
In our last blog, we discussed how accounting offices commonly buy client records from each other. Here is how that works. Most commonly they pay only for those clients that actually transfer, typically 20% – 40% of the amount that they collect for that client.
How Can This Work For Optometry?
How would this apply to Optometry? And what, exactly, are an OD’s charts worth? I searched the literature and found very little information. Yet there are many practitioners out there closing their doors, and the charts remain. I am finding lots of interest lately among OD’s about how to sell these charts rather than letting them languish.
Small Practice Value In Charts
In many cases, these are smaller practices that have provided a retiring optometrist a great living, but over the years have lost value to a new buyer. These are often smaller practices (below $350,000 in sales) that have below average technology. In some cases they are practices that are in distress – offices that are running in the red and the doctor is losing money by staying. They have little interest to new buyers. While the owners often tout the “potential” of their practice, the buyer can rightfully ask: “If it has such great potential, why haven’t you made the practice grow?”
Options for OD Closing Office
So what are the options for the OD who is closing his office? Basically it is to sell the assets of the practice the best you can. “Hard assets” include equipment and inventory. Equipment companies may buy your used equipment, but you are much better off if you can sell to a local colleague. Advertise in your state optometry newsletter and talk to your sales reps about potential buyers. Many OD’s have had success using eBay or optometry social media sites.
Set Realistic Price on Inventory
Be realistic about setting a price – the longer the equipment sits there unsold, the less the value. Do the same for your frames and contact lens inventory – again you will probably get pennies on the dollar, but that is reality, and something is better than nothing.
Value of Optometry Charts
And what about the “intangible assets” – the charts? Again, there is no “right” way to do it. But in talking with fellow consultants Jerry Hayes and John Rumpakis, the “going rate” in their experience seems to be in the $5.00 to $9.00 range per “active charts” (ie those that have been to the office in the past 2-4 years). The price will vary based on 1) the likelihood of the patient transferring to your office, and 2) the amount of profit the buyer can expect from those transferred patients. The stronger the seller’s endorsement of the buyer through, the better for the buyer. This can take the form of letters, post cards, or emails, as well as announcements in the newspapers or social media outlets.
Chart Value Example
Let’s say Dr. A is retiring and has 4,000 active charts, and his colleague Dr. B wants to buy them. They agree on a price of $7.00 per chart, or $28,000 total. If 1,000 patients (25%) transfer to the new office, and the new office averages $100 profit per patient, they enjoy an additional $72,000 profit ($100,000 in profit minus $28,000 spent on the charts). Seems like a good deal for both parties!
Play with the numbers and make it work for both parties. If you want professional help, please give us a call.