Author: Shardul Gaikwad

Business legal services in Silicon Valley

Selling Your Practice to a Private Equity-Backed Group?

Private equity-backed groups have become active buyers of medical practices throughout California. These deals can offer real advantages, including liquidity, administrative support, and a path to retirement. They also come with unique structural and regulatory issues that a traditional practice sale to another physician does not raise. Here, our California business lawyer for buying and selling a business outlines what physicians should know before signing on with a private equity-backed buyer.

Selling a Medical Practice to a Private Equity-Backed Group: What to Know

Understand the Deal Structure Before You Negotiate Price

California’s corporate practice of medicine doctrine generally prohibits a non-physician entity from owning a medical practice outright. Private equity-backed buyers typically work around this through a management services organization, or MSO, model. The MSO purchases the practice’s non-clinical assets and provides administrative, billing, and management services under a long-term agreement, while a professional medical corporation owned by a licensed physician continues to hold the clinical practice. The management fee, contract length, termination rights, and control retained by the MSO over staffing and operations all affect the real value and risk of the deal, often more than the headline purchase price.

California Now Requires Advance Notice of Many Health Care Transactions

California’s Office of Health Care Affordability now requires many health care entities to file a notice at least 90 days before closing certain transactions that involve a material change in ownership, control, or governance. OHCA reviews the notice and decides whether to conduct a cost and market impact review before the deal can close. Depending on the size of the practice and the buyer, this notice requirement may apply to a sale involving a private equity-backed group, and missing the filing deadline can delay or jeopardize closing. It is important to determine early in negotiations whether this requirement applies to your transaction.

Protect Your Interests Before You Sign

A private equity buyer’s paperwork is drafted to protect the buyer. Before signing a letter of intent, physicians should review the deal with an eye toward:

How the purchase price is structured, including any portion tied to future performance, earnouts, or continued employment
The length and terms of the physician employment or professional services agreement that follows the sale
Whether restrictive covenants, forfeiture provisions, or non-solicitation clauses are enforceable under California law
Representations, warranties, and indemnification obligations tied to prior billing, coding, and compliance practices
Whether any required regulatory notices or filings, including an OHCA notice, apply to the transaction

Physicians who negotiate these terms early, rather than after a letter of intent is signed, generally retain far more leverage over price and post-closing control.

Contact Our Business Lawyer for Medical Practices Today

Lynnette Ariathurai is a California business attorney who advises medical practices on sales, mergers, and acquisitions throughout the Bay Area. If you are considering selling your medical practice to a private equity-backed group, our business attorney can help you evaluate the deal. Please do not hesitate to contact us today for a confidential consultation.

California medical practice law, medical practice legal advice, selling medical practice, selling to private equity-backed group

If the Physician at a Solo Medical Practice Becomes Disabled or Dies Unexpectedly, What’s Next?

Running a solo medical practice in California means the entire business often depends on one licensed professional. When that physician becomes suddenly disabled or passes away, the practice does not stop being subject to state law. Family members, staff, and patients can be left scrambling if there is no plan in place. Here, our California business lawyer for medical practices explains what typically happens to a solo practice after an unexpected disability or death, and why advance planning matters so much.

What Happens to a Solo Medical Practice When the Physician Becomes Disabled or Dies Unexpectedly?

The Professional Corporation Rules Do Not Pause for a Crisis

Most solo physicians in California operate through a professional medical corporation. State law places strict limits on who may hold shares in that corporation. If the sole shareholder becomes disqualified from practicing medicine due to disability, or dies, the shares generally must be transferred to a licensed physician within a fixed window under California law. If that transfer does not happen in time, the corporation’s certificate of registration can be suspended or revoked. That is a serious problem for a business that may still have staff, leases, and active patients depending on it.

Patients, Records, and Operations Do Not Manage Themselves

A solo practice does not have a co-owner to step in and keep the lights on. Someone needs authority to access bank accounts, pay staff, maintain the office lease, and most importantly arrange continuity of care for patients. Medical records must be protected and made available to patients and any new treating physician. Billing, payer credentialing, and malpractice coverage also need attention almost immediately, since gaps in any of these areas can create liability that outlives the physician’s ability to practice.

Why a Succession Plan Should Be in Place Before a Crisis Hits

A written plan drafted while the physician is healthy and available is far more effective than improvising during a medical emergency. A solid plan for a solo practice generally addresses:

A durable power of attorney authorizing a trusted person to manage business and financial matters if the physician becomes incapacitated
A designated licensed physician, locum tenens arrangement, or covering practice that can step in to treat patients on short notice
Clear instructions for who has access to accounts, payroll systems, and the electronic health record
A buy-sell or asset purchase arrangement identifying who may acquire the practice, and on what terms, if the physician cannot return
Updated estate planning documents that address the professional corporation shares specifically, not just personal assets

Building this plan often requires coordinating an estate planning attorney, an accountant, and a business attorney familiar with medical practice structures, since the professional corporation rules add a layer that most standard estate plans do not address.

Contact Our Business Lawyer for Medical Practices Today

Lynnette Ariathurai is a California business attorney who works with solo and group medical practices throughout the Bay Area. If you have questions about protecting your practice against the unexpected, our business succession planning attorney can help you put a plan in place. We’ll answer the question: What Happens to a Solo Medical Practice When the Physician Becomes Disabled or Dies Unexpectedly? Please do not hesitate to contact us today for a confidential consultation.

California healthcare practice law, medical practice legal advice

How California Medical Practices can Protect Themselves Without a Non-Compete

Employee non-compete agreements are highly disfavored in California. Indeed, state law (California Business and Professions Code § 16600) holds that non-compete agreements are broadly void, invalid, and unenforceable. For the owners of group medical practices, it is generally impermissible to use a non-compete for a physician. However, there are some alternative options available. Here, our Fremont business contracts lawyer provides an overview of the key things to know about how to protect your practice when you cannot use a non-compete agreement for a physician in California.

Physician Non-Compete Alternatives: Protecting Your Practice When You Can’t Use a Non-Compete

A Deeper Overview of the Law: California Prohibition on Non-Compete Agreements

California takes one of the nation’s strictest approaches to employee non-compete agreements. Business and Professions Code § 16600 provides that, except for narrow statutory exceptions, “every contract” restraining a person from engaging in a lawful profession, trade, or business is void. For physician employment agreements, that rule is especially important. A medical group generally cannot prevent a departing physician from continuing to practice medicine, opening a competing office, joining another practice, or treating patients in the same geographic market.

Note: California’s 2024 amendments made the rule even stronger. Section 16600 now requires broad construction of the statute and specifically confirms that employment non-competes are void no matter how narrowly tailored unless a statutory exception applies.

Know the (Narrow) Exception to the Non-Compete Restriction

The main business-sale exception is found in Business and Professions Code § 16601. A physician-owner who sells goodwill, equity, or substantially all operating assets of a practice may agree to a geographically limited restraint connected to that sale. With that being said, the exception is narrow and should not be treated as a workaround for ordinary physician employment.

How to Protect Your Practice: Physician Non-Compete Alternatives in California

A medical practice still has legitimate ways to protect its business. The key is to protect specific business assets without restraining a physician’s lawful practice of medicine. Here are some of the alternatives to physician non-competes that can help to protect your medical practice in California:

Strong confidentiality/trade secret provisions: A practice can prohibit misuse of confidential business information. That may include payer contracts, fee schedules, referral-source strategy, internal compensation data, staffing information, marketing plans, vendor terms, credentialing files, and non-public operational data.
Comprehensive protection of patient records: A departing physician may have professional and ethical duties related to continuity of care, but patient charts, scheduling data, billing records, portal access, and practice management systems belong to the practice.
Very carefully drafted non-solicitation agreements: California courts are skeptical of employee and customer non-solicitation provisions when they operate like restraints on competition. However, certain non-solicitation clauses may be viable.
Reasonable repayment and training-cost provisions: A group medical practice may want to recover signing bonuses, relocation payments, advanced compensation, malpractice tail contributions, or training expenses if a physician leaves early. Beginning 1/1/2026, California has placed limitations on employers’ ability to recover such sums when an employee leaves. Therefore, these provisions should be reviewed by an attorney to ensure compliance. Also, these provisions should be reasonable, clearly documented, and structured as repayment of identifiable benefits rather than a penalty for competition.

Contact Our California Business Lawyer for Physician Practices Today

Lynnette Ariathurai is a California business attorney who works with group medical practices. If you have any questions about the alternatives to non-compete for physicians in California, please do not hesitate to contact us today for a confidential consultation. We provide business law services to medical practices throughout the Bay Area.

California non-compete law, medical practice legal advice, physician non-compete

Mergers: Best Practices for Combining Medical Practices in California

Are you preparing to combine two established medical practices in California? Mergers can be complicated. A proactive, detail-focused approach is a must. Lynnette Ariathurai is a business lawyer who has the knowledge and experience needed to help professional practices navigate transitions. Here, our California attorney for buying and selling a business highlights key things to know about medical practice mergers.

Medical Practice Mergers: Combining Two Established Practices in California

You Must Confirm the Combined Practices Meet California Legal Requirements

It is crucial that you pay careful attention to our state’s requirements for structuring a group medical practice. California medical practices generally cannot be operated through an ordinary business entity if practicing medicine. The structure must account for the Moscone-Knox Professional Corporation Act, the Medical Practice Act, and California’s corporate practice of medicine doctrine. In many cases, the operating vehicle will be a professional medical corporation owned and controlled by licensed physicians.

Conduct Comprehensive Health Care Specific Due Diligence

Due diligence is an absolute requirement with mergers and acquisitions. Standard business due diligence is not enough for a medical practice merger. Among other things, the parties should review corporate records, ownership ledgers, shareholder agreements, employment contracts, independent contractor arrangements, payer agreements, provider enrollment files, leases, equipment financing, malpractice coverage, billing practices, accounts receivable, patient credit balances, HIPAA policies, referral relationships, and any prior audits or board complaints.

Put a Priority on Patients: Medical Records, Continuity of Care, and More

Patients should always come first. A merger can disrupt patient care if medical records and open treatment issues are not handled carefully. Among other things, the agreement should state who will maintain custody of records, how EHR access will be transferred, how patients will be notified, how pending lab results and referrals will be monitored, and how records requests will be processed after closing. California physicians must also account for medical record retention obligations and patient access rights.

Make Sure that Finances are Handled Properly (Cash-Flow Matters)

A merged practice in California may face serious cash-flow problems if payer contracts, provider numbers, credentialing, billing addresses, tax identification numbers, and reassignment rules are not coordinated in advance. The parties should determine whether contracts can be assigned, whether new enrollments are required, whether Medicare or Medi-Cal notices are triggered, and whether commercial payers will treat the transaction as a change of ownership.

Put Strong, Well-Drafted Governance Documents in Place for Post-Merger

Once two established practices combine, informal understandings are dangerous. The shareholder agreement, bylaws, employment agreements, compensation plan, and buy-sell provisions should address voting rights, management authority, productivity expectations, call obligations, expense allocation, profit distributions, deadlock procedures, physician departures, disability, retirement, termination for cause, and mandatory repurchase rights.

Contact Our California Business Lawyer for Group Medical Practices Today

Lynnette Ariathurai is a California business attorney with extensive experience working with medical practices. If you have any specific questions about medical practice mergers, including combining two established medical practices in California, we can help. Please do not hesitate to contact us today for a confidential consultation. With an office in Fremont, we handle business law issues for medical practices throughout the San Francisco Bay Area.

medical practice legal advice, Merging physician practices

Medical Practice Buy-Ins: How to Bring an Associate Physician in as a Partner

Medical practice buy-ins are notoriously complex. If you are preparing to bring in an associate physician as a partner in your practice, it is imperative that you ensure that everything is done properly. An associate physician can make a great partner. The right approach will protect your business interests. In this article, our Fremont business attorney for employers provides an overview of medical practice buy-ins and how to bring in an associate physician as a partner in a group medical practice in California.

Know the California Ownership Rules Before Offering Equity

There are specific rules and regulations for the ownership of medical practices in California. A medical practice buy-in in the Bay Area must account for our state’s strict rules on professional medical corporations and the corporate practice of medicine. A general business investor cannot simply buy into a medical practice and share control over clinical operations.

California Corporations Code § 13401.5 limits who may own shares, serve as officers, serve as directors, or work as professional employees in certain professional corporations. For a professional medical corporation, licensed physicians must remain in control. A practice that brings in an associate physician should confirm licensure, ownership eligibility, voting rights, and transfer restrictions before discussing price.

You Need Value the Medical Practice With More than Near-Term Revenue

Price matters for any business purchase. Whether it makes sense for you to allow an associate physician to become a partner depends on the prices. The buy-in price should reflect the actual economics of the California medical practice. A key point to remember is that the near-term revenue alone rarely tells the full story. With that in mind, you should be prepared to review collections, payer mix, physician compensation, accounts receivable, equipment, lease obligations, staff costs, malpractice history, goodwill, and expected future profitability.

Medical Practices Should Use a Written Buy-In Agreement

A handshake deal is not enough for a physician buy-in. The agreement should state the purchase price, payment schedule, interest rate if financed, consequences of default, tax treatment, and whether payments come from personal funds, reduced compensation, or future distributions. California medical practices should also coordinate the buy-in agreement with the shareholder agreement, bylaws, employment agreement, and any lender or landlord consent requirements.

Medical Practice Governance Must Be Clearly Specified Before the Relationship Changes

A strong associate physician does not automatically become a good business partner. Before closing the buy-in, the practice should define governance rights with precision. The documents should address voting thresholds, management authority, hiring decisions, compensation formulas, call coverage, admission of future partners, debt approval, expansion plans, and major capital purchases. Clinical authority and business authority should also be separated where appropriate. In California, medical judgment must remain with licensed physicians. Still, not every physician-owner needs equal authority over every business decision.

You Need a Comprehensive Plan for Exit, Disability, Death, and Termination

Finally, a buy-in by an associate doctor for a group medical practice in California should always include a buy-sell structure. The associate may leave, lose a license, become disabled, retire, die, or be terminated for cause. The practice needs a clear repurchase right for each scenario. The agreement should state how shares are valued, when payment must be made, whether discounts apply, and whether restrictive covenants or patient-transition duties apply.

Contact Our Bay Area Business Lawyer for Medical Practices Today

Lynnette Ariathurai is a California business attorney with extensive experience working with medical practices. If you have any questions about how to bring in an associate physician to a medical practice as a partner, we can help. Please do not hesitate to contact us today for a completely confidential case review. Our firm provides business law services to medical practices throughout the Bay Area.

business planning, growing a medical practice, healthcare agency buy-ins

Hiring a New Physician: Employment Agreements, Bonuses, etc. in California

Are you a partner in a medical practice? You may be considering hiring a new physician to join the practice. It can be a complicated process in California. There are a number of different considerations that business owners need to consider and address, including employment agreement, compensation terms, and ownership structure. Here, our California business lawyer for employers highlights the key things to know about hiring a new physician to join a group medical practice in the Bay Area.

You Should Start With a Physician-Specific Employment Agreement

California is an at-will employment law state. Medical practices are not required to use employment contracts to hire employees. With that being said, a comprehensive, professionally-drafted employment agreement is always recommended when hiring a new physician for your group medical practice. The contract should be tailored to physicians. A generic employee offer letter usually leaves too much unresolved. The agreement should identify the physician’s title, clinical duties, schedule, call expectations, supervision structure, administrative obligations, patient documentation standards, and compliance responsibilities. It should also address licensure, board certification, DEA registration, medical staff privileges, malpractice coverage, and participation in Medicare, Medi-Cal, and private payer networks.

Beware of non-compete agreements: California sharply limits restrictive covenants. Business and Professions Code § 16600 generally voids contracts that restrain a person from engaging in a lawful profession, trade, or business. In other words, non-compete should generally be avoided.

Medical Practices Should Carefully Define Compensation, Bonuses, and Productivity

Physician compensation should be clear before employment begins. Along with other things, the employment agreement should state base salary, bonus eligibility, productivity targets, collection thresholds, quality metrics, and payment timing. If the practice uses a productivity bonus tied to collections, relative value units (RVUs), profit sharing, or new patient volume, the formula must be precise.

Know the law: California Labor Code § 2751 requires written commission agreements when an employee’s pay involves commissions.

Ownership Expectations Should Be Addressed Upfront

Many associate physicians join a group practice with an expectation that partnership may follow. The employment agreement should avoid vague promises. If ownership may be offered later, the agreement should describe the process without guaranteeing admission as a partner. The practice can require minimum tenure, productivity levels, cultural fit, licensure compliance, board approval, capital contribution, or a separate buy-in agreement.

Medical Practices Can Benefit With a Plan for Termination, Transition, and Risk Management

The agreement should explain how the relationship can end. Termination provisions should address without-cause notice, for-cause termination, loss of license, exclusion from federal health care programs, loss of malpractice coverage, substance impairment issues, patient safety concerns, and failure to maintain hospital privileges or payer credentials. As a general matter, the contract should also state things like how compensation, accrued bonuses, benefits, records, equipment, and patient handoff duties are handled at separation. Malpractice coverage deserves special attention. If the practice uses claims-made coverage, the agreement should specify who pays for tail coverage after termination.

We Provide Business Law Services to Medical Practices in California

Lynnette Ariathurai is a California business lawyer who works directly with employers, including professional practices. If you have any questions about hiring a new physician for a medical practice, please do not hesitate to contact us today. With an office in Fremont, we work with medical practices throughout the Bay Area.

business planning, healthcare agencies, hiring a doctor, medical practice hiring

Physician Compensation Models in California

Owning and operating a medical practice is complicated. Physician compensation is just one of many issues that needs to be considered. Physician compensation in California depends on how medical services are structured, billed, and regulated under state law. Compensation models must account for corporate practice of medicine restrictions, fee-splitting prohibitions, and payer reimbursement rules. These are important constraints. Attorney Lynnette Ariathurai helps medical practices navigate these challenges. In this article, our Bay Area business lawyer for medical practices provides an overview of the most common physician compensation models in California.

An Overview of Different Types of California Physician Compensation Models

Salary-Based Compensation

The most straightforward compensation model for doctors is to be paid a salary. There will typically be an employment contract that clarifies the specific terms. In California, salary-based compensation is most common in hospital systems, academic settings, and for larger group medical practices. With this type of model, the practice pays a fixed amount regardless of patient volume or collections. A key advantage of it as a compensation structure is that it reduces variability and compliance risk because compensation does not fluctuate directly with referrals or billed services. Though, it can sometimes be more challenging to attract talent.

Productivity-Based Compensation

Productivity models tie compensation to measurable output such as work relative value units (RVUs), patient encounters, or collections. These arrangements require careful structuring in California. They are lawful, but there are very strict rules and regulations in place. Compensation formulas must avoid improper fee splitting and must not incentivize referrals in a way that triggers anti-kickback exposure. A business law attorney can help.

Percentage of Collections Models

Another option in California used by some medical practices is to pay physicians a percentage of professional fees collected for their services. State law permits this structure only when the physician earns compensation for services personally rendered. The model cannot allocate a share of global revenue or facility fees in a way that violates fee-splitting rules.

Bonus and Incentive Compensation

Practices often use bonuses to reward quality metrics, efficiency, or patient satisfaction. It can be a strong option to attract more high quality physicians to join a group medical practice. In California, incentive compensation must remain detached from improper referral volume or ownership interests. Violations can lead to very serious sanctions.

Management Services Organization (MSO) and Management Structures

Finally, there are many California medical practices that operate alongside a management services organization. In these structures, physicians receive clinical compensation while the MSO receives management fees. The compensation model must preserve physician control over clinical decisions. Under the law, management fees reflect fair market value for non-clinical services only.

Contact Our California Business Lawyer for Medical Practices Today

Lynnette Ariathurai is a California business law attorney who puts clients first. If you have any questions about physician compensation models in California, please do not hesitate to contact us today to set up a completely confidential, no obligation initial consultation. With an office in Fremont, we provide business law representation to medical practices throughout the Bay Area.

medical practice structure, medical professionals compensation, physician compensation models

Managing Risk When Expanding a Medical Practice to Multiple Locations in California

Are you preparing to expand your medical practice to a different location in California? If so, there are several different risks that you need to consider. Multi-location expansion changes how a California medical practice operates from day to day. Staffing models, reimbursement flow, and physician oversight become more difficult to monitor across sites. Seemingly small breakdowns have the potential to cause very big problems. Within this article, our California attorney for buying a medical practice highlights the key things to know about managing risk.

Key Risk: Corporate Practice of Medicine and Ownership Structure (California Law)

There are strict rules and regulations in our state regarding the business operations of medical practices. Specifically, California’s corporate practice of medicine doctrine restricts who may own and control a medical practice. That is a big risk to consider for medical practices that are preparing to expand to new locations. Expansion often involves new entities, real estate arrangements, or management agreements. If ownership and control blur between clinical and non-clinical parties, the regulatory risk rises. To remain in full compliance with California law, each location must preserve physician control over clinical decision-making and medical revenue.

Additional Risk: Licensing, Supervision, and Scope of Practice

There are many other risks to consider as well beyond California’s corporate practice of medicine doctrine. Each additional location increases licensing and supervision obligations. Physicians must maintain proper licensures for all locations of the medical practice. Beyond that, medical practices in California must ensure compliant supervision of physician assistants, nurse practitioners, and other clinical staff. Scope-of-practice violations can arise when oversight becomes decentralized. It is a major risk that requires attention before additional medical practices are opened.

Another Additional Risk: Billing, Reimbursement, and Payor Compliance

Expansion complicates billing and reimbursement controls. Practices must confirm that payor contracts permit services at each location. Credentialing delays or location mismatches can result in recouped payments or even denied claims, resulting in significant revenue losses. It is crucial that billing practices get careful attention.

Proactive Planning Helps to Reduce Risk When Opening New Medical Practice Locations

For medical practices that are planning to expand to a new location(s) in California, a proactive approach is the best approach. Advanced planning can go a long way towards reducing the risk of problems. Medical practices that grow without tightening their structure often discover problems through enforcement rather than planning. You do not want that to happen to your business. A risk-managed expansion aligns ownership, clinical authority, and operational controls before opening new doors. An experienced business attorney for medical practices in California can help.

Speak to Our California Business Lawyer for Medical Practices Today

Lynnette Ariathurai is a California business attorney with extensive experience working with medical practices. If you have any questions about managing risks when expanding to a multi-location medical practice, please contact us today for a completely confidential, no obligation case review. With offices in Fremont, we handle business law matters for medical practices across the Bay Area.

medical practice expansion, medical practice risk management, Multi-location medical practice California

What Medical Practices Should Know Before Terminating a Physician, Nurse, or Practice Manager in California

Employment law is complicated. Before a medical practice takes the big step of terminating a physician, nurse, practice manager, or other key player, it is important to have a proper plan in place. There are a wide range of legal, logistical, and business issues that need to be addressed. Here, our California business lawyer for employers highlights key considerations that medical practices should know before terminating a doctor, nurse, or practice manager.

Start With an Employment Contract (If there is One)

California is an at-will employment law state (CalChamber). The relationship between an employer and employee is fully voluntary and can be ended by either party at any time. That is unless there is an employment contract that holds otherwise. It is an important consideration for medical practices because many doctors and nurses work under a contract. If there is a contract, it needs to be carefully reviewed before a termination moves forward.

Evaluate the Potential Wrongful Termination Risk

Even in an at-will employment state, a termination decision must comply with California law. No employee can be removed for illegal reasons. In other words, a medical practice employer cannot terminate a physician, nurse, or practice manager for a reason that violates statutory protections or clearly established public policy. California courts recognize claims for wrongful termination when an employee is discharged for refusing to engage in unlawful conduct, reporting regulatory violations, or exercising protected legal rights. If you have any questions about a potential wrongful termination claim by an employee, a California employment lawyer for medical practices can help.

Continuity of Patient Care

The most important consideration of the medical practice is the continuity of care for the patients. A plan should be put in place for patients to ensure their continuity of medical care following the employee leaving the medical practice.

Follow Established Internal Procedures and Be Sure Everything is Properly Documented

Before terminating a key healthcare employee, a medical practice should ensure that it has followed consistent internal disciplinary procedures. Employers should review performance evaluations, written warnings, and any prior disciplinary measures. Proper documentation helps demonstrate that the termination decision is grounded in legitimate business reasons rather than discriminatory or retaliatory motives. Practices should also coordinate the termination process with human resources policies, compliance officers, and their outside legal counsel.

Ensure Full Compliance With Medical Staff and Licensing Rules in California

When terminating a physician, medical practices must also consider professional licensing and credentialing implications. Physicians often hold clinical privileges, contractual obligations, or professional relationships that extend beyond the employment agreement. A termination may sometimes lead to reporting obligations under certain circumstances. That is particularly true if the termination involves allegations of professional misconduct and/or quality-of-care issues. Medical practices should evaluate whether the situation requires reporting to the California Medical Board, hospital credentialing committees, or national practitioner reporting systems.

Contact Our Bay Area Employment Lawyer for Medical Practices Today

Lynnette Ariathurai is a California employment lawyer for employers. If you have any questions about terminating a physician, nurse, or practice manager, we can help. Contact us today for a fully confidential initial consultation. With an office in Fremont, we provide employment law representation to medical practices throughout the Bay Area.

terminating doctor, terminating nurse, Terminating physician, terminating practice manager

Succession Planning for California Medical Practices

The owners of California medical practices should have a comprehensive, well-considered succession plan in place. If something happens to any owner of the medical practice without a plan in place, it can create some very serious challenges. Navigating the transition is a lot easier with a proper business succession plan. Here, our California business law attorney for business owners provides a guide to succession planning for Bay Area medical practices.

Background: What is Business Succession Planning?

The United States Small Business Administration (SBA) explains that business succession planning is the process of preparing for the transfer of ownership and management of a business when an owner retires, becomes incapacitated, or passes away. Along with other things, a comprehensive business succession plan for a medical practice identifies future leadership, establishes a transition timeline, and addresses key legal, regulatory, and financial issues tied to the change in control.

Physician Ownership Restrictions in CA are Key to Medical Practice Succession Planning

Succession planning for a California medical practice must always begin with the state’s corporate practice of medicine doctrine. California law restricts ownership of professional medical corporations to licensed physicians and certain other licensed healthcare professionals. These rules appear in the Moscone-Knox Professional Corporation Act. A transition plan must ensure that ownership always remains compliant with these requirements. If a physician owner dies, becomes disabled, or retires, the practice must transfer the ownership interest to a qualified licensed professional. That needs to be addressed within your business succession plan.

Buy-Sell Agreements for Medical Practice Ownership

A comprehensive succession plan for a medical practice will often include a buy-sell agreement governing ownership transfers. It is this type of agreement that establishes the legal mechanism for transferring shares when a triggering event occurs. The most common “triggers” are death, disability, retirement, voluntary departure, or the loss of a professional license of an owner.

A buy-sell agreement must be properly drafted. It should clearly define the valuation methodology used to determine the purchase price of the departing physician’s ownership interest. It should also identify the funding mechanism used to complete the purchase. Many medical practices rely on disability insurance or life insurance policies to fund ownership buyouts.

Full Compliance With California’s Corporate Structure Rules is a Must

Most physician groups in California operate as professional medical corporations (PCs). Succession planning must address the governance and ownership rules that apply to these entities. Only individuals licensed to practice medicine may hold shares in a medical corporation, though limited exceptions exist for certain allied professionals. When a physician shareholder leaves the practice, the corporation must ensure that the shares transfer to a properly licensed successor. A California business lawyer for medical practices can help.

Contact Our Bay Area Business Lawyer for Medical Practices Today

Lynnette Ariathurai is a California business law attorney who has extensive experience working with medical practices. If you have any questions or concerns about succession planning strategies for a medical practice in California, please do not hesitate to contact us today for a fully confidential consultation. With an office in Fremont, we work with medical practices throughout the entire San Francisco Bay area.

business planning, business succession plan, healthcare agency succession plan