Embarking on a new healthcare venture in Florida—whether buying and selling medical practices, or starting a new clinic from the ground up—is an exciting prospect filled with immense opportunity.
However, the path for a healthcare entrepreneur is paved with unique and complex legal issues, particularly in a highly regulated state like Florida.
A successful transaction requires more than just financial acumen; it demands a deep understanding of corporate structuring, regulatory compliance, and meticulous due diligence.
A misstep in any of these areas can lead to costly legal battles, voided agreements, or even federal investigations into your medical practice.
At Ace Your Case, our healthcare business attorneys have guided countless physicians and entrepreneurs through these high-stakes transactions. This guide will walk you through the critical legal considerations you need to understand to ensure your business is built for success.
Key Considerations for Buying and Selling Medical Practices in Florida
The process of buying and selling medical practices in Florida is a complex transaction. It requires careful planning and expert legal counsel.
Whether you are a physician looking to acquire a practice to expand your services, or a practitioner preparing for retirement, understanding the legal landscape is essential.
These transactions involve significant financial investment and regulatory scrutiny.
Key aspects include accurate business value assessment, navigating the transfer of assets and patients’ records, and ensuring all agreements are structured to comply with both state laws and federal law.
A mistake at any stage can have long-lasting consequences, making professional legal assistance a critical component of a successful deal.
The First Hurdle for Your Medical Practice: Florida’s CPOM Doctrine
Before any transaction can be structured, you must understand Florida’s stance on the Corporate Practice of Medicine (CPOM).
This is a foundational piece of law that affects all health care clinics and any private practice.
Does Florida Have a Corporate Practice of Medicine Doctrine?
Yes. While not as strict as in some other states, Florida’s Corporate Practice of Medicine doctrine generally prohibits non-physician-owned corporations from employing physicians to practice medicine.
The primary goal is to prevent unlicensed individuals or business entities from having undue influence over clinical decision-making affecting patients. The integrity of the patient-physician relationship is paramount under this law.
Can You Own a Medical Practice Without Being a Doctor in Florida?
This is the most common question entrepreneurs ask. A non-physician cannot directly own a medical practice that employs physicians to provide health care services.
However, they can own a management company that provides administrative and business support services to a physician-owned professional association (P.A.).
This is commonly known as a Management Services Organization (MSO) model, which is a common structure for a healthcare organization.
The key is that the MSO cannot control the actual practice of medicine.
Such MSO services can include billing, marketing, HR for non-clinical employees, and managing the physical offices.
What is the correct business structure?
Can a medical practice be an LLC in Florida? Yes, a physician can form a Professional Limited Liability Company (P.L.L.C.), but ownership is still restricted to licensed practitioners.
Understanding these ownership restrictions is a critical first step. An experienced attorney can provide the necessary knowledge to select the right form for your entity.
The Core Process of Buying and Selling Medical Practices in Florida
While every deal is unique, the transaction process generally follows a structured path designed to protect both the buyer and the seller.
- Letter of Intent (LOI): An initial, non-binding agreement outlining the basic terms of the sale, purchase price, and an exclusivity period for negotiations.
- Due Diligence: The intensive investigation phase where the buyer verifies every aspect of the practice.
- Purchase Agreement: The final, binding legal agreement detailing all terms and conditions of the sale. This is the cornerstone document of the entire transaction.
- Closing: The final transfer of assets and funds, officially completing the acquisition.
Key Provisions in a Purchase Agreement
The Purchase Agreement is a lengthy, detailed document. Key provisions often include:
- Representations and Warranties: Statements of fact from the seller about the condition and compliance of the business.
- Covenants: Promises regarding actions to be taken (or not taken) before and after the closing.
- Indemnification: Clauses that allocate financial risk between the parties for breaches of the agreement.
- Non-Compete Clauses: Restrictions on the seller’s ability to open a competing practice within a certain timeframe and geographic area.
The Legal Nuances of Buying and Selling Medical Practices in Florida
The landscape for buying and selling medical practices florida is shaped by more than just federal regulations. Any transaction in the state must adhere to specific Florida health care laws. Failing to account for these can derail a deal or lead to significant penalties post-acquisition.
Florida’s Patient Brokering Act (PBA)
Florida has one of the strictest anti-kickback laws in the country, the Patient Brokering Act. The PBA makes it illegal for any person to offer or receive a commission, bonus, or kickback for referring patients to or from a health care provider or facility.
Unlike the federal statute, the PBA applies to all payers, not just government programs like Medicare. This has major implications for marketing arrangements and compensation structures within a medical practice.
The Health Care Clinic Act
Florida also heavily regulates health care clinics. If a practice is owned by non-physicians (where allowed, such as with certain specialties) or is structured in a particular way, it may need a Health Care Clinic License to operate. A thorough health investigation during due diligence must confirm the target practice has all necessary state licenses.
Buying a Medical Practice: The Critical Role of Due Diligence and Health Investigation
When you pursue acquisitions of a healthcare business, you are not just buying its assets; you are often inheriting its liabilities.
A thorough due diligence process and health investigation are non-negotiable for any medical practice acquisition. Failure to conduct a proper investigation is a significant risk.
What is Due Diligence in Healthcare?
In healthcare, due diligence is a comprehensive health investigation into every aspect of the target practice to verify its value and uncover potential risk.
This process goes far beyond a simple financial review. An example of a due diligence transaction would be a hospital acquiring a physician group and investigating its billing practices, physician contracts, and compliance history.
Key areas of a healthcare due diligence and health investigation include:
Financial Due Diligence
This involves a deep dive into the practice’s financial health to establish a fair market value. Key procedures include:
- Reviewing several years of financial statements, tax returns, and accounts receivable aging reports.
- Analyzing the practice’s payer mix (e.g., Medicare, Medicaid, private insurance).
- Scrutinizing billing and coding practices for accuracy and potential reimbursement issues.
- Verifying the condition and ownership of major assets, including medical equipment.
Regulatory Compliance Due Diligence
This is a critical step to uncover hidden liabilities. The investigation must engage with all aspects of regulatory adherence. This is essential for long-term practice health.
- Stark Law & Anti-Kickback Statute: Auditing physician compensation and financial arrangements to check for compliance. This includes reviewing agreements with labs, imaging centers, and other providers of designated health services.
- HIPAA: Reviewing privacy and security policies, breach notification procedures, and employee training records.
- Licensing and Credentialing: Verifying that all clinical personnel, including physicians and medical staff, hold current, unrestricted licenses and are properly credentialed with all relevant payers.
- Medicare/Medicaid: Checking for any history of audits, investigations, or exclusions from any federal health care program. This includes reviewing records with the Department of Health and Human Services (HHS).
Operational Due Diligence
This assesses the day-to-day workings of the practice.
- Payer Contracts: Reviewing all contracts with insurance companies and other payers. Are the rates favorable? Are there assignment clauses that could prevent a smooth transfer?
- Employee & Physician Agreements: Examining employment contracts, non-compete clauses, and benefits packages for all employees.
- Real Estate: Reviewing leases for offices and equipment.
- IT Systems: Assessing the state of the EHR/EMR software and other critical technology.
Selling a Medical Practice: Maximizing Your Return
For many physicians, selling their private practice is the culmination of a lifelong career. Proper planning is essential to maximize its value and ensure a smooth transition.
How Much Can I Sell My Medical Practice For?
The valuation of a medical practice is complex. The price is often based on a multiple of the practice’s EBITDA to determine a fair market price.
Factors that significantly influence the sale price include the practice’s specialty, payer mix, location, and compliance history.
A clean compliance record, verified through a health investigation, can substantially increase the value of your practice. The business generated by a well-run clinic is a key driver of its final price.
What are the Tax Consequences of Selling a Medical Practice?
The tax implications are significant. They depend heavily on how the sale is structured.
An “asset sale” versus a “stock sale” will have different tax consequences for both the buyer and the seller.
It is critical to work with both a healthcare attorney and a CPA to structure the deal in the most tax-advantaged way possible to protect the money you’ve earned.
Starting a New Private Practice in Florida: A Legal Checklist
Launching a new private practice is a major undertaking that requires careful planning and a solid legal foundation.
How Much Money Do I Need to Start a Medical Practice?
The startup costs can be substantial and vary widely. Key expenses for your new business organization include:
- Office Space: Leasing and build-out for health care clinics.
- Medical Equipment & Supplies: Including diagnostic tools and basic pharmacy stock.
- Technology: EHR/EMR software, billing systems, and IT infrastructure.
- Staffing: Salaries, benefits, and payroll for all clinical and administrative employees.
- Insurance: Professional liability (malpractice) insurance and general business insurance.
- Legal & Accounting Fees: For entity formation and ongoing compliance advice.
Navigating Regulatory Hurdles in Health Care Transactions
All healthcare transactions must navigate a maze of federal law and state laws. These regulations are complex, and non-compliance can lead to severe penalties.
The Federal Anti-Kickback Statute
The Federal Anti-Kickback Statute (AKS) is a cornerstone of healthcare law.
It is a criminal law that prohibits knowingly and willfully offering, paying, soliciting, or receiving anything of value to induce or reward patient referrals or the generation of business involving any item or service payable by a federal health care program.
What is the Anti-Kickback Statute in simple terms? It is a federal law that makes it illegal to pay for referrals of patients.
The law is written broadly. Many arrangements that seem like normal business practices can potentially violate the federal anti-kickback statute if not structured properly by experienced legal counsel.
An example would be a pharmacy paying a physician’s office staff a fee for every prescription sent their way, as this could be seen as giving rise to improper influence.
Understanding Stark Law
The Stark Law is another critical federal law that governs physician referrals. It is a strict liability statute, meaning intent does not matter.
It prohibits physicians from referring patients to receive “designated health services” (DHS) payable by Medicare or Medicaid from entities with which the physician or an immediate family member has a financial relationship, unless an exception applies.
A financial relationship can be an ownership interest, investment interest, or a compensation arrangement.
The core purpose is to prevent self-referral, where a physician could profit from their own referrals, potentially leading to overutilization of services.
What 5 elements must exist for a Stark Law violation to occur?
- A referral from a physician for a designated health service.
- The service is payable by Medicare.
- The referral is to an entity.
- The physician (or an immediate family member) has a financial relationship with the entity.
- No exception applies to the financial relationship.
Understanding the Safe Harbor Rule for Healthcare Ventures
Both the Federal Anti-Kickback Statute and the Stark Law have “safe harbors” or exceptions.
A safe harbor rule defines a payment, business arrangement, or set of procedures that is specifically excepted from prosecution. These other provisions are essential for compliant operations.
For a joint venture or any other business arrangement to be compliant, it must fit squarely within one of these safe harbor exceptions. This is a primary focus for any experienced healthcare attorney.
The following requirements of a specific safe harbor must be met exactly. Structuring such services to meet these exceptions requires deep legal knowledge and careful planning.
This allows legitimate health care providers to participate in collaborations that improve the delivery of care.
The Rise of Private Equity and Large Health Systems in Florida
In recent years, private equity firms have become major players in the healthcare market.
They are pursuing acquisitions of medical practices, health care clinics, and partnering with health systems.
These transactions are often highly complex and require experienced legal counsel to navigate.
Physicians approached by private equity need to carefully review the terms of any proposed sale or partnership to understand the long-term implications for their practice and career.
The business generated by these deals can be substantial, but so are the risks to physician autonomy and the delivery of patient care.
Why You Need Specialized Legal Counsel
The complexity of these transactions cannot be overstated. You need a law firm with a deep understanding of the healthcare industry. Our clients rely on our expertise.
A Specialist’s Critical Advantage
Choosing a general business lawyer over a health care law specialist is a significant risk. A specialist possesses an intimate knowledge of how federal and state regulations intersect with corporate transactions. They have the ability to identify subtle compliance issues in a health investigation that a non-specialist would likely miss. This specialized counsel is not a luxury; it is a necessity for protecting your investment.
Our attorneys provide the legal counsel necessary to:
- Structure transactions for compliance with all state laws and federal law.
- Conduct a thorough health investigation and due diligence to uncover hidden liabilities.
- Negotiate purchase agreements, employment contracts, and management services agreements.
- Provide ongoing legal support for your new business.
Meet Our Lead Healthcare Business Attorney: Aaron Draizin
Aaron Draizin is an aggressive and methodical civil litigation attorney with extensive experience representing medical providers and business owners.
His deep knowledge of insurance law and complex transactions gives our clients a decisive edge.
He now uses his insider knowledge to fight for the rights of healthcare professionals, ensuring every transaction is structured to protect their interests.
He has been awarded an AV Preeminent peer review rating from Martindale-Hubbell and was named a Florida Super Lawyers Rising Star for five consecutive years.
Florida Healthcare Business FAQs
Can you own a medical practice without being a doctor in Florida?
Generally, no. Due to the Corporate Practice of Medicine doctrine, a non-physician cannot directly employ physicians to practice medicine. However, they can own a Management Services Organization (MSO) that provides administrative services to a physician-owned practice.
What is due diligence in healthcare?
It is a comprehensive health investigation of a healthcare practice’s financial, operational, and regulatory compliance history before a sale or merger. This is done to identify potential liabilities and verify the value of the business.
What is the Anti-Kickback Statute in simple terms?
It is a federal criminal law that makes it illegal to pay, offer, solicit, or receive anything of value in exchange for patient referrals if the service is paid for by a federal health care program like Medicare or Medicaid.
What is the difference between Stark Law and the Anti-Kickback Statute?
The Anti-Kickback Statute is a criminal law based on intent, while Stark Law is a civil statute with strict liability (intent doesn’t matter). Stark Law only applies to physician referrals for designated health services and involves a financial relationship, whereas the AKS is broader and can apply to anyone.
Contact a Florida Healthcare Business Attorney Today
Whether you are buying, selling, or starting a medical practice, navigating the legal complexities is critical to your success.
The legal team at Ace Your Case has the experience to guide you through every stage of the process, from initial due diligence to final closing.
Don’t leave your investment to chance. Contact us today to schedule a confidential consultation.
