Here you will find a simplified example that helps illustrate the financial benefits of partnering with SMP. The numbers are arbitrary to make the math easy. For a free assessment of the value of your practice, please contact us.
A Better Cardiology (ABC) practice has been providing great patient care to the community for 20 years. The 2 Cardiologists at ABC see patients and offer diagnostic testing. The total revenue of ABC is $1 million per year. Based on the stability and location of the practice, the quality of the equipment and a variety of other factors, SMP values the business at $5 million.
The Cardiologists would like to retain 30% of the business, with SMP partnering at 70%. Upon signing, the Cardiologists receive a cheque for 70% of the value of the business, or $3.5M. They also receive the other $1.5 million in the form of shares in the SMP platform, which will (hopefully) go up in value as the network expands. The 2 Physician-Partner Cardiologists of ABC agree to work for at least 5 more years.
Going forward:
The Cardiologists keep 70% of their professional billings. The other 30% overhead goes to SMP, which uses it to run the business (salaries, rent, disposables, etc). Since the office is now under professional management, the operation is smoother, giving a better patient experience and higher total revenue.
The Cardiologists keep 70% of the professional fees to interpret diagnostic tests. SMP gets 30% of the professional fees, and all the technical fees.
As the SMP network grows across the country, it becomes more attractive to institutional investors (like banks), since the risk goes down. As an analogy, it is less risky to own 30 buildings with 300 tenants than to own 1 building with just 10 tenants. Therefore, the value of the shares goes up.
One of the Cardiologists at ABC has completed their 5-year agreement and wants to retire. SMP will help find a mutually acceptable replacement with one or more younger Cardiologists who fit into the culture of the ABC office. The younger Cardiologists agree to buy the shares of the retiring MD, which have gone up in value since being issued. So, the departing MD gets another bolus of money to launch their retirement plans.
Dr. Krishna Sharma, Chief Medical Officer, Specialty Medical Partners
Comments