Here, three consultants and an experienced practice administrator share their advice regarding: planning your transition; dealing with a major life change at the psychological level; finding a buyer for a practice; making the transition as painless as possible for those with whom you work; being realistic about the value of your practice; dealing with (and protecting) your patients; and finding a replacement doctor (when necessary).
Planning for the Change
“The number one pitfall in the process of transitioning from active practice, which I see repeatedly, is that physicians do not plan their transition early enough,” says Bruce Maller, founder, president, and chief executive officer of BSM Consulting. “If you wait until the last year or two to start planning, odds are good that things will not work out particularly well. Things might work out OK if you have no interest in seeing your practice continue, but most of the practitioners I work with feel a sense of purpose and see their practice as a legacy with value. They want to see their practice continue, both for the good of their patients and the good of those working in the practice. For that to happen, you have to be planning much further ahead than a year or two.”
Craig N. Piso, PhD, a psychologist and organizational development consultant with a focus in ophthalmology, notes that planning is essential. “Retiring is a tough thing to do, even if you’re well-prepared. And if you’re not prepared—if you haven’t done any planning—you won’t have confidence about the changes you’re making. In some cases, this results in a doctor avoiding retirement altogether. A lot of ophthalmologists end up working longer than they ever dreamed, and sometimes they can’t even explain why they’re still working.”
How far ahead should you plan your transition? “I normally advise my clients to think about transition planning between three and 10 years before the date that they plan to start the transition,” says Mr. Maller. “If you’re part of a group practice, the group probably has a plan specifying how partners can transition from full-time work into retirement, and that plan probably states how much advance notice you need to provide. In that situation you might be able to get away with planning your transition three to five years ahead of the date you want to move out. But if you’re on your own, you need to plan with a longer-term time horizon. You need to have enough time to do it right.”
In addition to planning early, the following strategies can help make your retirement transition go smoothly (both at the personal and business level):
• Let your goals for the practice drive your transition process. “Five or 10 years ahead of your anticipated retirement date, you need to really think about what your goals are—your goals should drive the process,” says Mr. Maller. “For example, you might want to optimize the worth of your practice, bring in an associate or make sure your practice continues after you leave. You need to be clear on those goals. Otherwise the process will become reactive: ‘Oh, I’m a year away, I’ll just hang up my gloves and in the meantime I’ll try to sell my practice to a group in town.’ If you go that route you’re limiting your options, and the likelihood of a favorable outcome is significantly diminished. If you want to see something happen in the future, whether it’s selling your practice for as much a possible or giving your practice to the next generation, those goals should drive your plans.”
• Have a written plan. “There are so many moving parts to this that you don’t want to forget anything important,” says Corinne Z. Wohl, MHSA, COE, administrator at Delaware Ophthalmology Consultants, who has been in health-care management for more than 25 years. “Write down your plan, step by step. What do you need? What are your concerns? How are you going to address each of them?”
• Get specific about your dreams, goals and aspirations. “It’s important for you to determine what your dreams are,” says Dr. Piso. “I recommend that people write down their dreams and goals for this year and for the long term. Then, start crafting that into a retirement plan, not just a financial plan, but plans centering on the things you’d love to do, the lifestyle you’d like to be living.”
“Make sure you have something to do in retirement,” adds Mark E. Kropiewnicki, JD, LLM, an attorney with Health Care Law Associates and a consultant with the Health Care Group, both in Plymouth Meeting, Pa. “You can’t just go and sit on your rear end. Many people die soon after they retire; some become different, less effective and vibrant than they were before. You need to retire to something—a hobby, a business, becoming a consultant, volunteering—because you’ll get tired of playing golf pretty quickly. Furthermore, if you have a spouse and no project to keep you busy, you’ll get tired of each other pretty quickly, even though you love each other.”
• Don’t be afraid to get help planning the transition. “Doctors often don’t make use of the expertise that’s out there to help guide and coach them when planning for major changes and transitions,” says Dr. Piso. “There are consultants who are expert at the technology of making major life or practice changes, who can assist with both the tangible and intangible variables that must be taken into account.
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"if "Like many surgeons, ophthalmologists tend to rely on their own thinking ... Don't be afraid to get help from someone with expertise in this kind of change."
–Craig N. Piso, PhD |
• Think strategically, not tactically. “Strategic planning means focusing on the longer-term, broader view about positioning your practice for future success,” explains Mr. Maller. “Tactics, in contrast, are the things you do to achieve those goals. In my experience, physicians are very good at thinking tactically, but they seldom think strategically. I think it’s because a surgeon’s job is very tactical: ‘You have a problem, I’ll fix it.’ That’s how surgeons are trained, how they’re wired, and they are very good at that. But if you ask them to think more broadly about something like their business or retirement, many of them find that hard to do. Fortunately, most physicians are incredibly bright, so when I take the time to point them in that direction, they get the idea quickly.”
• If you’re looking for a replacement, one year might not be enough time. “I think it’s getting harder and harder to recruit doctors, although it may depend on what part of the country you’re in,” says Ms. Wohl. “It often takes more than a year to find the right doctor for your practice. You should take that into account when planning your retirement.”
• In a group practice, learn from other doctors’ retirement experience and make changes right after they’ve gone. “We always learn something when a doctor goes through the retirement process,” says Ms. Wohl. “Sometimes when an owner retires, we find that we need to make significant changes in how the compensation formula works. When someone else has just retired is a good time to reevaluate shareholder agreements and compensation formulas; any problems are clear, but emotions are low because usually no one else is on the verge of retiring. It’s harder to fix problems when you’re in the middle of the process yourself.”
• Make sure your practice’s retirement protocol hasn’t been sitting in a file unchanged for years. With circumstances in the world rapidly changing, a plan set up 10 or 20 years ago may not be as applicable as it used to be. “You may not realize it until you start to implement it,” says Ms. Wohl. “At that point, it’s too late. Ideally you should look at your official retirement protocol periodically. Of course, in the real world doctors often don’t because they’re more focused on day-to-day challenges.”
• Remember that the best-laid plans may have to be altered due to circumstances beyond your control. Being flexible can preserve your peace of mind if things don’t go the way you planned. “In the past five years, I’ve known several doctors who had planned to retire who ended up staying on longer than they had anticipated because of the changes in their portfolios in 2008,” says Ms. Wohl. “When they finally retired, they wished they’d been able to do so earlier, but sometimes you have to adapt to unexpected circumstances. If this is the case, focusing on things that do make you happy while still working may relieve some of the stress that comes from the change in plans.”
Dealing With Change
One of the biggest issues a surgeon must deal with when getting ready to retire, according to Dr. Piso, is the difficulty all human beings have making significant changes in life or career. “Even when people want to change, and it’s under their control and in their own best interest, they still often fail to make the changes,” he says. “An ophthalmologist’s career is the result of a huge amount of investment at the front end, including college, medical school, residency, all the effort required to pay back loans, and the work required to get established successfully in a solo or group practice or become entrenched in an academic system, as well as earning the respect of your colleagues. To reach a point at which you’ve mastered your craft may require doing thousands and thousands of procedures. After all of that up-front investment, it’s hard to let go. Some may feel that they haven’t gotten the return on their investment that they deserved. Others simply haven’t done the planning that would enable them to more easily make the transition.”
Dr. Piso observes that it’s always easier to stay with something that’s become comfortable than to risk moving to something new and different. “As author Jim Collins says in his book Good to Great, good is the enemy of great,” he says. “In other words, when things are good enough, we settle. We prefer to remain comfortable rather than deal with the discomfort of embracing change. And there’s the rub, because if we don’t muster our courage and tolerate the discomfort of going through transition, we never make the changes that allow us to be our best, or to have new experiences that might bring us great joy. We settle for what we currently have. The discomfort of making a transition—especially when you haven’t done any planning—is the biggest obstacle to entering what could be a wonderful time of your life.”
Dr. Piso says that three things can help us avoid falling into this trap. “The first thing to do is simply accept the reality that nothing in life is permanent,” he says. “Generally, ophthalmologists find that their surgical skills are the first thing to go. Hands tremble, vision starts to fade. So the first task is to accept that no matter how great your career is, there will come a time when you have to hang up your gloves.
“Second, it helps to have an enlightened understanding of the process of change,” he continues. “We usually think of a change as going from point A to point B, but it’s much more realistic to think of this journey as A to B to C, where B is the transition, which is a thing unto itself. In this case, your career is point A and retirement is point C. B is the transition between those two, and transition can be tough because that’s when you change your habits, lifestyle, schedule, identity and professional activities. Thinking of the process this way helps make it go more smoothly because you’re seeing it more realistically.
“Third, it’s important to realize that the energy you need to deal with the stress of making a transition comes from a psychological, emotional standpoint; it comes from the generation of hope,” he says. “When we have hope, we’re energized. It’s that energy that enables us to keep moving forward and make the changes and endure the difficulties we may encounter in transition.
“There are two primary sources for that hope,” he continues. “One is having goals that are personally important and meaningful to us, such as retiring to doing something different that we really care about. The other is having confidence that we can make the transition successfully. That partly comes from doing our homework about the details of the new situation we hope to create, such as understanding the budget of retirement life, sources of revenue and expenses; but it also comes from having confidence that we’re going to be psychologically and emotionally strong enough to let go of the past and enter new territory and a new lifestyle. When people have hope, both because they’ve planned for tangible concerns like money and budgets and because they have faith in their ability to deal with change, they have the energy they need to make the transition successfully.”
The Challenge of Slowing Down
Many ophthalmologists would prefer to make the retirement transition more slowly; instead of simply calling it quits one day, they aim to cut back on their workload gradually. “In the real world, at least based on my experience, most doctors don’t just work full time and then abruptly stop working,” notes Mr. Maller. “Most choose—or would like to be able to choose—to start the process by slowing down.” Dr. Piso agrees, noting that gradual change is generally much more manageable psychologically and emotionally than abrupt change.
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"[Slowing down] is probably the biggest mistake people make when they're looking to sell. A buyer, whether a group or individual, is looking for a viable practice ... You need to maintain your income and keep your patients coming in as long as possible."
–Mark Kropiewnicki |
“For example, assume I’m in a solo practice wanting to sell to you,” he continues. “My practice is making a decent amount of money. You’ve been in practice for a couple of years working for someone else; now you move into my area and you’re interested in buying my practice. My goal is to sell the practice and continue to make some money; your goal is essentially to slip into my shoes and make the same amount of money I do. The problem is, how can we work out a deal that will allow you to buy the practice and have enough net income to pay me for the purchase of the practice, pay me to continue to work in the practice and put some money in your pocket so you can live? It’s almost impossible to do.
“On the other hand, if the buyer is a group practice it could work out,” he says. “A group practice with three or four doctors and a young guy that’s coming up to speed could buy my practice, allowing me to slow down and take an extra day or two off. They can make money by taking the work that I don’t want to do anymore, including surgeries. We’re seeing a lot of that sort of deal, but selling to a solo doctor is considerably harder.”
In fact, if you’re hoping to sell your practice, slowing down may be exactly the wrong thing to do. “This is probably the biggest mistake people make when they’re looking to sell,” says Mr. Kropiewnicki. “You may be 60 years old and not wanting to work so hard, so you start cutting back from five days a week to four, and then three and a half. But a buyer, whether a group or an individual, is looking for a viable practice. If you’re spending $300,000 for overhead and only putting $100,000 into your pocket, buyers are not going to be interested. And once patients start going somewhere else because you’re cutting back on your hours, there’s no effective way to get them back. So you need to maintain your income and keep your patients coming in as long as possible.
“The same thing applies to doing surgery,” he continues. “If you’re still doing the surgeries you can just transition them all to the guy or group that buys your practice. But if you start referring your surgeries to someone else before you sell, you may have a problem convincing the buyer to proceed.”
Even if slowing down is a viable option in your specific situation, advance planning is crucial. “It requires very effective planning to be able to make a change of this magnitude gradually,” says Dr Piso. “If you cut back to part-time or try out a change in schedule and lifestyle without careful planning, it may not go smoothly. It’s easy to take that as evidence that you’re going down the wrong path. In fact, it may very well be the right path—just the wrong way of trying to get there.”
“The concept of slowing down has strategic implications for the practice that that doctor is a part of, so even this level of change calls for planning far in advance to avoid compromising the needs of the practice,” agrees Mr. Maller. “In my experience, the people you work with will be very reasonable if you give them enough time to manage the change. If you don’t give them much time and you force them into a corner where you’re simply telling them what you’re going to do, they’ll become unreasonable. That rarely works.
“For a solo practitioner, switching to part-time work may require bringing in a younger partner to carry some of the workload,” he adds. “This also requires advance planning, and equally important, transparency. You have to be completely open and honest with the younger doctor about your plans, so he or she can plan accordingly.”
Finding a Practice Buyer
If a part of your retirement plan involves selling your solo practice, that process can involve pitfalls of its own. These strategies can help avoid disappointments and misfires:
• Be realistic about the value of your practice. Mr. Maller says a common mistake he sees solo ophthalmologists make when preparing to retire is having an unrealistic sense of what their practice is worth. “Many surgeons expect that when they retire they’re going to get some significant bolus of cash or consideration for their practice, but when the time comes they find out that this isn’t realistic,” he says. “They may find that there aren’t any buyers for the practice; the big group in town they thought might buy the practice is not particularly interested—certainly not at the price the doctor assumed the practice was worth.
“Don’t let the value tail wag the dog,” he continues. “The practice has been very good to you over the past 35 years; you’ve made a lot of money and done extremely well. Don’t assume there’s this residual value in your practice that you’re going to cash in. That’s just not real-world.
“Ultimately, the real value of your practice is the patient list and patient records, and technically, you don’t own the patient records,” he points out. “You’re simply functioning as a custodian. When you’re transitioning out of practice, it makes more sense to think about finding a capable person or group who can take over as custodian of your patients—as opposed to, ‘I own these 20,000 patient charts, somebody should pay me several hundred thousand dollars for them.’ That’s just not realistic.”
• If you’re a solo practice hoping for a solo buyer, make sure you advertise. “Any potential buyers in your area probably have a restrictive covenant that’s going to prevent them from buying your practice,” notes Mr. Kropiewnicki. “So your buyer will most likely be someone from another part of the country who’s interested in working in your area. Few young doctors coming out of training are looking to buy a practice; it’s usually doctors who have been working for several years who have just decided to make a move. You have to advertise to make that happen.”
• Don’t get too focused on one specific way of selling your practice. “I’m a firm believer that it doesn’t hurt to talk to almost everybody; you never know where the right deal is going to come from,” says Mr. Kropiewnicki. “Be open to alternatives. If you’re looking at a group buying you, it’s basically going to be one your competitors, whether friendly or not. Or a group in the next town over might be looking to make inroads in your community.
“One possibility that’s becoming more common is having a hospital buy your practice,” he continues. “Hospitals are looking for this type of arrangement a little bit more than in the past. It may be that there aren’t many ophthalmologists in the area, so the hospital wants to make sure you stick around for a couple of years until they can recruit another ophthalmologist to come to the area.
“In those cases you probably won’t get top dollar for your practice, but it gives you a nice place to land and continue to work; and you also (hopefully) have someone else who will be responsible for of all the changes that are needed from a standpoint of billing, EMR and regulatory requirements,” he says. “In fact, that’s the reason many older doctors are looking to move on; they have no desire to get into electronic records just to avoid penalties, or to deal with all the regulatory stuff.”
• If your solo practice doesn’t attract a buyer, consider simply working another year or two. “Some doctors want to start slowing down, but nobody wants to buy them, and they don’t want to work for someone else; they’ve been doing things their way and don’t want to have to deal with it,” says Mr. Kropiewnicki. “In many cases, the value of their practice isn’t huge—maybe only $300,000 or $400,000. In that situation, rather than trying to sell it, just work for another year or two. If you’re making $300,000 a year, another couple of years will earn you as much money as you would have from selling the practice. Then, if you want to slow down, work another year making $250,000, another year making $200,000, and another making $150,000.
“By then you’ll probably be looking to get out, because at some point you’re working more to pay the overhead than to put money in your pocket,” he adds. “But I’ve seen doctors do it that way. They’re not making a lot of income, but they’re happy. Some patients will leave, but if you’re not worried about selling that’s not a bad thing. You can continue to work and make money.”
Protecting Patients and Staff
A doctor’s retirement will obviously affect many others, including staff and patients. It’s important to think carefully about how to ensure your patients’ ongoing care, and in some cases, how to encourage them to continue coming to the practice (if the practice will continue after you’ve retired). Similarly, it behooves a retiring doctor to mitigate the potential negative impacts retiring can have on employees.
Probably the most important advice here is to not overlook these concerns. Mr. Maller notes that when doctors start thinking about retirement, they tend to be a little self-centered in how they view the world. “Doctors often don’t think enough about what’s best for their patients and their employees,” he says. “I don’t mean to imply that they don’t care; I don’t think that’s the case. They simply don’t think this way.
“If you run a business for 30 or 35 years, your patients and the people working for you are integral to that business,” he says. “You need to do the right thing for them. You need to make sure your patients have continuity of care, and your employees are not left hanging. Thinking about these issues is hard for many doctors, who are so focused on the finish line that they lose some perspective. Thinking about others first changes your view of the process and how you go about it. That’s actually another reason to be realistic about the value of your practice.”
One of the most important things you can do to minimize the potential negative impact of leaving is to not wait until the last minute to inform your staff. “This is somewhat practice-dependent, but I’m a big advocate for educating and engaging staff sooner, not later, about your plans,” says Mr. Maller. “Of course, you don’t want to scare off the staff and have them think, ‘Oh, he’s quitting, I need to find another job.’ Nevertheless, when communicating with them, be honest. Tell them you’re thinking about transitioning over the next several years and you’re starting to get a little bit more serious about that, but you want them to know that you’re going to do everything in your power to do this in an orderly fashion so that if they choose to stay with the practice they’ll always have a job. Tell them that you’re grateful for their help and loyalty and the wonderful job they’ve done with your patients, and that your goal is to perpetuate the practice into the future.
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"Retirement should be a prospect that you get excited about, and one that is envisioned as another rewarding part of your life, not a sign that your life is over."
–Craig N. Piso, PhD |
“I’ve seen situations in which a doctor knows that on a certain date he’ll be leaving the group, but he doesn’t want to tell anyone, patients or staff, until the week before he leaves,” he adds. “That doctor is putting his interests ahead of what’s best for the group, and I do not advocate that. A doctor in this position may say he doesn’t want to upset anyone, but it’s far more upsetting to leave in this manner.”
Once your staff knows you’re retiring, some will probably want to jump ship before the retirement date arrives. If that’s the case, you may want to incentivize important staff members to stick around. “If you’re selling a practice, you’ll typically end up telling your staff a month or two ahead of time,” says Mr. Kropiewnicki. “If it’s two months and someone you need is not going to be kept on after the sale, or they decide to retire, you may want to give that person an incentive to stick around until the bitter end.
“First of all, if an employee is being terminated, make sure he knows that he’ll be able to collect unemployment because he’s not being terminated as a result of any wrongdoing,” he continues. “And if you need him to stick around, perhaps to keep billing and collecting up to the end (or even a bit beyond), offer him a bonus for staying. This might be a month or even two months or more of extra pay. Sometimes you need to throw some money at it to make it work; otherwise you’ll have to try to hire someone to fill in for two months, which is hard to do.”
Another issue is managing your patients as you approach retirement. If you want your patients to continue coming to the practice after you depart, you need to give careful thought to what you say to them about your departure. Ms. Wohl notes that in her multi-doctor practice retiring doctors are coached about this. “It makes a difference when you verbally pass the patient on to a real doctor with a name, instead of just telling patients that you’ll be retiring in a year and asking them to call and be scheduled with someone else,” she says. “We coach the doctor to say something like: ‘When you come back, I’d like you to see Dr. Jones; she’s been a great colleague of mine for many years, and I think you’ll really like her.’ He can even introduce Dr. Jones if she happens to be nearby.”
You should also coach your staff about how to handle making appointments, taking telephone calls and answering questions about your retirement. “You want to be sure your staff also says the right things,” Ms. Wohl advises. “It’s very easy for a patient to decide to try a practice that’s closer to her home if the doctor she likes is leaving. We try to keep patients attached to the practice by making them feel wanted and doing a personal handoff. Your staff should be coached to say something that indicates you’re hoping the patient will see your colleague, whom you trust and respect and with whom you believe the patient will be very comfortable. It should be a nurturing, personalized handoff.”
Finally, if you’re closing a solo practice, get someone else to take your patient records. “Most states require you to keep your records for a number of years,” notes Mr. Kropiewnicki. “In a group practice, that’s already taken care of. If you’re solo, where are you going to keep them? Your basement or attic? It’s better if you can find somebody that’s willing to take them. You can tell your patients that the other doctor now has their records, which they can get from him if they don’t choose to see him.”
A Great Transition
Clearly, retiring from practice deserves careful thought and planning. Most people only get one chance to do it right, so finding and taking good advice is worthwhile. “If you follow guidelines like those we’ve been discussing, you’re much more likely to be able to transition on your terms, in a way you can be proud of, and in a way that will help ensure that the legacy you’ve created through your career will continue,” says Mr. Maller.
Having the right attitude is also key. “Retirement should be seen as a new section of your life, not just some kind of endgame,” says Dr. Piso. “Retirement can be seen as an empowering opportunity to bring in the return on investment generated by a successful career. It should be a prospect that you get excited about, and one that is envisioned as another rewarding part of your life, not a sign that your life is over. It should be an opportunity to do things you’ve always wanted to do. Then someday when you die you won’t do so with a sense of regret for things not done, but a sense of contentment about a life well-lived.” REVIEW
