Buy-Sell Agreement - Physician Contract Glossary

Buy-Sell Agreement

Definition

A contract that outlines the terms for purchasing or selling ownership interests in a medical practice.

Examples in Context

“If the physician's employment is terminated or they retire, the employer will repurchase the physician's ownership interest at fair market value within 90 days of the separation date.”

“In the event of a physician's departure, the practice will execute a buyout at an amount calculated using the practice’s last 12 months of net collections, minus overhead expenses.”

Implications for Physicians

• Ensures fair treatment if you leave, retire, or sell your ownership stake.
• Prevents disputes over valuation or payment timelines.
• Protects your investment by providing a clear exit strategy.

Negotiation Tips

• Ensure the valuation method is clearly defined (e.g., appraisal, revenue multiple).
• Request installment payments if a buyout is triggered unexpectedly to reduce financial strain.
• Ask for language that ensures payments are made within a reasonable timeframe after departure.

Red Flags and Pitfalls

• Undefined valuation terms can lead to disputes or undervalued payouts.
• Some agreements may exclude payout for certain conditions, like termination for cause — ensure all payout conditions are listed.
• Ensure the practice is required to initiate the valuation process promptly after your departure.

Related Terms

• Equity Ownership
• Deferred Compensation Agreement
• Ownership and Setting of Fees
• Contracting Challenges

FAQs

• “What happens if I leave the practice suddenly?”
  • The buy-sell agreement will outline the process for calculating and paying your buyout. Ensure the timeline for payout is reasonable (e.g., 30-90 days).
• “Can I negotiate a higher buyout amount?”
  • Yes, especially if you anticipate high revenue growth in your practice. Consider adding language that includes projected revenue in the valuation.
• “What if my ownership stake loses value?”
  • Negotiate for valuation terms that protect against temporary downturns in practice revenue.

Legal Disclaimer

The information provided in this glossary is for educational and informational purposes only and should not be construed as legal advice. While we strive to provide accurate and up-to-date information, this content is intended to help physicians better understand common contract terms and does not replace professional legal guidance.

For personalized advice regarding your employment contract or other legal concerns, we strongly recommend consulting with a qualified attorney who specializes in physician employment contracts.

You can find experienced legal professionals through our Physician Contract Lawyer Directory.