Buying a Medical Practice In Ontario
Only licensed physicians can purchase a medical practice.
Although buying a medical practice may be a safer financial decision, there may be some major adaptations required to continue the process successfully. Buyers are likely required to adapt to current practices and cultures or risk losing patients and staff.
From a legal perspective, purchasing a medical practice requires fundamentally the same core steps as other business purchases: Due diligence is the rule of thumb.
First Things First: Confidentiality & Non-Disclosure Agreement
Although some practitioners may wish to shortcut the sale and purchase process and rely solely on a written agreement to complete the acquisition, it is advisable to start first with having both parties sign a non-disclosure agreement to ensure that negotiators safekeep confidential business information about the practice. This may include a valuation of the practice and what it may be worth on the long term, any information regarding cash flow, revenue forecasts, accounts receivable and payable, debts, assets, permits, contracts, equipment and any past or potentially arising legal issues or claims. Confidential business information will also include the findings of due diligence which will be explained below
Next Step: Letter Of Intent
Although it is customary to send a letter of intent and a confidentiality agreement simultaneously, I advise signing the non-disclosure agreement first. A letter of intent is a letter from the party interested in completing the business transaction. The purpose behind it is to agree to a future purchase, with an outline of the terms and conditions of the transaction. The letter of intent will serve as a guiding document for the transaction. This document can be legally binding which is why it is important to have it reviewed or drafted by a lawyer. Our founder’s, Rana Charif, original legal specialty was acquisitions of healthcare clinics. If you need assistance with purchasing a medical practice in Ontario, please book a consultation by calling 647 806 9184 or clicking here.
Due diligence is the main legal step that protects a purchaser. A purchaser is always advised to know why a seller is selling and perform a background check on them to prevent financial issues or litigation in the near future. Legal due diligence involves reviewing employment contracts and ensuring they are transferred as per the business transaction’s intent, investigating the business entity, reviewing all relevant legal documents and ensuring that the business is in compliance with applicable laws. A building inspection will also ensure that the practice facility is up to code. Legal documents will also reveal legally binding relationships with third parties that may be of interest to the purchaser. It is important for the purchaser to know what they will be bound to for years.
If a purchaser needs unbundled legal services to review only certain but not all aspects of the purchase of a medical practice, you can call us at 647 806 9184 or click here to book a consultation.
Guidelines re Patient Records & Patient Care Transfer
The Personal Health Information Protection Act establishes Ontario rules for the collection, use and disclosure of personal health information of patients in order to protect their privacy and the confidentiality of their information. It also provides individuals with a right of access to their personal health information. This Act applies to the transfer of patients’ health records to a purchaser. When needing legal advice regarding the safe transfer of information, we can assist you by providing you with legal guidelines as we draft your agreement or represent you throughout the transaction.
As lawyers, we guide you to make the best legal decisions regarding this process. While we focus on complying with the Law, you can safely focus on the business and medical success of your practice.