Hi,
Can anyone suggest a good article or white paper on the implications of donating a private physician practice to a hospital? Thank you. Jane Alessandrini
In donating a practice, what is it worth? How do you value it? In a practice, they sell time and service. when the physician retires or quits, they have nothing to sell. And a few years out, the physician's equipment is obsolete. In my opinion, the hard assets of equipment and buildings is what can be donated. Something a CPA can do in finding out the hard value. Again, what are the assets to be donated is the key because the physician is the practice. If I can find a white paper or article, I'll let you know. But if you can get some free advice from a CPA, they can point you and donor in the right direction. Tom Marshall, CFRE
Jane:
I've not had experience with an m.d. practice yet but I have worked with gifts of partnership shares thru wills of deceased lawyers who wished to benefit the Law School at my institution. One of the more valuable assets was the accounts receivable. However, as Tom suggests, you really want some expert CPA or counsel advice on this as it is my recollection that such receivables are IRD in the hands of an individual beneficiary and to receive such a gift could involve you in collection problems....Howard Salmon, Jr, J.D.
Tom is absolutely right. A few years ago 2 of our local physicians (husband and wife) decided to retire early. They both had their own practices, one a Peditrician and the other an Opthomologist. They donated their building to our non-profit hospital, thus having a tax deduction. They did not attempt to donate their "practice" since there would not longer be services being provided. As always though, a CPA would be able to provide further clarification. Rob Timm, CFRE
Does the practice have a patient list it can transfer to the hospital along with any good will. If so you might be able to place value on it. If the patients move over then I think you can arugue you have transferred something of value. If you sell a practice to another physician doesn't it have value?
See also power point illustration and discussion of the sale of a dental practice using a CRT at http://www.floridadental.org/foundation/documents/Selling.pdf
I handled a gift of this nature a couple of years ago. There are many issues that need to be addressed beside the gift implications. These include who is responsible for the old and current patient records if your hospital is going to continue the practice. Does the retired physician have a sufficient tail on his/her liability insurance.
On the gift front, there are a number of companies that in fact specialize in appraising professional practices. In the case that I was involved with, the donor claimed a deduction for the equipment that was donated and also claimed a substantial deduction for the intellectual property value of his practice. Thus far, he has not been audited by the IRS. From the organization's point of view, the donor recognition was limited to the tangible assets that were donated.
There are also gift implications based on the manner in which the physician owns his practice. Options may very depending on how the physician is incorporated.
It has been my understanding that the corporate form of the practice must be a C Corp. That introduces other issues that may complicate the transfer of a practice to a new buyer, or at least make it less desireable to a new buyer.
This is in response to comment #4, suggesting gifting of patient names.
The patient list should not and cannot be given or disclosed to a charity that does not have prior legal rights to know the names of the patients. First, there is the medical ethics issue in regard to disclosure of the patient names. Disclosure of the names would violate doctor-patient confidentiality. Second and more important is the fact that disclosure of the patient names to entities (who were not part of the same company as the physician's office) is illegal.
Now, more than ever, privacy laws in the U.S. are more strict and apply to ALL U.S. states. See The Health Insurance Portability and Accountability Act of 1996 (HIPAA). Disclosure of even the patient's names to other than those who needed to know at the physician's office or are legally the same part of the office is illegal per this federal law. Patients can sue and prevail in private court for violation of their privacy rights and the Office of Civil Rights, Department of Health and Human Services oversees HIPAA complaints as well.
Therefore, patient names should not and cannot be considered a part of the gift value since they legally cannot be transferred to an outside organization without a highly specific legal waiver from the patients. Susan Lee, Esq.
Physician practice
In donating a practice, what is it worth? How do you value it? In a practice, they sell time and service. when the physician retires or quits, they have nothing to sell. And a few years out, the physician's equipment is obsolete. In my opinion, the hard assets of equipment and buildings is what can be donated. Something a CPA can do in finding out the hard value. Again, what are the assets to be donated is the key because the physician is the practice. If I can find a white paper or article, I'll let you know. But if you can get some free advice from a CPA, they can point you and donor in the right direction. Tom Marshall, CFRE
Physician's practice
Physician practice
Tom is absolutely right. A few years ago 2 of our local physicians (husband and wife) decided to retire early. They both had their own practices, one a Peditrician and the other an Opthomologist. They donated their building to our non-profit hospital, thus having a tax deduction. They did not attempt to donate their "practice" since there would not longer be services being provided. As always though, a CPA would be able to provide further clarification. Rob Timm, CFRE
Physician practice
Physician Practice
Physician Practice
I handled a gift of this nature a couple of years ago. There are many issues that need to be addressed beside the gift implications. These include who is responsible for the old and current patient records if your hospital is going to continue the practice. Does the retired physician have a sufficient tail on his/her liability insurance.
On the gift front, there are a number of companies that in fact specialize in appraising professional practices. In the case that I was involved with, the donor claimed a deduction for the equipment that was donated and also claimed a substantial deduction for the intellectual property value of his practice. Thus far, he has not been audited by the IRS. From the organization's point of view, the donor recognition was limited to the tangible assets that were donated.
There are also gift implications based on the manner in which the physician owns his practice. Options may very depending on how the physician is incorporated.
Corporate form of the practice
Thank you
Physician practice
The patient list should not and cannot be given or disclosed to a charity that does not have prior legal rights to know the names of the patients. First, there is the medical ethics issue in regard to disclosure of the patient names. Disclosure of the names would violate doctor-patient confidentiality. Second and more important is the fact that disclosure of the patient names to entities (who were not part of the same company as the physician's office) is illegal.
Now, more than ever, privacy laws in the U.S. are more strict and apply to ALL U.S. states. See The Health Insurance Portability and Accountability Act of 1996 (HIPAA). Disclosure of even the patient's names to other than those who needed to know at the physician's office or are legally the same part of the office is illegal per this federal law. Patients can sue and prevail in private court for violation of their privacy rights and the Office of Civil Rights, Department of Health and Human Services oversees HIPAA complaints as well.
Therefore, patient names should not and cannot be considered a part of the gift value since they legally cannot be transferred to an outside organization without a highly specific legal waiver from the patients. Susan Lee, Esq.