Is Ophthalmology Profitable Today? Factors to Consider Before Selling Your Practice

Ophthalmology can be lucrative, but it doesn't guarantee a good sale. Before selling an ophthalmology practice, you should know what buyers are interested in and what helps or hurts your valuation.

This article will walk you through the realities of the current market and the necessary steps to take when you have decided to exit. Optirova has extensive experience in this field and assists you in securing the best deal from the most suitable buyers.

1. Profitability Depends on Your Focus

Although ophthalmology can be quite lucrative, this doesn't imply that all practices are capable of making a profit. Notably, cataract surgery and premium IOL procedures are some services that generate high margins. Retina specialists with regular referrals have excellent performance. In contrast, general clinics that are mostly dependent on Medicare have to struggle with minimal profits since the reimbursement rates are continually falling. Hence, before selling an ophthalmology practice, you have to look into the sources of your profits. The buyers will offer more for clinics that have multiple sources of income that are not dependent exclusively on one type of operation or one type of insurance.

2. Corporate Buyers Are Everywhere

Private equity groups are purchasing practices quickly. This situation offers chances for selling an ophthalmology practice; however, be careful of the fine print. Corporate purchasers frequently extend 5-8x EBITDA and finalize the deal quickly. The downside? They are frequently binding 30-40% of your funds to the performance metrics post-acquisition, over which you have no control. Individual buyers and younger doctors provide simple deals but might need you to fund part of the sale. Learn what each type of buyer looks for and improve your negotiating skills.

3. Old Equipment Hinders High Price

While selling an ophthalmology practice, depreciated equipment brings down your value. Buyers will add the cost of replacing phaco machines, OCT devices, and diagnostic tools to the price you present. If your equipment is out-of-date, you can expect buyers to slash $200,000-$500,000+, which translates to the cost of very advanced models of machinery. Selling in the near future and planning for 18-24 months? Recognizing your strategic need for an upgrade of equipment can yield a 3-4x increment through higher selling prices. Address vital gaps first.

4. Dependence on Medicare Is a Negative Sign

Medicare continues to reduce reimbursement rates. Before selling an ophthalmology practice, you need to demonstrate that your income is secure. Those practices with a large share of elective surgeries (LASIK, cosmetic procedures, premium cataract options) make you feel safer when talking about government payment cuts. Prove your payer mix. Buyers discount heavily if 70%+ of your revenue is Medicare. If you find yourself in this situation, either diversify revenue before making a sale or accept a lower price.

5. Staff Turnover Points to Problems

Buyers going over selling an ophthalmology practice concern areas tend to take employee tenure into account. A high turnover rate is associated with either management issues or pay problems. Practices that have a long staff list—especially those with experienced ophthalmic technicians and surgery coordinators—often have higher evaluation rates since they operate effectively. Did you have any recent staff changes? Resolve the issues before listing. During due diligence, buyers will find out for themselves, and in the end, the explanation will make you look bad.

6. Your Patient Demographics Matter

When it comes to selling an ophthalmology practice, patient age distribution becomes a matter of value. Buyers seek to purchase practices that have patients falling in the range of 45-65, as these will get more cataracts and glaucoma in the future. On the flip side, practices that have a dominant 75+ age group perplex buyers who foresee decreasing numbers through natural attrition. Hence, you need to be aware of patient demographics. In case you have an older base, the best way would be to prove your relationships with the specialists who attend to the younger patients or show that you have achieved strong new patient acquisition.

7. Real Estate Issues Add Difficulty

Selling an ophthalmology practice is complicated when you have your own building. Some buyers will want the real estate included in the deal, while others would prefer having a lease. If you own the building, you'll need to decide right away if you will sell it with the practice or not. If you keep it, you will collect rental income, but negotiations will be complicated. It's easier to sell it, but it may result in poor tax treatment. Leasing could slow down the process. Therefore, it would be best to have prior discussions with tax advisors and brokers before making a decision that could either increase or decrease your net proceeds significantly.

Seek the Expertise of Optirova

Selling an ophthalmology practice is a task that requires specialized expertise. Optirova offers expertise regarding the ophthalmology valuations, what buyers expect, and the relevant market conditions. We take care of everything—from confidential marketing to closing—to ensure that you avoid mistakes and increase the value of your practice.

Do you want to know your practice's prospective selling price? Reach out to Optirova's team without delay.