Aging Physicians Are Selling Their Practices - and the Real Estate Attached Is Complicating the Exit

A generational turnover is underway in independent medical practices across the United States, and it is creating a real estate problem that most commercial brokers rarely encounter. Roughly 30 percent of physician-owners looking to sell their practices also own the building, according to Shaun Rudgear of Strategic Medical Brokers, a national firm that specializes in medical practice sales. That overlap between business and property means the typical exit is not one transaction but two, and the second one, the real estate, often determines whether the first one closes at all.

When the Building Can’t Support the Deal

A practice sale depends on the buyer’s ability to finance both the business and the occupancy. When the physician also owns the building, the buyer either purchases or leases the property alongside the practice. Banks impose their own requirements: commercial lenders require the practice to remain in its current location for a minimum of five years, and SBA lenders require the right to occupy for up to ten.

That location lock creates a dependency. If the practice generates enough revenue to cover both the business acquisition debt and the real estate debt, the building can be bundled into the sale. If it doesn’t, the deal has to be restructured. Rudgear points to a current central Florida listing involving a plastic surgery practice with a med spa where the revenue falls short. “The practice isn’t generating enough money to support the sale of the building because it just can’t support the debt service coverage,” he says. In that case, the only viable path is to place the buyer on a long-term triple net lease – ideally ten years with options – and then sell the building separately to a healthcare real estate investor using the lease as the income stream.

A physician who assumed they would walk away from both the practice and the building in a single closing may instead need to close the practice sale first, establish a lease, and then market the building to an entirely different buyer pool.

Who Is Actually Buying

The buyer profile for independent medical practices does not match the assumption that younger physicians are stepping in to replace retiring ones. Newer graduates, Rudgear says, overwhelmingly prefer employment. “They want high income, they want to relieve their debt, and they want lifestyle. They don’t want all that responsibility and burden of owning a practice.”

The typical individual buyer is a physician between 40 and 55 who has spent roughly a decade in corporate healthcare and grown dissatisfied enough to pursue ownership. Beyond individuals, group practices acquiring to expand into new markets, strategic buyers in complementary specialties, and institutional buyers including hospitals and private equity firms round out the demand side.

Rudgear describes one example of the strategic buyer: a cardiologist purchasing a large primary care practice to create a referral pipeline for cardiovascular patients. “If they buy this primary care practice, they can have this synergistic relationship between the primary care and get more patients over into their cardiology practice,” he says.

The Hospital Wave Has Already Passed

The narrative that hospitals and private equity are buying up every independent practice is partially outdated. Hospital systems drove a significant acquisition wave to control patient flow, converting independent practices into branded outpatient clinics. But Rudgear says that cycle has largely run its course. “That wave has already kind of happened.”

What persists is an information gap. Most physicians considering an exit know only a few options: close the doors, give patients to a competitor, or sell to a hospital system. Few are aware that brokers specializing in medical practices exist. That gap has pricing consequences – Rudgear says his firm typically sells practices for double what a hospital system offers. “The hospitals have been able to get away with paying next to nothing for a long time because doctors only were aware that was the only option rather than close my doors.”

What Sells and What Sits

Practices that stall on the market share common traits: unrealistic pricing, poor financial documentation, and sellers unwilling to consider deal structures beyond all-cash. Rudgear notes that 80 percent or more of business sales involve some level of seller financing. A seller who insists on all cash “has eliminated 80% of the market.”

Specialty practices aligned with an aging population – cardiovascular, endocrinology, neurology, dermatology, rheumatology, oncology – are in strong demand but take roughly 20 to 25 percent longer to sell because fewer subspecialists are in the buyer pool. Cash-based practices that operate outside the insurance system, including concierge medicine, aesthetics, and hormone replacement clinics, are also in high demand.

That shift toward cash-based models is itself accelerating. Physicians frustrated by shrinking reimbursements are opting out of insurance entirely and converting to concierge models – limiting their patient panels and offering direct access for a fee. “Physicians are finally tired of fighting the insurance game and the insurance companies continuing to compress down the profit margins,” Rudgear says.

Financing Favors the Physician Buyer

Lenders view physician borrowers as low risk, and the financing reflects it. According to Rudgear, banks will offer physicians up to 100 percent financing on the practice itself – no down payment required, only liquidity for cash flow. On the real estate side, terms run to 20- to 25-year amortization at fixed rates in the low six percent range, with roughly 15 percent down. Having real estate in the deal helps rather than complicates the financing. “Banks love physicians,” Rudgear says.

Interest rates remain the variable Rudgear watches most closely, since rising capital costs affect both practice valuations and buyer qualification. But the deeper structural pressure, he says, is the imbalance between retiring physician-owners who have deferred their exits – often for years, waiting for a successor – and a younger generation uninterested in ownership. “They’re staying there, deferring their retirement for another year, another year, because they don’t know how to solve the problem.”

For physician-owners who also hold the real estate, that delay carries a compounding cost: the longer the practice stagnates without a succession plan, the harder it becomes to structure a deal where the building’s debt service is supported by the business underneath it.