November 6, 2020
Physician real estate succession planning is consistently a primary conversation amongst medical practices. Groups attempting to perpetuate the ownership of their real estate, such that it reflects the dynamic ownership of the practice, often struggle with facilitating large and ever-increasing buy-ins.
What many groups do not realize, however, is the equally difficult proposition on the horizon – how to buy out existing shareholders upon retirement. For those groups that internally finance buy-ins, the issue of buying out partners is compounded because both activities will deplete operating cash flow, perhaps in its entirety. Historically, physician groups have not had the tools available to test the probability and severity of the unfavorable outcomes often spawned from partner succession. This has led to an iterative process of amending their operating agreements with a new partner succession structure and a “hope it works out” strategy.
CMAC developed TruCourse 2.0 to fix this very problem. By applying a physician group’s unique investment specifications, TruCourse 2.0 utilizes a series of statistical modeling algorithms to provide insight into future adverse events. In fact, the algorithms take into consideration 37 different independent variables to understand each group's situation in granular detail. These variables are modeled out over a 15-year period to understand the impact of future buy-ins and buyouts. By running this simulation and tweaking the input variables, groups have the opportunity to mitigate future risks before they happen.
Each group has its own methods of handling partner succession planning and there is certainly not one right or wrong way. Modeling out the current structure, however, will undoubtedly assist in understanding any risks ahead and help to create a more sustainable real estate investment. Contact the CMAC team today to learn what TruCourse 2.0 can do for your group.