Whether you're planning to retire, acquire another practice, or sell your practice to private equity, understanding how to accurately value a medical practice in New York is essential. It's one of the most financially consequential decisions a physician can make—and one of the most complex.
In New York, this decision comes with its own set of challenges: stricter regulations, mandatory transaction disclosures, and structural rules that don’t apply in other states. Add those to standard valuation considerations like earnings, payer mix, and provider dependency, and it’s easy to see why so many physicians miss out on the full value of what they’ve built.
This guide outlines how medical practices are valued, what factors drive that value in New York, and how to avoid costly mistakes, so you can approach this life-changing transaction with clarity and confidence.
Medical practices aren’t valued like retail shops or manufacturing businesses. You’re not just selling equipment or a list of patients: you’re selling a service business with ongoing revenue, reliant on licensed providers and personal relationships. That means valuation is focused less on hard assets and more on sustainable earnings.
The most accurate and widely accepted method for valuing medical practices is the income approach. It’s based on adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) normalized to account for personal expenses, above- or below-market compensation, and other one-time items. This provides a clear picture of the true, transferable earnings potential of the business.
Multiples vary by specialty and performance, but practices with over $1 million in EBITDA tend to command stronger valuations, often 6x to 11x, because they present less risk and more scalability to buyers. Practices below that threshold may still transact at healthy valuations, but they’re often more sensitive to provider dependency and operational inefficiencies.
Other methods, like the market approach, asset approach, and rule-of-thumb multiples, can help round out the picture but are rarely accurate on their own. Market comps are limited and inconsistent. Asset values are often a fraction of the total business value. And rules of thumb (like valuing a practice at 0.5–1x annual revenue) ignore key drivers like profitability and payer mix. These shortcuts can be dangerous if used without deeper analysis.
Bottom line: Sustainable cash flow is king. The stronger and more predictable the earnings, the more attractive the practice is to buyers.
While national trends apply, several factors have an outsized impact on medical practice value in New York. Ignoring them can lead to inflated expectations—or missed opportunities.
Practices also must comply with New York’s corporate practice of medicine laws, which prohibit non-physicians from owning medical entities. Structuring around this typically requires a Management Services Organization (MSO), and even that can be fraught if not done correctly.
Valuations must account for these regulatory risks—both in timing and deal structure. A practice that’s well-positioned and compliant will transact faster and at better terms.
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A successful valuation starts months before a transaction. Preparation, documentation, and professional support can mean the difference between a deal that falls apart and one that builds long-term wealth.
Organize three to five years of clean financials, including tax returns and detailed P&Ls. Normalize earnings by separating business operations from personal expenses: travel, vehicles, family salaries, and other discretionary spending should be clearly adjusted. Compile key data like patient volumes, payer contracts, staff compensation, and equipment lists. For New York practices, include all relevant licensing and compliance documentation to avoid surprises later.
Medical practice valuations in New York come with unique complexities, from CPOM rules to Department of Health filing requirements. A generic, one-size-fits-all approach won’t cut it. You need a partner who understands how regulatory, financial, and operational details drive real deal value.
Common Mistakes:
Correcting these issues mid-deal is costly and delays closing. Fixing them in advance improves valuation and leverage.
You don’t have to wait until a buyer shows interest to improve your valuation. The best outcomes happen when you start preparing several years in advance. During that time, you’ll want to take steps such as:
These steps don’t just boost the selling price: they make your practice more attractive to strategic buyers, private equity platforms, and other acquirers who pay premiums for well-run, low-risk businesses.
Valuing a medical practice in New York is as much an art as a science. It requires a deep understanding of the practice’s earnings potential, operational resilience, and regulatory compliance, all within the context of one of the most complex healthcare markets in the country.
At Revonary, we help physicians throughout New York navigate the valuation process with clarity and confidence. Whether you’re thinking about retirement, exploring a sale, or preparing for acquisition, our team of CPAs and healthcare advisors can help you maximize value and avoid costly missteps.
Reach out to Revonary today to schedule a consultation and take the first step toward a successful transaction.