Buying a medical or urgent care practice in New York

The 30-second version

Medical practices are typically valued on a multiple of EBITDA (not SDE — most have an office manager in place and physician compensation is a real operating expense). The valuation premium comes from: (1) payer mix (private > Medicare > Medicaid); (2) specialty (procedural > primary care); (3) patient panel retention through transition; (4) physician retention. The diligence job is to identify which regulatory regime applies (Article 28 vs. Professions), verify the Medicare/Medicaid provider enrollment transfer process, and review any Stark exposure.

How medical practices are valued

Medical practices are typically priced on a multiple of EBITDA. See the SDE vs EBITDA guide for the formula. Common medical practice add-backs:

• Depreciation on medical equipment (non-cash — but verify equipment age and replacement cycles).
• One-time legal or regulatory compliance fees.
• Owner physician compensation is a real operating expense (NOT an add-back) — this is the key distinction between SDE-based and EBITDA-based valuation.

Add-backs a SBA lender will challenge:

• Equipment repair and replacement — ongoing capex, not a discretionary add-back ^[3] . Medical equipment has strict replacement cycles and calibration requirements.
• Owner physician 'salary' that's actually two physicians' compensation when only one will be replaced.
• Marketing that drives ongoing patient acquisition.

The three real value drivers

1. Payer mix

The most important medical practice valuation factor: payer mix — what % of revenue comes from private insurance vs. Medicare vs. Medicaid vs. self-pay. Reimbursement differs materially by payer for the same procedure, and the practice’s payer mix therefore drives its revenue per visit more than its volume does. The rates are contract-specific: get the actual fee schedules and the payer mix by revenue, not by patient count. A practice with 70% private insurance is fundamentally more profitable than one with 30% private insurance on the same revenue base.

Diligence: get trailing 12 months of revenue by payer. A practice with declining private payer % is losing the most profitable revenue stream — structural problem.

2. Specialty mix

Procedural specialties (orthopedics, gastroenterology, dermatology, ophthalmology) typically command higher EBITDA multiples than primary care (family medicine, internal medicine, pediatrics) because procedural revenue is higher per visit and the practice is more scalable. But procedural specialties also have higher equipment capex and Stark exposure (ancillary revenue from in-house imaging, surgery centers, etc.).

3. Patient panel retention through transition

The patient panel is the asset. But patients are mobile — they can choose a new provider, follow the selling physician, or move to a competitor. The transition plan is the diligence question:

• Is the selling physician staying on for 2–6 months post-close to transition patients?
• Is there a replacement physician in place, or does the buyer need to hire one?
• What's the patient notification protocol?
• What's the historical patient attrition rate when physicians leave?

Model patient attrition explicitly rather than assuming continuity, and set the assumption from the answers above — whether patients see the physician or the practice, whether that physician is staying and for how long, and what the practice’s own history shows when a physician has left before.

The regulatory bifurcation — Article 28 vs. Professions

This is the diligence angle most buyers miss. Medical practices in NYS fall under one of two regulatory regimes:

• NYS DOH Article 28 (Public Health Law). Regulates diagnostic and treatment centers, urgent care centers, ambulatory surgery centers, and clinical laboratories. The Article 28 operating license is held by the entity and is a materially heavier transfer process than a private practice. Requires DOH approval of the change of ownership.
• NYS Education Department, Office of the Professions. Regulates the practice of medicine itself — physician licenses, professional corporation (PC) registration, professional misconduct. Each individual physician must be licensed individually. The PC registration is entity-level.

For buyers: identify which regime the target falls under before signing an LOI. Article 28 transfers are materially slower (60–180+ days) and require DOH review. Private practice transfers (Professions only) are faster but the buyer must be a licensed physician (or employ one) to operate the practice.

Medicare / Medicaid provider enrollment transfer

If the practice bills Medicare or Medicaid (most do), the provider enrollment must transfer or be re-enrolled:

• Medicare provider enrollment with the Medicare Administrative Contractor (MAC). The provider number (NPI for the practice; PTAN for billing) is tied to the entity and individual providers. A change of ownership requires a new or amended enrolment, and the elapsed time is long enough to govern your closing date rather than follow it. Confirm the current processing time with the payer at the start of diligence, not the end.
• Medicaid provider enrollment with the NYS Department of Health. Similar process; the new owner must qualify individually.

The provider enrollment transfer is a financing contingency. SBA lenders and conventional lenders both want to see active enrollment transfer processes before approving the loan. Build the timeline into your LOI.

Stark Law compliance

The federal Stark Law (Ethics in Patient Referrals Act) prohibits physician self-referral — a physician cannot refer Medicare/Medicaid patients to an entity with which the physician (or an immediate family member) has a financial relationship, unless an exception applies. For a medical practice acquisition, diligence:

• Any existing physician referral patterns to ancillary services (in-house imaging, lab, physical therapy).
• The structure of physician compensation — productivity-based pay must meet Stark's "in-office ancillary" exception.
• Any physician recruitment arrangements or non-compete terms.
• Any vendor relationships (medical device suppliers, pharmacies) that could be construed as kickback.

Use a healthcare attorney. Stark is complex and mistakes are expensive — both civil penalties and False Claims Act exposure.

What you are buying, by practice shape

Medical practices vary more than most categories in what a buyer actually receives. The clinical work, the payer contracts, the ancillary revenue and the goodwill all transfer differently, and the practice’s shape determines which of them dominates.

Two questions decide most of this: who does the patient think they are seeing, and what happens to the payer contracts on a change of ownership. Answer both before you value anything. Credentialing timelines in particular tend to set the closing date rather than the other way round.

The entity-level rules apply across the licensed professions. Every shareholder, officer and director of a New York professional corporation is expected to hold a professional licence, and the Office of the Professions asks filers to allow 8–10 weeks for review — by post. See buying a professional practice in New York.

Medical practice-specific diligence red flags

• Declining private payer %. The most profitable revenue stream is shrinking. Structural.
• Selling physician leaving entirely. Model attrition at the high end where the selling physician is leaving outright and the relationship is with them rather than the practice.
• No transition plan. Patient panel walks with the physician; the practice loses its primary asset.
• Pending Stark or Anti-Kickback review. Real liability; can suspend Medicare/Medicaid billing — which effectively shuts down the practice.
• Outstanding Medicare/Medicaid recoupment actions. Verify with the MAC and NYS DOH.
• Medical equipment at end of life. Medical equipment has strict replacement cycles and calibration requirements; outdated equipment is real capex.
• Patient records retention non-compliance. New York sets a minimum retention period, longer for records of minors. Confirm the current requirement for the specialty with counsel — it is a legal obligation that transfers with the practice, and the records themselves are an asset you must be able to produce. Gaps create regulatory exposure.
• Declining gross margin with stable revenue. Payer mix is shifting toward Medicare/Medicaid. Structural.
• Physician non-compete enforceability. NYS limits physician non-competes; verify current rules with a healthcare attorney.
• Seller pushing to skip Stark review or Medicare enrollment diligence. Walk.

New York State-specific items

• NYS DOH Article 28 license — required for free-standing surgery centers, urgent care, ambulatory care, and certain diagnostic facilities.
• NYS Education Department, Office of the Professions — regulates physician licenses and the professional corporation (PC).
• Medicaid provider enrollment with NYS DOH.
• Combined NYS + local sales tax — most medical services are exempt; ancillary services (cosmetic, certain OTC products) may be taxable. Verify with a CPA ^[4] .
• NYC DOHMH overlay — additional NYC health permits for facilities in the five boroughs.
• Workers' comp, statutory disability, PFL — mandatory for staff ^[5] . WC rates for healthcare (lifting, needlesticks) are typically higher than many service businesses.
• UI registration (NYS 100) via NYS DOL ^[6] .
• HIPAA compliance — federal, but applies at the practice level. Verify the seller's HIPAA compliance program and any breach history.

SBA 7(a) financing for medical practice acquisitions

Medical practices are a common SBA 7(a) use case, particularly for physician buyers acquiring from a retiring physician. Key SBA items:

• Max 7(a) loan $5M; allowed for "changes of ownership" ^[2] .
• Debt service coverage of at least 1.25:1 on a first acquisition, the SOP 50 10 8.1 floor ^[1] ; lenders can ask for more as credit policy ^[3] .
• Buyer equity injection of 10% of total project cost, which SOP 50 10 8.1 states cannot be reduced or eliminated on a first acquisition; no more than half of it may come from a standby seller note. ^[1] See the equity injection guide.
• Buyer must be a licensed physician (or employ one) to operate the practice. Lenders heavily weight the buyer's medical credentials.
• Medicare/Medicaid enrollment transfer is a financing contingency. The lender will want to see active enrollment transfer processes before approving the loan.
• Article 28 license transfer (if applicable) is a financing contingency.
• Stark compliance review — lenders may require a healthcare attorney's opinion on existing arrangements.
• Medical equipment can typically be financed as part of the loan.

See the affordability calculator for the full SBA 7(a) math.