Selling a physiotherapy clinic in Canada

A physiotherapy clinic is built on referrals, steady bookings and physiotherapists that patients trust. Buyers will want to see that the visits are real, that the clinicians will stay, and that ICBC, WorkSafeBC and insurer billing can carry on under a new owner without a gap. Here is what to expect and how to prepare.

What buyers look at first

Most buyers of a physiotherapy clinic ask the same questions early. Have clear answers ready before you list:

• Sales and profit. Two or three years of numbers by month, with treatment revenue kept apart from product sales.
• Visits. Visits per week, new patients per month, average visits per case and how full each schedule is.
• Who pays. The share of revenue from ICBC, WorkSafeBC, extended health plans and patients paying directly.
• Clinicians. Each physiotherapist's visits and revenue, how they are paid, and who plans to stay.
• Referrals. Where new patients come from, such as doctors, sports clubs, online booking or word of mouth.
• Space and equipment. The lease, treatment rooms, gym area and the age of equipment such as tables and shockwave or laser units.
• History. Any billing audits, complaints or claim recoveries.

Buyers will check these during due diligence, so it helps to gather them now. Our list of documents needed to sell a business is a good start.

Proving visits and revenue

Your booking and charting software holds the visit history, and buyers will want reports from it that match your bank deposits, your payer remittances and your tax returns. Keep revenue by payer and by clinician, because a clinic that depends on one funder or one physiotherapist carries more risk for a buyer.

If you treat patients yourself, list a fair wage for your own caseload and any personal costs run through the business as add backs with proof, and be honest about what it would cost to replace your hours. Clinics where the owner treats most patients are harder to sell, so see making your business run without you.

Keeping your physiotherapists

Patients tend to follow the clinician they see. Many clinics pay physiotherapists as contractors on a percentage split, others as employees. Gather each agreement, check notice periods and any non solicitation terms, and think about when to tell your clinicians. A buyer may ask key people to sign new agreements before closing, or tie part of the price to them staying through an earn out or a holdback.

In British Columbia, section 97 of the Employment Standards Act says that when a business is sold, the employment of an employee is deemed continuous with the new owner. Talk to your lawyer about how employees and contractors move over, and read what to tell employees when selling before you share the news.

ICBC direct billing

For many clinics, patients injured in car crashes are a large share of visits. ICBC's physiotherapy program guide says that if a firm changes its legal name or ownership, it must submit a new application through the Health Care Vendor Application. ICBC's vendor account questions add that Recovery Network accounts are not transferable, are tied to one physical location, and that the application has a field to show you recently purchased an existing clinic. Approval into the Recovery Network is at ICBC's discretion, and only services by an approved physiotherapist at an approved firm can be direct billed. Plan the buyer's application well before closing so patients can keep coming without paying up front.

WorkSafeBC contracts

Clinics that treat injured workers usually hold a contract with WorkSafeBC. Its Physiotherapy Services Agreement says the contractor must give at least 60 days written notice of a proposed change to its legal ownership or facility location, and ask for approval. WorkSafeBC may require the new owner to qualify or requalify as a provider, and it may decline the change. New providers apply with a vendor application, and WorkSafeBC says a contracted clinic must operate in BC with a registered physiotherapist. Put this notice into your timeline and your offer conditions. See transferring contracts and licences.

Extended health insurers and their billing networks each have their own provider sign up, so make a list of every payer you bill and ask how a new owner registers.

Corporation permits in British Columbia

Physical therapists in BC are licensed by the College of Health and Care Professionals of BC. The Health and Care Professionals Regulation says a corporation that does not hold a health profession corporation permit must not carry on the business of providing health services to the public when those services are provided by licensees who practise physical therapy. The College's page on corporations explains how a permit is applied for, including corporate records, proof of liability protection and a certificate from a lawyer, and that an eligible licensee is named as the designated person.

This matters for how the deal is built. In a share sale, the buyer takes over the company that already holds the permit, and the company must still meet the rules afterward. In an asset sale, the buyer's own company may need its own permit before it starts. Ask your lawyer and the College how the rules apply to both companies before you set a closing date. See asset sale vs share sale.

Patient records and privacy

Patient charts are sensitive and hold much of the clinic's value. In British Columbia, section 20 of the Personal Information Protection Act allows personal information to move to a buyer as part of a sale without consent, but only what is needed, only under an agreement that limits how it is used, and after closing the people whose information was passed on must be told that the sale happened. During due diligence, share counts and summaries rather than patient names.

The College's records standard says a complete patient record must be kept for at least 16 years from the last encounter, or 16 years from the date the patient reaches the age of majority, whichever is later, and that patients can ask for access to their records. The purchase agreement should say who keeps the charts, how patients and the College can reach them, and how they stay secure. See telling customers and suppliers.

The lease and the space

Location, parking and accessibility drive referrals. Check how many years are left, any renewal options, whether the landlord must consent to an assignment, and whether the use clause allows a health clinic. Buyers will also look at the number of treatment rooms, since rooms limit how many clinicians can work at once. See the commercial lease when selling.

GST/HST and PST

Physiotherapy services rendered to an individual by a licensed practitioner are generally exempt from GST/HST under section 7 of Part II of Schedule V to the Excise Tax Act, whether the patient, an insurer or another party pays. The CRA notes that services outside the scope of the profession, and some other services offered in clinics, can be taxable, and that a provider of both must separate them. Products such as braces, tape and exercise equipment may be taxable for GST/HST and for BC PST.

When the clinic itself is sold in an asset sale, the section 167 election on Form GST44 can often remove GST/HST when the buyer acquires all or substantially all of what is needed to run the business, but it has conditions about registration, so ask your accountant. In British Columbia, PST generally applies to taxable equipment such as treatment tables and exercise machines, but not to goodwill. See taxes when selling a business.

A worked example

Questions to take to your lawyer and accountant

• Should this be an asset sale or a share sale, given the permit rules and the billing contracts?
• Does the buyer's company need its own health profession corporation permit?
• What notice do ICBC, WorkSafeBC and each insurer need, and when?
• How do my physiotherapists and staff move to the buyer, and what do their agreements allow?
• Who keeps the patient charts, for how long, and how are patients told?
• Am I charging GST/HST and PST correctly on services and products?
• Can we use the section 167 election, and how does PST apply to the equipment?

Rules and fees change, so confirm current requirements with the College of Health and Care Professionals of BC, ICBC and WorkSafeBC before you set dates. For more, read what your lawyer and accountant do. Running a related business? See selling a spa, massage or wellness clinic or selling a gym or fitness studio. Running a dental office? See selling a dental practice. Running an animal clinic? See selling a veterinary clinic. This guide is general information, not legal or tax advice for your situation. Questions about listing with us go to hello@sellmybusinessdirect.com.