If selling or raising capital is part of your three-to-five-year plan, do not wait until the buyer, lender, or investor arrives to improve the business.
Capital providers generally place greater value on practices with clean data, reliable cash flow, defensible EBITDA, diversified revenue, and operating systems that do not depend entirely on the physician owner.
Here are the areas to address before entering the market.
1. Clean your patient data
A patient database may look valuable until diligence reveals that a meaningful portion of it is unusable. How many records contain:
- Disconnected phone numbers
- Invalid email addresses
- Outdated insurance information
- Duplicate profiles
- Inactive patients
- Patients the practice no longer serves
- Deceased patients
- Missing demographic or consent information
A buyer or investor will want to understand the practice’s active, reachable, and appropriately documented patient population. A large database filled with inaccurate records does not support the same value as a smaller, well-maintained population.
Begin cleaning the data well before a transaction. Establish standards for updating contact information, verifying insurance, identifying duplicate records, and distinguishing active from inactive patients. Any cleanup should follow HIPAA, record-retention, and applicable legal requirements.
Clean data supports more than diligence. It improves scheduling, patient outreach, billing, service-line enrollment, and marketing performance.
2. Optimize billing and collect what you have already earned
A buyer will examine revenue quality, not simply top-line billings. Coding errors, missed charges, unresolved denials, unworked accounts receivable, and inconsistent documentation weaken cash flow and introduce uncertainty. A buyer may discount earnings it cannot verify or does not believe will continue.
Before a sale or capital raise:
- Audit coding and documentation
- Identify missed or undercoded services
- Work aged accounts receivable
- Review denial patterns
- Confirm eligibility-verification workflows
- Track billed revenue against actual collections
- Correct recurring leakage inside the EHR and billing systems
I partner with GenerXAI, whose AI agents were built on research originating at the National Institutes of Health. The agents operate within EHR and billing workflows to identify patterns associated with revenue leakage and missed care gaps.
GenerXAI reports that its platform can increase revenue by approximately $18–$25 PMPM and identify three to four times more care gaps, depending on the practice and implementation. The company also offers an initial three-month term followed by month-to-month flexibility, allowing practices to validate performance before accepting a longer commitment.
These are company-reported results and should be validated against the clinic’s patient population, payer mix, workflows, and baseline performance.
Do not take preventable billing leakage into a transaction. Improve it early enough for buyers to see sustained collections, not a last-minute adjustment.
3. Present a true, defensible EBITDA
Many physician owners run personal or non-operating expenses through the practice. Some expenses may qualify as legitimate owner add-backs during a transaction. Others create unnecessary questions and make the financial statements harder to evaluate.
Separate personal, discretionary, and nonrecurring expenses from the clinic’s normal operations. Work with qualified accounting and transaction advisors to identify defensible adjustments and produce financial statements that accurately reflect the earnings of the business.
Do not simply “add back” every expense you believe a future owner would eliminate. Buyers will challenge unsupported adjustments. The objective is clean, credible EBITDA that can withstand diligence.
4. Build revenue-driving service lines before the transaction
A practice that relies almost entirely on physician visits may be less attractive than one with multiple, established sources of recurring revenue. Clinically appropriate service lines can include:
- Chronic Care Management
- Remote Patient Monitoring
- Remote Therapeutic Monitoring
- Advanced Primary Care Management
- Behavioral Health Integration
- The GUIDE Model for dementia care
These programs can improve access, support patients between visits, maintain more current patient information, and create revenue beyond the traditional appointment.
However, a service line launched immediately before a sale or capital raise may receive limited valuation credit. Capital providers want evidence that the program is compliant, operationally stable, producing collections, retaining patients, and capable of continuing after the transaction.
Ideally, establish the program early enough to demonstrate:
- Consistent enrollment
- Patient engagement and retention
- Reliable billing and collections
- Clear clinical escalation pathways
- Defined vendor and staff responsibilities
- Documented quality or access improvements
- Sustainable contribution to EBITDA
Recurring revenue becomes more valuable when it is proven and does not depend entirely on the selling physician.
Raising capital no matter your needs
A practice may need capital without wanting to sell. Growth capital can support:
- Physician and APP recruitment
- New locations
- Equipment and technology
- Marketing and patient acquisition
- Acquisitions of smaller practices
- Ambulatory or office-based procedural capabilities
- New service lines
- Working capital during expansion
Whether the capital comes from a bank, strategic partner, private equity investor, family office, or another source, the underlying questions remain similar. Can the practice produce reliable financial information? Is revenue recurring and collectible? Can the operating model scale? Is growth dependent entirely on one physician? How will the capital generate a return?
Clean patient data can demonstrate the size and quality of the addressable population. Strong billing shows that the practice converts clinical activity into cash. Revenue-driving service lines can prove that the clinic can create additional value from its existing patient base.
Practices should also know exactly what type of capital they need. Debt preserves ownership but requires repayment and dependable cash flow. Equity may provide more flexibility and strategic resources but requires giving up part of the business and potentially some control.
Do not raise capital simply because it is available. Develop a specific use-of-funds plan
showing:
- How much capital is required
- Where it will be deployed
- What milestones it should achieve
- How quickly the investment can produce value
- Whether the practice can support repayment or dilution
- How the capital affects future ownership options
A cleaner, more profitable practice is better positioned to obtain capital on favorable terms and maintain greater control over the relationship.
What I learned from Chicago Cardiology Institute
I first met Chicago Cardiology Institute in late 2021. During our first meeting, its founder and CEO, Dr. Parag Doshi, told me he expected to pursue a transaction within the following 12 to 24 months. He wanted to implement Chronic Care Management and Remote Patient Monitoring for two connected reasons:
- Improve care and support for the practice’s cardiovascular patients.
- Create additional recurring revenue that could strengthen the practice’s value at sale.
CCI moved forward with those service lines. Its partnership with Cardiovascular Associates of America was publicly announced in October 2022. After the transaction, Dr. Doshi told me directly that CCM and RPM had meaningfully improved the practice’s valuation multiple.
Value creation should begin before the sale process.
CCI did not view ancillary services only as additional billing codes. The practice used them to enhance patient care, establish recurring revenue, and present a stronger operating story to the market.
Buyers and investors pay for earnings, quality, and reduced risk
A capital provider is not evaluating only the prior year’s revenue. It is assessing:
- How reliable the financial and patient data is
- Whether revenue will continue
- How dependent the clinic is on the owner
- Whether billing and documentation are defensible
- How engaged and reachable the patient population is
- Whether service lines can scale
- Whether new capital can produce additional growth
- How much operational cleanup will be required
Clean data reduces uncertainty. Optimized billing strengthens cash flow. Defensible financials create confidence. Established ancillary services can diversify revenue and demonstrate a more comprehensive care model.
None of these actions guarantees a particular valuation, transaction multiple, or financing outcome. But together they can make the practice more durable, scalable, transferable, and attractive to capital providers.
Do not begin preparing your clinic when the letter of intent or financing proposal arrives. Clean the data. Capture the revenue you have earned. Remove financial noise. Build valuable service lines. Prove the model. Develop a credible growth plan.
Then decide whether to remain independent, raise capital, or sell from a position of strength.
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