Medical practices in crisis: Insolvency doesn’t have to be the end

Early warning signs are often ignored

A crisis in a medical practice rarely arises suddenly. Typical warning signs include:

• declining case numbers,
• persistent cash flow problems,
• rising leasing and financing costs,
• a lack of financial transparency,
• increasing use of overdraft facilities,
• deferred tax payments or social security contributions.

The psychological aspect is particularly dangerous: many practice owners hope for too long that the situation will ‘automatically improve’. This is precisely why valuable opportunities for restructuring are lost.

Out-of-court restructuring: often the best first step

In many cases, insolvency can still be avoided. However, this requires early and consistent action.

The focus is usually on:

Cost and structural measures

These include, in particular:

• Adjustment of rental and leasing contracts,
• Optimisation of staff costs,
• Review of external service providers,
• Partnerships or group practices,
• Focus on economically viable services.

Cash flow management

Medical practices in particular often have valuable outstanding fees, which are not, however, consistently monitored. Professional debt management can free up significant liquidity in the short term.

Negotiations with banks and creditors

Banks often respond much more constructively if transparency is established at an early stage and a comprehensible restructuring plan is presented. The credibility of the restructuring plan is crucial in this regard.

Insolvency proceedings today: a restructuring tool rather than liquidation

Modern insolvency law has undergone fundamental changes. Whereas liquidation was often the primary focus in the past, the emphasis today is increasingly on business continuity and restructuring.

This offers significant opportunities, particularly for medical practices.

Self-administration and protective shield proceedings

Of particular interest today are:

• self-administration and
• the protective shield procedure.

The major advantage is that the practice owner generally retains the ability to act and continues to run the practice alongside restructuring experts. Patient care, staff structures and practice operations can often be stabilised.

This is particularly crucial for medical practices. After all, the true value of the practice often lies in the relationship of trust between doctor and patient.

Why early preparation is crucial

Many restructuring efforts fail not because of a lack of options, but because action is taken too late.

Those who react early generally have significantly better chances:

• of preserving the practice,
• to continue operations,
• in negotiations with banks,
• to utilise modern restructuring tools,
• avoiding personal liability risks.

Self-administration, in particular, requires professional preparation. Without robust cash flow planning, transparent figures and a realistic recovery plan, such a process is unlikely to be successfully implemented.

Personal risks are often overestimated

Many doctors still worry that insolvency automatically leads to the loss of their medical licence. This is incorrect.

An economic crisis or the initiation of insolvency proceedings alone do not, in principle, constitute professional unreliability. The situation only becomes critical in the event of accompanying criminal acts – such as asset transfers, tax offences or fraud.

This is another reason why seeking legal advice at an early stage is crucial.