Selling your telehealth or digital therapy practice presents a significant opportunity, especially in Tennessee’s growing market. The combination of strong national growth and unique state regulations creates a favorable but complex environment for practice owners. This guide provides a clear overview of the market, key considerations for your specialty, and the steps involved in a successful sale. Understanding these factors is the first step toward making a well-informed decision about your future.
Market Overview
The market for telehealth and digital therapy is not just growing; it is expanding at a remarkable pace. Nationally, the industry is projected to grow by over 18% annually through 2034, signaling a long-term shift in how healthcare is delivered. This trend is not an abstract future concept. It is happening right now. Buyers, from private equity firms to large health systems, are actively seeking to acquire well-run practices to meet this demand.
In Tennessee, the environment is particularly strong. With nearly 85% of hospitals already utilizing telehealth services, the state’s infrastructure and patient acceptance are well-established. This widespread adoption creates a fertile ground for digital therapy solutions to thrive. For a practice owner, this means your business is not just part of a growing trend but is located in a market that is ahead of the curve.
Key Considerations
While the market is promising, a successful sale depends on navigating factors specific to Tennessee. Potential buyers will look closely at your operational and regulatory standing.
Favorable Reimbursement
Tennessee’s status as a “parity state” is a significant asset. This law requires commercial and TennCare payors to reimburse telehealth services at the same rate as in-person visits. For a buyer, this removes a major element of financial uncertainty and makes your revenue streams more predictable and valuable compared to practices in non-parity states.
Licensing and Compliance
Buyers, especially those from out-of-state, will scrutinize your compliance with Tennessee’s licensing laws. Ensuring all your providers are properly licensed to practice in the state is a critical due diligence item. Similarly, having a fully HIPAA-compliant technology platform is not just a requirement but a key selling point. Preparing this documentation proactively is a must.
Market Activity
The initial frenzy of telehealth investment during the pandemic has settled. Today’s market is more mature and rational. This is good news for serious practice owners. The buyers who remain are not speculators. They are strategic acquirers and experienced healthcare investors looking for stable, profitable, and compliant operations with a clear path for growth. They are less interested in hype and more interested in quality.
This means that practices with a demonstrated history of profitability, a stable base of providers, and strong patient relationships are in high demand. These buyers are willing to pay a premium for businesses that have already solved the operational and regulatory challenges. Your proven track record is your most valuable asset in the current environment. The key is knowing how to present that track record in a way that sophisticated buyers understand and value.
The Sale Process
Selling a practice is not a single event but a multi-stage process that requires careful management. Running a structured process ensures you maintain control, protect confidentiality, and create a competitive environment to drive value. While every deal is unique, most successful transactions follow four main phases.
- Preparation and Valuation. This is the foundational stage where we help you organize your financials, identify your practice’s key value drivers, and determine a realistic and defendable market value.
- Confidential Marketing. We identify and discreetly approach a curated list of qualified buyers. Your identity and practice details are protected until a potential buyer is vetted and signs a non-disclosure agreement.
- Negotiation and Offer. Multiple interested parties are managed to create competitive tension. We help you compare offers, which are more than just a price, and negotiate a formal Letter of Intent (LOI).
- Due Diligence and Closing. This is the final, intensive review where the buyer verifies all information. Proper preparation upfront makes this stage smoother, preventing surprises that can derail a deal before the final contracts are signed.
Valuation
Determining your practice’s value is more than applying a simple formula. Sophisticated buyers value businesses based on a metric called Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). This figure represents your practice’s true cash flow. We calculate it by taking your net income and adding back owner-specific expenses like excess salary, personal auto leases, or other non-operational costs. Many owners are surprised to learn their practice’s Adjusted EBITDA is significantly higher than its reported profit.
Once this baseline is established, a valuation multiple is applied. This is not a fixed number. It varies based on risk and growth potential. A practice that relies on multiple providers will attract a higher multiple than a solo operation. Favorable payer contracts and a track record of growth also increase this multiplier. Getting this calculation right is the foundation of any successful sale negotiation.
A comprehensive valuation is the foundation of a successful practice transition strategy.
Post-Sale Considerations
The transaction does not end when the contracts are signed. The structure of your deal has major implications for your future wealth, your role after the sale, and the transition for your staff. Many owners now opt for strategic partnerships instead of a 100% cash sale. These structures often involve retaining a portion of equity or agreeing to performance-based payments. While more complex, they can better align your goals with the new owner and offer significant upside.
Understanding these components is key to choosing the right offer.
| Deal Component | Purpose | Seller Benefit |
|---|---|---|
| Equity Rollover | You “roll over” a portion of your sale proceeds into equity in the new, larger company. | Allows you to share in the future growth and benefit from a “second bite of the apple” when the larger entity sells again. |
| Earnout | A portion of the sale price is paid out over 1-2 years if the practice hits pre-agreed performance targets. | Can bridge a valuation gap and allows you to get paid for the future growth you know is coming. |
Structuring these agreements to protect your interests is critical. The right advisor ensures your legacy is protected and your financial goals are met long after the sale closes.
Your legacy and staff deserve protection during the transition to new ownership.
Frequently Asked Questions
What is the current market outlook for selling a Telehealth & Digital Therapy practice in Tennessee?
The market is growing rapidly with national growth projected at over 18% annually through 2034. Tennessee is particularly strong with 85% of hospitals using telehealth, creating a fertile ground for digital therapy solutions. Buyers are actively looking for profitable, compliant practices in this expanding market.
How does Tennessee’s reimbursement policy affect the sale of a Telehealth practice?
Tennessee is a ‘parity state,’ meaning commercial and TennCare payors reimburse telehealth services at the same rate as in-person visits. This makes revenue streams more predictable and valuable to buyers, removing significant financial uncertainty.
What compliance and licensing issues must be considered when selling a Telehealth practice in Tennessee?
All providers must be properly licensed in Tennessee, and the practice must maintain a fully HIPAA-compliant technology platform. Buyers, especially from out-of-state, will carefully scrutinize these factors during due diligence.
What are the typical steps involved in the sale process of a Telehealth & Digital Therapy practice?
The sale process typically includes: 1) Preparation and Valuation, 2) Confidential Marketing, 3) Negotiation and Offer, and 4) Due Diligence and Closing. Each step helps maintain control, protect confidentiality, and create a competitive environment to maximize value.
How can the deal structure impact a practice owner’s benefits after selling their Telehealth practice?
Deal structures like equity rollover and earnouts allow owners to retain some financial interest or receive payments based on future performance, which can increase total value. Proper structuring protects the owner’s legacy and aligns their goals with the new owner’s for the longer term.