Go Private or Stay with Employer

[bababrown]

I am OP rheumatologist, in NorthEast, employed by hospital system making low 200s with full benefits (medical, dental, health, 401k with 6% match). I have an offer from south (urban setting) for a profit sharing partnership employment from the physician owned practice. Partnership may not be the right word as there is no buy in or buy out, but the practice is ready to offer profit sharing from ancillaries (infusion, imaging and labs) from the first year. The profit sharing is capped at 35% meaning out all the revenue I bring in, the practice keeps 65% as its profit + overhead costs and passes on 35% to me minus my salary. Salary is the same at my current job, but may not matter after 2 years as I expect to exceed that in 35% of collections.

I am on the fence with this. I like the idea of private practice, being in south, as well as the upside potential with profit sharing although I am not very good at making sense out of numbers. The cons are I have a very nice established practice currently and I will have to start with scratch in terms of new patients once I move.

Any thoughts helping me to go one way or the other are welcome. Thanks.

 

 

[CordMcNally]

That isn't even close to a partnership. It's basically an employed position with performance bonuses. Do they tell you how much other docs are bringing in so you can get an idea of what the bonus potential is?

[bababrown]

CordMcNally wrote:

That isn’t even close to a partnership. It’s basically an employed position with performance bonuses. Do they tell you how much other docs are bringing in so you can get an idea of what the bonus potential is?

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Thanks for your response.

The other providers in the practice are making around 350K depending upon what they're billing and amount of the infusions being done.

How does this compare to partnership? I understand that with partnership one will have equal claim on the profits as the rest of the people but also will have to factor in overheads. Being paid 35% flat out and not have to worry about overheads (including imaging and lab) is bad of a deal compared to traditional buy in partnership models?

[CordMcNally]

bababrown wrote:

How does this compare to partnership? I understand that with partnership one will have equal claim on the profits as the rest of the people but also will have to factor in overheads. Being paid 35% flat out and not have to worry about overheads (including imaging and lab) is bad of a deal compared to traditional buy in partnership models?

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In a partnership, you're entitled to your equal share of profits (or losses). I'm not sure what the overhead for the group is but I do know one thing, they're still going to be making plenty of money off of you. With that said, it may not be a bad deal for you. Not everyone wants to deal with the potential headaches of a partnership and owning your own job. Just know that there will never be a time where they lose money on you.

[EntrepreneurMD]

35% of your collections in income is low. Ask for 40-45% on the salary side.

[bababrown]

EntrepreneurMD wrote:

35% of your collections in income is low. Ask for 40-45% on the salary side.

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Already did.

Here is the answer I got : overhead is 50-55% (including the staff needed to operate labs and imaging). From the left over 45%, the employer gets 10% and employee (me) gets to keep 35%. So the employing physician makes 10% profit off of my revenues on top of his earning.

Sounds good deal or bad? Or I should push?

[CordMcNally]

bababrown wrote:

Here is the answer I got : overhead is 50-55% (including the staff needed to operate labs and imaging). From the left over 45%, the employer gets 10% and employee (me) gets to keep 35%. So the employing physician makes 10% profit off of my revenues on top of his earning. Sounds good deal or bad? Or I should push?

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I don't think those are true percentages. I don't know anything about Rheumatology practices but that overhead seems crazy.

[bababrown]

CordMcNally wrote:

bababrown wrote:

Here is the answer I got : overhead is 50-55% (including the staff needed to operate labs and imaging). From the left over 45%, the employer gets 10% and employee (me) gets to keep 35%. So the employing physician makes 10% profit off of my revenues on top of his earning. Sounds good deal or bad? Or I should push?

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I don’t think those are true percentages. I don’t know anything about Rheumatology practices but that overhead seems crazy.

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I kind of feel the same way deep inside, but I am a totally novice about how any practice would operate.

I suppose overall Rheum should be at par with IM with exception of infusion nurses. This particular practice has labs and X-rays - that might add some more operating expense.

[Zaphod]

CordMcNally wrote:

bababrown wrote:

Here is the answer I got : overhead is 50-55% (including the staff needed to operate labs and imaging). From the left over 45%, the employer gets 10% and employee (me) gets to keep 35%. So the employing physician makes 10% profit off of my revenues on top of his earning. Sounds good deal or bad? Or I should push?

Click to expand…

I don’t think those are true percentages. I don’t know anything about Rheumatology practices but that overhead seems crazy.

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Agree about the percentages, theyre made up of course.

I mean overhead is definitely not a single static number either, and it doesnt linearly scale either.

[nephron]

I would probably see both as employed jobs, one with the profit going to your hospital, and the other one with a portion of the profit going to you and a portion going to your private practice employer.   I could see the benefit of sharing in some of the profits, I also think that it can be nice working for a large employer (easier to go to work when you don't see the person that you are enriching everyday).   I personally don't like the conflict of interest that occurs when part of your income is derived from non-clinical work (ie infusions, labs, diagnostic tests) as it does create a conflict of interest when you are deciding to infuse your patients with private insurance some drug that you have a large profit margin on but then deciding not to use the same drug for your medicaid patient that you will lose money on.   Medicine is a business though, and obviously, your hospital would not continue to offer the infusion center if it was operating at a loss, so you could easily argue that you might as well be receiving the benefits instead of the hospital.

[Brains428]

Not really a thought about the practice, but more a location question. What area of the northeast and what area of the south? It can be very different culturally, which can be an adjustment. From a pocketbook standpoint, it will typically benefit you to move from the northeast from a cost of living/tax standpoint.

 

[Tim]

A traditional partnership would leave you opportunity for your share of the overhead being high or low. The interest of the partnership is the same as yours. No conflict.

This model shields you from impact of the overhead. You can bet "someone" is collecting the favorable stuff and will not continue at a loss. You have base plus incentive (a plus if you bust your tail). I would checkout the length and history of changing the compensation plans.

"Costs are increasing and compensation and incentives need to be lowered" would be the explanation. Comp, job, location. How overhead is spent and determined is critical. For sure run some number on the cost of living that can actually give a boost in taxes but the benefits can be a problem. Do your homework for the housing at the new location as well.

[Fugue]

35% would be considered low in my field as well (derm), that's more PA level. If you have any entrepreneurial spirit being a true partner would likely be better for you financially.

It brings up an interesting point...what is a reasonable overhead in different fields? In derm 40% overhead is considered standard.

[Kamban]

bababrown wrote:

Here is the answer I got : overhead is 50-55% (including the staff needed to operate labs and imaging). From the left over 45%, the employer gets 10% and employee (me) gets to keep 35%. So the employing physician makes 10% profit off of my revenues on top of his earning.

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So is this a single employer physician employing other physicians and PAs and NPs. If so, be very careful of this set up. He / She gets to rule like an overlord and you either follow the rules or you get out or thrown out. Worse if you have a non-compete. I worked for a single employer boss and would never do it again under any circumstance.

Basically it comes to how much you pay for the drugs, how many infusion nurses are there for the facility and their pay, how many lab and X-Ray techs are there, who reads the X-Rays and how much you pay them, how much doe the rent and utilities cost etc. On the other side is how much you get paid by Medicare and private insurances for all that. The difference is profit.

Inquire around. See if other docs are happy. See if there is a revolving door turnover of physicians every year or two. You are better off joining a large hospital system in the South that might employ you with a higher pay and benefits. Look for hospitals that get 340b pricing for drugs. They get the most profit and hence might be willing to share more of it with you.

[bababrown]

Brains428 wrote:

Not really a thought about the practice, but more a location question. What area of the northeast and what area of the south? It can be very different culturally, which can be an adjustment. From a pocketbook standpoint, it will typically benefit you to move from the northeast from a cost of living/tax standpoint.

 

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You bring up a great point and I've put some thought into this as well.

I am in MA, and the job offer is from GA: both urban settings. So yes COL will be much better in GA including better property taxes, lower prices for 3500 sq feet house (about 250 to 300 K lower), no car property tax so on and so forth.

However, on the flip side- insurance payments and fee structures are different too. I was initially looking in to FL as well and had a couple of offers on the table. But when I looked at fee structure, it paid poorly about 60-70% of what is being paid in north east region and turned the offer down despite other advantages of FL including no state income taxes and better asset protection state statutes.

I am not sure if this is what other providers have also found.