Group selling out midway to my achieving partner... how to make equal?...

[George]

Hello, looking for any thoughts on how to make "fair"... (not that things in life are fair)...

So I work with an emergency group that staffs 6 hospitals, around 80 partners, and around 10 non-partners.  The 10 of us are on a 2 year partnership track and range from 2 months of employment to 22 months employment.  So it seems that the partners have voted to have the practice "valued" and possibly (depending on the vote), sell the group.  The way it was explained to me was basically the group would get a lump sum for partners to split, and from then on, approximately 20% of future revenue would go to the "investing" owner.

I do have a contract with hourly rates, and future rates... but I suspect that it could be terminated by my group if needed.

The way I see it is:

If I was retiring soon, this would be a nice way to get out, and who cares about the younger partners taking a 20% hit for the next decades.

If I was early to the group, +/- okay depending on the payout.

and my situation... nothing from the sell for being a "near partner"... and I take a 20% hit on future earnings...

 

Has anyone had any experience with a similar scenario, and if so how to make it somewhat equitable for those of us that are "near-partners" looking at a 20% pay cut, while my co-workers walk away with a big payout?

 

[PhysicianOnFIRE]

I heard a rumor about an anesthesia group where partners each took home a 7-figure sum when the practice was purchased. Those with 23 months in got zilch. I can't imagine being in the situation of "almost partner." I don't think you're in a position to do much about it, unfortunately, but it never hurts to ask.

[Zaphod]

PhysicianOnFIRE wrote:

I heard a rumor about an anesthesia group where partners each took home a 7-figure sum when the practice was purchased. Those with 23 months in got zilch. I can’t imagine being in the situation of “almost partner.” I don’t think you’re in a position to do much about it, unfortunately, but it never hurts to ask.

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What?! That is super harsh. Dang. I guess its something for those signing contracts with partnerships to think about and maybe plan for addressing.

[jhwkr542]

No personal experience but know of groups that have "sold out".  I hate to see it never works out for the physicians unless they were poorly run in the first place.  Physicians usually take a large financial hit in the long run.  These companies that buy the groups are doing it because there's profit to be made off stupid physicians who aren't business savvy.  I'm guessing you have a bunch of baby boomers looking for a nice financial parachute into retirement?  Either way, I think your only avenue is to play politics and hope to dissuade them.  Possibly appeal to their emotions..."Imagine if those before you were as greedy", etc.

[Zaphod]

jhwkr542 wrote:

No personal experience but know of groups that have “sold out”.  I hate to see it never works out for the physicians unless they were poorly run in the first place.  Physicians usually take a large financial hit in the long run.  These companies that buy the groups are doing it because there’s profit to be made off stupid physicians who aren’t business savvy.  I’m guessing you have a bunch of baby boomers looking for a nice financial parachute into retirement?  Either way, I think your only avenue is to play politics and hope to dissuade them.  Possibly appeal to their emotions…”Imagine if those before you were as greedy”, etc.

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Not bad but I wouldnt choose any wording that impugned their character or such, try to use things that based on your personal knowledge of them will feed into their incentives and motives. People will retract and be defensive and unresponsive if offended right off.

[Med0000]

Are the partners "shareholders?" If so, I believe the way these buyouts are structures is on a per share basis. If you don't own a share, you don't get any buyout. If you haven't owned the share for 1 year you will have to pay ordinary income tax. Over a year and it's capital gains rate. Of course they will offer you a contract to work for them at a reduced rate. If you can see through the b.s., the "buyout" is a pay advance for the next x amount of years.

[jhwkr542]

Agreed, zaphod. Diplomacy and politicking I think would be the only way to approach the situation. Draft a letter from the non partners, perhaps?

[Gas_Doc]

PhysicianOnFIRE wrote:

I heard a rumor about an anesthesia group where partners each took home a 7-figure sum when the practice was purchased. Those with 23 months in got zilch. I can’t imagine being in the situation of “almost partner.” I don’t think you’re in a position to do much about it, unfortunately, but it never hurts to ask.

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Not sure if we are talking about the same group, but this exact thing happened to an anesthesia group in my city within the last 18 months. The senior (ie voting) partners took a lump sum buy-out in exchange for reduced salaries down the road. In that case, the non-voting partners (those with less than 3 years with the group) as well as the CRNAs got nothing. Didn't matter if you had been with the group for 35 months and 20 days, you didn't see any part of the buyout. All of the junior partners and the majority of the CRNAs quit, causing a huge anesthesia provider vacuum at the hospital.

[canadianoutlaw]

PhysicianOnFIRE wrote:

I heard a rumor about an anesthesia group where partners each took home a 7-figure sum when the practice was purchased. Those with 23 months in got zilch. I can’t imagine being in the situation of “almost partner.” I don’t think you’re in a position to do much about it, unfortunately, but it never hurts to ask.

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Situations such as this are increasingly common across health care

[Quan]

These buyouts sometimes have a clause that a certain % of providers must sign to remain on staff for 2-3 years.  If there is a clause for that, you can discuss with the other nonpartners to not sign the new contract and tank the deal for the partners or use this as a bargaining point.  I know with our group when we sold, we offered the nonpartners a monetary bonus to encourage people to sign on and stay for the 3 years after the buyout.

[Kamban]

Twenty years ago a similar thing happened in town when 5 med oncs sold their practice to a private group that was listed in Nasdaq. Each got about 2M in cash and equivalent amount in shares which they had to hold for 5 years and work with the group for 5 years. My buddy who joined them about 1.5 years earlier, and to soon become a partner got a paltry $200K which was contingent on signing on the dotted line.

Suddenly the attractive group did not seem attractive to join and I declined to join them 6 months later when my contract with my multi-specialty group employer was up and I was expected to join this single specialty group. A few years later I struck out on my own, and now I am glad I did not join to become an employee.

[Steve]

jhwkr542, it is often more complicated than you think.  In cardiology, it isn't the doctors who are stupid, it is CMS.  A vast majority of cardiologists are now owned by hospitals because Medicare pays around a $650 technical fee for an echo done in the hospital, and a $250 technical fee for an echo in a private cardiologist's office.  It was after this change in policy that the cardiologists started to be bought as the reimbursement for an echo in the office isn't enough to cover overhead, but the amount in the hospital is a huge profit boon that the hospital can unofficially share with their employed cardiologist via a higher salary. This is why employed cardiologists currently make about $100K more while doing 1000 RVUs less than their private practice counterparts.

As to the original question...I know one internist who was on a two year partnership tract.  After two years, her partners delayed allowing her buy in for several months.  She was given some petty excuses but didn't know what to do about it. She later found it was because they were in the process of selling out.  When they sold, she got nothing.  She obviously left that place (probably with her middle finger straight up).

 

[VagabondMD]

My group (radiology) considered a similar buyout offer about 18 months ago. At the time, we had one associate (he was about six months with us at the time, and we really liked him) and planned to include him in the deal, but with a lower level of participation (smaller windfall).

Your one potential trump card is these deals fail when the junior associates all leave. If you can get the group of you together and threaten to bail, you might have some leverage in the negotiation. The acquiring company does not want to buy a practice that is imploding. Hire a lawyer and/or consultant if you need some help.