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  • #46
    Originally posted by MPMD

    sure it should be. it's hard for me to imagine how a contract could be fair that spelled out a buyout for the older guys but didn't provide for a full partner to see RVU data.

    i for one would be very uninterested in "buying out" a retiring partner who had actively blocked me from seeing group data.

    if you aren't given the information about how the group runs then you can't ethically be held to paying someone who stops working there. legally is another story and this thread should be another one for lurkers reading about handshake agreements with older docs who "seem like good guys."
    the seeing of data can be solved in short order. The OP made the mistake and set the precedent by not asking to see data before ever agreeing to become partner, before buying in, before signing a contract.

    if OP wants to bail now that’s fine. Others can be left holding the bag. But if OP is staying they should expect to hold up to the terms of the contracts that they signed.

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    • #47
      This thread has been very eye opening. As someone who will soon be looking for my first post fellowship job, it's good to see this side of things so hopefully I can avoid a similar scenario.

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      • #48
        Most radiology groups now track productivity (RVUs, $ billed, $ collected, and or other parameters). I would be wary of joining a group that did not or did not share this information with other partners.

        I am not sure that I understand the "buy in" in the OP. Working for one year at a salary is not what I would consider to be a buy in. If there is truly a buy in, you will have purchased something - a share of accounts receivable, ownership interest in imaging center(s), etc. The time to figure all of this stuff out is when you are considering the job in the first place and as you are working your way through the partnership track. Before you sign any partnership papers (did the OP sign any), there should be disclosure of any pertinent obligations. If there is a buyout, there has to be a buy in. They should be the same formula, in the opposite direction.

        Finally, I would not assume that the senior partners are less productive than the newly hired rads, as some have suggested earlier. The recent experience of our practice has been the opposite.

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        • #49
          There are many ways to look at this situation, and some of the things you mentioned raise more questions.

          First, did the partnership agreement specify a split of the profits in a certain way? Or did the agreement simply specify a higher fixed salary for you once you became "partner". I am wondering if you may have simply agreed to accept an increased salary as the "junior" partner. If that is the case, the "seniors" did nothing wrong because you agreed to things being the way they have been. The fact that there was no buy in makes me think this may have been the case.

          Second, the docs who built the practice originally likely put in the sweat equity to start the practice and to make things work. From their perspective, it may seem fair that you agreed to become a "partner" at perhaps 350k/year, and they were making more because "they started and built the practice". And if you are now going to go from an income of perhaps 350k to a projected 600k, then there would be enough money coming in to both pay them their buyout and for you to earn significantly more than you are now. But you need to understand the numbers to know if after paying the buyout you owe them there will be enough for this to be a net positive for you.

          When gathering the data, I would also recommend paying attention to trends in volume and collections over the last few years. You don't want them bailing on you and you having to pay them a large buyout if there are downward trends in collections. You may want to engage a health care savvy accountant to help you with all of this, in particular if you have no knowledge of the business side of running a medical practice. It would likely cost you several thousand dollars, but be well worth it given the financial magnitude and consequences of the decisions you are going to have to make in the near future.

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          • #50
            WBD defined the correct approach.
            •You need to review the total partnership financial profitability.
            • The distribution of the profits historically needs to be understood.
            • The intangibles such as contracts and unrecorded liabilities need to be identified.
            This financial review is impartial, it is what it is.
            From that, proforma the future.
            With 2-3 retiring, you have the additional “buyouts” and workloads and potentially additional staff/physicians. What are you looking at? Fifty percent of the staff is huge.
            Subtract out their revenues and the costs
            Adjust you own for the impact of admin.
            Add in the costs of obtaining replacements
            Add in the revenues for the new ones and “profit split”
            Add in the “buyout costs”
            What have you got?
            Just because you are there, everyone else is too under the current plan. The question is does the partnership as a whole remain viable? The $1.2m “buyouts” may sink the ship or not.
            As current partners, they may be required to take a haircut, or split it with the remaining partners. For sure “new partners” might have questions funding retirement buyout for 10 years. The remaining partners might have a problem as well.
            Profitability going forward is objective one.
            How it is split, is objective two.
            The retirement payout is essential a delayed buy-in. The remaining partners have a choice. Take it, negotiate, or walk. You need to understand the the financials past (and accept them), are the profits and the split acceptable in the future?

            The last thing you want, is the retirees walking leaving the existing partners holding the bag for $1.2m. That’s a lawsuit. It needs to be a viable partnership going forward. You have to understand the numbers now in the future for this to be a win-win.
            The fact is, they may have a great deal that’s not available to the remaining partners. That is past, the future is yours. Get the numbers, understand them, you may need a CPA to assist. Once they are out, you folks are stuck with the deal. That is your leverage. They want out, good faith and financials is required.
            If you guys leave, they are stuck with working.
            There is no need to be adversarial, it is what it is. Just numbers.



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            • #51
              ^^^ preach to your residents. If you’re going to private practice, you have to look at the ownership question as a business deal. Analyze numbers. Read the contracts. Ask questions. Get help. Before signing. Buyout terms are critically important. Don’t agree to something you don’t understand.

              and that’s not even to say that OP has a bad deal. The buyout is a pretty long stretch. $40k per year per retiree, split among whatever partners are remaining. Ownership in a revenue generating business with a “nominal” buy in in the OPs words.

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              • #52
                Originally posted by jacoavlu View Post
                if OP wants to bail now that’s fine. Others can be left holding the bag. But if OP is staying they should expect to hold up to the terms of the contracts that they signed.
                Entry and Exit terms need to be clearly defined.
                There is the possibility that a partner doesn’t have the “right” to retire, but requires the “approval” of the partnership. Just saying, both parties should expect renegotiation for poorly defined or omitted conditions. If the terms were not clearly defined and it surfaces later information was concealed, expect difficulty reaping the benefits.
                A partnership built on “trickery” will be rightfully challenged. It’s called deception.

                Comment


                • #53
                  Originally posted by Tim View Post
                  Entry and Exit terms need to be clearly defined...
                  If the terms were not clearly defined ...
                  A partnership built on “trickery” will be rightfully challenged. It’s called deception.
                  There is no indication here that buy in or buy out terms were not clearly defined. OP who hasn't seen billing data etc seems to be precisely aware of what their buy in was and what partners' buy outs are.

                  There more mysterious part is the ongoing compensation split. Is it and has it been fair?

                  Good points though. Here's to hoping the OP follows up after the meeting.

                  Comment


                  • #54
                    Originally posted by jacoavlu View Post

                    There is no indication here that buy in or buy out terms were not clearly defined. OP who hasn't seen billing data etc seems to be precisely aware of what their buy in was and what partners' buy outs are.

                    There more mysterious part is the ongoing compensation split. Is it and has it been fair?

                    Good points though. Here's to hoping the OP follows up after the meeting.
                    You pointed out it is an economic transaction.
                    This has the earmarks of employees with profit sharing with a fixed purchase option.
                    Packaged as a partnership for tax reasons.
                    That could be a very attractive deal. For example, many dentists would jump on it in a heartbeat.
                    Lower up front, higher in the middle and the “employee” reaps the ownership benefits for the sweat equity for a reasonable buyout. Share the profits and easy to cash flow with a ten year payment. The absence of financials and a clear understanding of the economics of the “partnership” simply needs to be sorted out before exercising that purchase option.
                    The “unfair” of the past is really a sidebar since it doesn’t really impact either party , or at least I heard no mention of clawback of any type.

                    The closed books is a concern. I am aware of a partnership in which the senior actually donated to a charitable group he was heavily involved with and it was a great cause. The motive wasn’t personal gain. It’s just he was donating without the other partners consent rather than personally.
                    Close to $1m that came to light due to a divorce. The spouse was awarded 1/2 of the partnership value and when the books came open, well let’s say the partners weren’t happy and contentious negotiations in a 3 way negotiation approved by a judge needed to be reached.
                    For all you doctors, open books also serve to protect both the leader and the partners. Checks and balances of the financials is the only solution.
                    Even sound decisions look different in hindsight.
                    I am aware of 2 large youth sports groups that have been ruined through “embezzlement” with good intentions. Things happen. An independent review, whether by an outside party or by the group needs to happen.
                    Hope OP is able to get clarity and remove the fog.
                    In the one case, I speculate that 75% was repaid.
                    Opps, $750k is a hit. He is still working but out of the county. Divorce settled too.

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