Ophthalmology practice buy in

[chocolatebear11]

Hi,

I’m early in my practice and was wondering for partnership does that include the practice and real estate or just the practice. I’m assuming the real estate inclusion will make the price higher. If so, how much higher would that usually make?

also, would it be generally better to buy into the ASC first before the medical practice?

I understand there may be many factors involved. Please let me know which factors may alter the situation.

thank you in advance

[Notsobad]

Every practice is set up differently. Some do not invite you to own the real estate some require it. The price depends on whether they own a fancy building in the expensive part of town or a shack on cheap land with a huge mortgage.
Same with ASC. Is it owned only by your future partners, or is it an independent company with several owners?
some practices also create different tiers of partnership.

even buy in equity is treated differently by different practices. To me the key would be understanding that you get the same deal as those who come before you and that you give the same to the future partners. This way it is more likely to even out, and nobody is being taken advantage of.

[jhwkr542]

These are very general questions. The answer to most of these is...it depends.

[HandFellow]

For us it is 3 partnerships, all with pretty much the same partners. ASC, real estate, and the practice. The practice partnership pretty much just makes it so every partner collects their own billing and has a nominal buy-in. The ASC has been our best investment by far. The real estate is probably underperforming as an investment but long term should work out very well.

You should do an analysis of how each partnership works, how profitable they are, what the upsides and downsides are, etc.

[wcinewbie]

Real estate is normally one of the best practice investments. Why is yours under performing? You set your own rent.

[Eye3md]

In my ophthalmology practice, we have separate buy ins for the practice, the practice real estate, and the ASC. The new partner buys an equal share of each so that no one partner owns more than another. The ASC is a phenomenal investment. We do earn money on our real estate, but a lot of the value in it is when you retire and are bought out. We recently had a partner retire, and their portion of the real estate was close to $800k (of course, the buy in years ago was much less)

[chocolatebear11]

Thank you for all the response. It’s definitely something to think about!

when I was thinking about partnership, I always thought about buying into the practice first but it seems like ASC first is also another route (the practice owns their own 2 OR ASC, no other outside speciality as city is small). I will have to evaluate which one is more profitable initially as both seem to be an expensive buy in.

I will be the first person to buy in (no other previous partners, no red flag here just the circumstance), so no previous track to compare.

[jfoxcpacfp]

Doubtful you’ll have a choice of what you buy in to and the order unless you have some kind of negotiating leverage. I think the most important thing to be aware of when buying in is having a really good understanding of all of the agreements, how to get out, non-compete terms, what happens if you decide to semi-retire, what happens if you’re disabled, etc. - in essence, the things an experienced practice attorney or contract review practice can help you with.

The fact that you w/b the first doctor to buy in would make me hyper-cautious because the sellers are trying to determine and set a value for an intangible same as you. You don’t want to become the example by which you all find that the practice was overvalued. Real estate is much easier. The ASC, somewhere in-between.

Just remember that you are investing yourself along with any buy-in cash, and how you choose to invest yourself is one of the most important decisions you’ll ever make.

[Eye3md]

Thank you for all the response. It’s definitely something to think about!

when I was thinking about partnership, I always thought about buying into the practice first but it seems like ASC first is also another route (the practice owns their own 2 OR ASC, no other outside speciality as city is small). I will have to evaluate which one is more profitable initially as both seem to be an expensive buy in.

I will be the first person to buy in (no other previous partners, no red flag here just the circumstance), so no previous track to compare.

in my practice, and many others I know, you buy into the practice and that gives you the privilege of buying into the extremely profitable portions like an ASC and real estate. Also, don’t undervalue the buyin for becoming partner. As an associate physician, I made really good money but it was nothing like what I make now as a full partner.

[TheDangerZone]

In my ophthalmology practice, we have separate buy ins for the practice, the practice real estate, and the ASC. The new partner buys an equal share of each so that no one partner owns more than another. The ASC is a phenomenal investment. We do earn money on our real estate, but a lot of the value in it is when you retire and are bought out. We recently had a partner retire, and their portion of the real estate was close to $800k (of course, the buy in years ago was much less)

I am employed in Ophthalmology but early career and open to PP in the future. Interested in the logistics of a buy out.

How did you all pay for your former partner’s share? And when it’s your turn to retire or if you leave the group, I suppose it would be contingent on others coming up with your buyout as well?

[Eye3md]

The corporate shares are paid through the practice, so no one person is writing a check. To buyin, or buy out, actual checks are written. These can be huge amounts of money but it’s usually spread out over several partners. As a new doc, buying in to become a full partner, they’d probably have to get a bank loan for the amounts (that’s what I did). As a partner, buying out a retiring partner, we each just wrote a check for what was individually owed to make up the retiring partner’s whole share(s)

[chocolatebear11]

in my practice, and many others I know, you buy into the practice and that gives you the privilege of buying into the extremely profitable portions like an ASC and real estate. Also, don’t undervalue the buyin for becoming partner. As an associate physician, I made really good money but it was nothing like what I make now as a full partner.

another unique circumstance is that the owner is looking to retire in the near future and it’s very evident by his decrease in clinic and surgical volume. Besides myself, they will be another surgeon who will be looking to buy in at the same time. I assume it be divided by 3 and then eventually will have to buy the retiring doc’s share.

One thing I’m worried is the cost of the buy in.
Is there a way to pay for the buy in by deferring the income to the cost of the buy in or do most prefer a loan?

[Eye3md]

I remember interviewing with a practice in another state, and they phased in the buyin over a four year period. That was good for the new partner, as it allowed the huge buyin to be spread out. It was bad because the new partner was not considered an “equal” partner until they have fully bought in.

if there’s a chance the senior doc is retiring soon, and you will be the new owner (split 50/50 with the other new doc, I assume), then you should have an idea of your income potential as a full partner (owner). It is difficult seeing that you have to spend that much money, but it’s an investment………an example is I believe my surgery center was $100k to buy in but it spits out about $150k in income, per partner, each year. When I was a associate, I didn’t have several hundred thousand dollars laying around……..I still had huge Med school loans……so it was certainly a shock to the system (my wallet) to spend this buyin money at the time. Ophthalmology equipment, and space, is expensive. But, I went to the bank, got loans, and did it. And it’s been the best financial decision I’ve made.

[doctorbone]

Don’t sweat the buy-in. If your group is well run, you’ll be fine. My real estate buy-in is over 10 years. My practice financed it and I just pay them monthly mortgage. I get quarterly rent payment from the practice and appraised value of the properties has been approaching 7 figures per partner.

I paid off the ASC and practice buy in within a year with the distributions. If you and the partners are motivated and do a good job of taking care of the patients, you’ll be successful.