My wife has been working as a Nephrologist for 3 years.
When she joined, she was told there was a partnership track and while they didn't have any information, she was told that they'd figure it out by the time she would be up, which is now.
At the time, the group consisted of 2 senior partners (A, who built up the practice from scratch, and B who joined 10+ years ago). There was also a junior partner C, who started work a year earlier than my wife.
Dr. C always thinks he's getting the short-end of the stick. He was up for partnership last year but they haven't finalized anything yet. He never understood the concept of what he was buying into, since the practice doesn't really own anything (such as dialysis machines). So they've spent a year going back and forth about the partnership with no resolution so far.
I understand his concern - In a medical practice, it sounds like you're basically you're buying into your own productivity (and that of a few RNs, PAs, and 1 non-partner-track physician), accounts receivables, and existing contracts with hospitals/insurance companies.
Also, since he and his wife have no roots in California, there is always a chance he might decide to move somewhere else. Paying into the practice might hinder his flexibility.
Dr. B developed a terminal disease and has a 5-year life expectancy. Actually it was 6 months, but that was 2 years - Yay for experimental treatment! He has been phased out and is working 9-5, with no call and no weekends.
Dr. A has had bad experiences with partners in the past. He has had a few junior partners that quit and dissolving the partnership has always been messy.
Based on this background, Dr. A has proposed the following:
This is an informal proposal and he's stated that he's not married to any of these but would like to open up a discussion.
From my point of view, it sounds like a great deal. You get the benefits of partnership without putting up any money. If Dr. C decides to bail, then it's a clean break. Also, if medicare reimbursements decline, the value of the practice goes down and so would a future valuation.
My main concern is that the chain of ownership becomes messy in case of Dr. A's sudden and unexpected death.
But I'm not an expert of partnership deals, so I would be grateful for the collective opinion on whether this is a good deal, how we should structure this, and what pitfalls should we be aware of.
Thanks!
When she joined, she was told there was a partnership track and while they didn't have any information, she was told that they'd figure it out by the time she would be up, which is now.
At the time, the group consisted of 2 senior partners (A, who built up the practice from scratch, and B who joined 10+ years ago). There was also a junior partner C, who started work a year earlier than my wife.
Dr. C always thinks he's getting the short-end of the stick. He was up for partnership last year but they haven't finalized anything yet. He never understood the concept of what he was buying into, since the practice doesn't really own anything (such as dialysis machines). So they've spent a year going back and forth about the partnership with no resolution so far.
I understand his concern - In a medical practice, it sounds like you're basically you're buying into your own productivity (and that of a few RNs, PAs, and 1 non-partner-track physician), accounts receivables, and existing contracts with hospitals/insurance companies.
Also, since he and his wife have no roots in California, there is always a chance he might decide to move somewhere else. Paying into the practice might hinder his flexibility.
Dr. B developed a terminal disease and has a 5-year life expectancy. Actually it was 6 months, but that was 2 years - Yay for experimental treatment! He has been phased out and is working 9-5, with no call and no weekends.
Dr. A has had bad experiences with partners in the past. He has had a few junior partners that quit and dissolving the partnership has always been messy.
Based on this background, Dr. A has proposed the following:
"Dr. C and my wife become board members of the group along with Dr A. The three of them control operations, make strategic decisions and hiring decisions. They have equal voice in compensation of ALL employees and physicians, both with respect to the amounts of annual compensation, and the allocation between salary and bonus, which will be evaluated annually. The Board of Directors will work together to make these practice management and financial distribution decisions. The Board of Directors will have access to all the financial and contractual documents and information of the practice to review. The Board will have the authority to admit other physicians to the Board of Directors as well.
Dr A retains full ownership of the group (it's a C-corp). If and when he decides to sell, Dr. C and my wife get first right of refusal.
Advantages:
1. formal authority to guide and develop the practice
2. opportunity to enhanced enjoyment of the financial and other benefits of the practice
3. no capital investment
Disadvantages:
1. no actual ownership of the practice"
This is an informal proposal and he's stated that he's not married to any of these but would like to open up a discussion.
From my point of view, it sounds like a great deal. You get the benefits of partnership without putting up any money. If Dr. C decides to bail, then it's a clean break. Also, if medicare reimbursements decline, the value of the practice goes down and so would a future valuation.
My main concern is that the chain of ownership becomes messy in case of Dr. A's sudden and unexpected death.
But I'm not an expert of partnership deals, so I would be grateful for the collective opinion on whether this is a good deal, how we should structure this, and what pitfalls should we be aware of.
Thanks!
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