Advice needed on possibly backing out on practice purchase

[buckeyedoc]

I have been a partner in my ophthalmology practice for the last 7 years but have had number of frustrations over that time and had always been looking at other opportunities in the area. A solo ophthalmologist had approached me late in 2020 about me buying his practice. At this time there were so many issues in my current practice I just wanted out, as long as the deal to buy this guy's practice was worth it. Over the last several months with the help of attorneys and consultant I hired we came up with a deal where I'd buy half the practice initially, work together for 2 years, he'd retire after 2 years and I'd buy the other half of the practice at that time. A portion of my profits would pay him off over a 4 year time period to cover goodwill. This does not include the building which is valuated at around $1mil. ( I made another forum post regarding financing this yesterday).

The paper work for all this is pretty much all done and is just awaiting final revisions from the attorneys. Nothing has been signed at this time.

I was pretty sure several months ago I wanted to go ahead take the new opportunity. I gave my partners 3 months notice that I was leaving at the end of October with the intent on starting at the new practice the beginning of February. Since this time there has been several positive developments that is giving me serious second thoughts. First of all the office manager at my current practice was terminated the same week I put in my notice. She honestly was terrible and since the new manager has taken over there has been a dramatic improvement in many areas of the practice. Second there has been an outpouring of support from my 2 current partners, employees of the practice , and even the board of the surgery hospital where I do cases at, to get me to stay. It's been quite overwhelming and touching and I did not realize how much I meant to so many people. Thirdly, things are greatly improving for me financially at the practice. That historically has been one of my biggest issues with the practice but they had our CPA sit down with me and showed my that if I stayed I would make around $320,000 in 2022. This would be nearly a 150,000 increase for me. My income with new practice would depend on the overall production of the practice but would in general only be about $150,000 for the next 3 years, then go way up in year 4.

In addition a financial advisor has pointed out several potential issues with the plan to buy and joint the new practice. For example he had me inquire about health insurance. Turns out I would be covered by the practice but I would have to pay for the family plan to cover my wife and kids. We are looking at how much this will cost per year. But that is one example of additional costs to me that I had not considered until now. But they keep adding up.

Anyways I am currently unsure of what I want to do now. There are other pros and cons I'm considering other than what I've mentioned. Financially it makes much more sense to stay with my current group. But I need more time to decide and look into some things. My question to this forum is what do I tell the doctor from whom I'm potentially buying the practice? He sent me an email today asking why is there all these last second questions ( like regarding my health insurance) and why haven't we signed the contracts. He has no idea I'm having these second thoughts and is expecting me to be starting in February. Do I just be bluntly honest with him that my current group is offering me more money and I'm having second thoughts? Just say I'm not ready to sign yet? I just want to be as professional as possible about this and not burn any bridges.

[zlandar]

Why are you getting a $150k bump in salary if you have been a partner at your current practice for 7 years? What has changed financially?

[CordMcNally]

How does your notice affect your current practice? Surely they’ve already found your replacement to buffer in the time it takes to get credentialed. You’ve certainly found yourself in an awkward situation. You probably should have come to a complete decision about the practice you were looking at buying before you gave notice to your current practice.

[TheDangerZone]

Would your partners be buying you out?

And you are/were making 170k as a private practice partner?

This seems crazy to me, even in the most saturated of markets. 320k is still on the low side. How many patients are you seeing per week and how many surgeries are you doing? Is your overhead north of 80%??!

[buckeyedoc]

The bump in income comes from several factors. The office manager that left made over 100 grand. We had an employed physician leave a few months ago that made 160 grand and wasn't coming close to covering her overhead. Thus overhead has went way down and one of the partners said he will give up all his surgeries and some of his clinic time to get me to stay. Hence the bump in income.

To answer the second response my practice wants me to stay. There is no replacement. Yes it is awkward. But I wasn't expecting the overwhelming response to get me to stay. I'm looking for advice. Not your criticism.

[CordMcNally]

Are all the partners equal in terms of pay because something seems off?

[chocolatebear11]

It’s seems unusual to be a partner for 7 years and only make 150k. It’s very much under the median.

The bump in salary came from a decrease in overhead, but doesn’t that mean eventually you will have a new manager and have to hire another ophthalmologist to fill in the one that left?

i feel like the starting salary for starting ophthalmologist ranged from 180 to 250k in the most places.

i think the reason we are mentioning this is maybe the practice is taking away too much of your income?

If I was in the same situation, I would be transparent and tell the selling practice the situation and that you still have a few questions.

[Shant]

Make sure you get any promises in writing. This doesn't sound like a sustainable improvement unless they were raking huge amounts off the top of your billings, and if they were, why would you want to stay?

[Kamban]

I would not stay. Once you made a decision to leave, leave. Salary might be low for 3 years but later you will ne the boss and can decide how much you want to work.

The current office can deteriorate back to what it was before and you might not be able to do much should you stay. And wistfully think of the opportunity missed.

Finally, you are playing fast and loose with your buyer and he has been open and honest with you so far.

[TheDangerZone]

Your partnership compensation is/was extremely low, therefore my advice is to look into the financial statements of your practice so you can understand what accounted for your comp. Unless you are extremely low volume, you should have been bringing home much more. You should have complete access to your financials as a partner.

If you were not treated equitably from a financial perspective, the decision to leave should be easy.

[Craigslist]

This is like a partner telling their SO they are dumping them and then the week before they move out the SO changes all the negative things in their relationship to convince you to stay, only to slowly go back into their bad habits.

Sounds like an abusive relationship...leave.

[eyecandy]

Something seems off with your current situation that’s only now ‘turning’ since you gave notice. I’m confused - are you only working a few days per week? Doing surgery currently? 150K is extremely low for an ophthal 7 years out if working 4-5 d/week. Even with building private practice clients—you should really be closer to 300-500K (even more if rural or Midwest). I bring this up not to criticize, but to point out there’s still something wrong with current practice and reimbursements. What’s your gross overhead at current practice?

I understand having second thoughts but you really need to sort this out quickly. And I’d be honest w private practice guy that your current office is aggressively negotiating to try and keep you. If said openly he may show his cards and desire for you to join—perhaps able to get a little price discount. I’ve always found honesty is the best policy, but most importantly choose words carefully when negotiating/discussions.

[TXDoc21]

If you wanted to cut back on your time and not have the stress of operating on patients you could be your office manager and make close to what you have been making it sounds like (over 100K). If you were a full partner, why were you not making more income?

When you mentioned that after 3 years at new job you will make much more? How much are we talking about?

My gut response to this is that there is a lot more going on than you realize at your current job. The deep dive into the financials should be able to answer this and since you are a full partner, you should be able to do that.

If I was you, I would take the new job as you had planned. It’s great they are being nice now, but time for a change.

[Tim]

Are all the partners equal in terms of pay because something seems off?

"Thus overhead has went way down and one of the partners said he will give up all his surgeries and some of his clinic time to get me to stay. Hence the bump in income."
"We had an employed physician leave a few months ago that made 160 grand and wasn't coming close to covering her overhead."
"The office manager that left made over 100 grand."

None of these are necessarily permanent. Actually they reflect on practice management. As a seven year partner, the question is who is running the practice?
Add another staff member, add another employed physician, change of heart and the other wants to start surgery again. Poof! $150k disappears. Just saying all of these are practice management that YOUR profit is not reflective of your practice contributions. Controllable. The three year payout AND your continued income will depend on effective management. Where do you really fit in in managing the practice? I have no idea how decisions are being made or how the practices are ran. No guarantees in either situation. I would not blame the current practice on management, you as a partner are also responsible for the current situation.

I would think the new opportunity has better long term prospects. Depends on how YOU run it.

[jfoxcpacfp]

From the perspective of seeing many salaries of ophthalmologists, even as new attendings, something appears very wrong here. You are going to burn bridges with either choice, so need to accept that reality. Are you subject to a non-compete? What happens if patients come with you? My personal opinion is that you are getting cold feet because it’s been comfortable in the nest and you don’t know what the “real” world is like outside your comfort zone - you’re finally getting some attention, but it sounds too little, too late.

Also sounds like a perfect fact pattern for an OM to be doing something rather…unacceptable…with cash flow. Maybe even same for whoever wanted to keep her in o place. Might want to consider hiring a forensic CPA to check on the history of billing and collections.

To address your prior comment, all I see above is advice, which is difficult to say sweetly and gently on a financial forum. Even though we may not intend it as criticism, I think it would be very difficult to give our honest opinions and the reasons for them without appearing critical. You have received very good, unbiased advice above. If you have a SO, maybe have him/her read through this with you and discuss.

Welcome to the forum - you’ve come to the right place!