Senior partner woes

[NJDoc]

So, the founder and managing partner for many years wants to go part time. He would like to continue on as managing partner, and since he has done it since the beginning of time the rest of the partners are happy to have him do so. He does draw a fee for the managerial work and we have negotiated that as part of his part time income package. However, then he "demands" a written agreement for the next 5 years that we guarantee a floor income level of 80% of that of the average full time partner or he quits the managerial side and will spend more time seeing patients, thus increasing his income.

All of the other partners ,myself included, are refusing to guarantee a floor income level especially for such long term. We suggested an annual renewable term, and he refused.Thus, we may have to call his bluff and take over the managing partner side of the practice. This kind of sucks for us, but sooner or later the transition needs to happen anyways.

I am considering a counter offer of agreeing to the floor for 5 years, but putting in place a clause stating that any deficit of his productivity vs his income will accrue and be deducted from his final buy out. Seems reasonable to me, that way I am putting the risk of productivity on his lap. The problem is if the deficit exceeds the buy out , collection would be next to impossible once he retires. Any other thoughts?

 

 

[q-school]

Going to be stressful.
I hope you guys can concurrently create some kind of succession plan because the proposal from senior partner sounds like a terrible arrangement imo.
Senior partner not vested in long term success of practice. Needs to be moved out of management. However he/she does not realize this yet. Are there other external concerns? Wants more recognition for long term management? Other partners eating away at enjoyble parts of day? Income declining recently for senior partner?

80% income doesn’t sound that part time.
How much does he get for managing the practice currently? Pay that to someone else. If no one else wants, then it probably isn’t enough for the work. Needs either more time or more money.

[jfoxcpacfp]

Agree that you need to cross-train to be prepared to take over the managerial side regardless. Nothing is guaranteed and he could pass away unexpectedly and you would be feeling your way around for awhile. This should have already happened, so your partner is actually doing you a favor by forcing you into doing this.

I like your idea - if he will agree to it. You might include a provision that if his balance is down to X% (say 20%) of the buyout amount, that you have the opportunity to adjust through payroll reduction until he is up to X% (say 50%). Of course, this contract is dependent upon your having a fixed amount for the buyout, which is often dependent upon profits, production, or some other variable determined as of the date of separation.

If he doesn't agree to this, you will have to be prepared to take over management or divide the responsibilities among 2 or more partners. As you said, you will have to do this sooner or later, anyway, and there's no better time than the present.

[NJDoc]

jfoxcpacfp wrote:

I like your idea – if he will agree to it. You might include a provision that if his balance is down to X% (say 20%) of the buyout amount, that you have the opportunity to adjust through payroll reduction until he is up to X% (say 50%). Of course, this contract is dependent upon your having a fixed amount for the buyout, which is often dependent upon profits, production, or some other variable determined as of the date of separation.

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That's a good idea, thanks.

Agreed, that he may not accept that offer. One of the other partners is ready to step up and help me run the management side if it comes to that , and in all likelihood it will.

q-school wrote:

Wants more recognition for long term management?

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For sure, he wants recognition and we are dealing with a massive ego here. So, it' s a bit challenging, although I know he wants to stay as THE managing partner since he enjoys the recognition around town.

[MPMD]

I am not in private practice and haven't dealt much with stuff like that but his initial offer sounds insane and like he's not negotiating in good faith with his group. 80% guaranteed for 5 years? Even if he decides to start straight up chillin' at work and seeing 1 pt/hr? I think you have a good idea about a productivity deficit but that sounds legally complex.

 

[q-school]

I know nothing about the person obviously but no way does he accept your counter offer and plus it pisses him off. At least that’s been my experience with md sociopaths.




Good luck.

[Dr. Mom]

I don't see the advantage to your group of keeping him as managing partner other than your group perceives it as the path of least resistance.  I would call his bluff.  Offer productivity only and no management concerns.  Your group needs to address his eventual retirement anyway.  What does his role entail that none of the rest of you wants to deal with it?  Can some of it be assigned to a business manager?  Does he have the role set with processes and systems that will facilitate eventual transition to one of you?  You could consider bringing in a practice consultant to help with the transition.  My husband brought in one in his solo practice during a transitional time and found him very beneficial.

[NJDoc]

q-school wrote:

I know nothing about the person obviously but no way does he accept your counter offer and plus it pisses him off. At least that’s been my experience with md sociopaths.

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LMAO

Dr. Mom wrote:

I don’t see the advantage to your group of keeping him as managing partner other than your group perceives it as the path of least resistance.

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Agreed - it is the path of least resistance. And I think you are right we need to begin the transition anyways. I have 7 yrs left and was hoping to avoid all this, but I can't agree to his guaranteed income demands. So, off we go...

[Dr. Mom]

NJDoc wrote:

Agreed – it is the path of least resistance. And I think you are right we need to begin the transition anyways. I have 7 yrs left and was hoping to avoid all this, but I can’t agree to his guaranteed income demands. So, off we go…

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My idea of a practice consultant could help ease the pain and would likely be far cheaper than agreeing to his demands.  Not sure your specialty, husband's is Ophthalmology.  PM me if you want name of who he used.  My husband found it very empowering to get better control over the business side of his practice. Good luck!

[Rb52dds]

What percent of partnership does this partner own? "Managing partner" can sometimes mean 51%.... that's why I ask. If you're all equal partners then this person is at your mercy. You've got a lot of moving parts because it sounds likely that this partner is retiring after 5 years and you want to be done after 7 years. You don't want to destroy good will and practice value during these final years. Both of you will be selling your partnerships at those times right?
I manage my practice and employ other doctors as associates thus far avoiding the "partnership". These issues are common and I agree with whoever said to bring on a transition consultant.
I also firmly believe that one doctor needs to be the managing doctor and that task is not to be undervalued. Even with a decent "office manager"... a partner has to be overseeing it all. Depending on how large the practice is that could be worth 80%.... but as others have said they need to be grooming someone to take over the management.

[NJDoc]

Rb52dds wrote:

What percent of partnership does this partner own?

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4 equal partners, another in the pipeline on buy in track. Yes, we will both be selling at the time of retirement .

We have an excellent office manager, but it is still a rather complex entity and he is more than fairly compensated for such at present. The issue , the guarantee demand - which is unacceptable in my opinion.

 

[G]

Does this partner bring in more money based upon who he is?  i.e. do people travel from other cities to have him consult on their care?  If not, he really isn't special, despite being a founder.  Therefore, he isn't in a position to make demands.

If someone is ready to step up and take over the administrative stuff, you are in a position of strength (so many groups don't have that!).  It would be best to not have ill will with your partner.  However, it sounds like there isn't much you can do to appease/rationalize based upon what you have described.  To his credit, this practice is his baby.  Unfortunately for him, he expanded in a fashion that sounds to be a democracy instead of a dictatorship--this isn't the US government (you can't just dump the treaty).  Therefore, he should expect no special treatment.

I haven't seen much success with groups that have the manager that becomes a simple worker bee.  Too many chefs in the kitchen.  My suggestion would be to pay him for managerial work as you have suggested, ideally with the goal of spinning up the new person.  Give him the option of part-time with income compensated just like everyone else.  Make sure he gets some kind of fancy title, "Founder of TaTaForNow Medical Group" or "Founder and President-Emeritus TTFNMG" and some business cards to reflect this.

Good luck!

[VagabondMD]

Sounds like a crappy deal for your group. His status as “founder” is meaningless, as I am sure the rest of you paid your dues, bought in, and continue to build the practice. Save sentimentality for friends and family, not partners.

I would not agree to those terms. Offer to take over the managerial function (which is probably not as big a deal as he is making it out to be) for the current compensation, and you will offer him a two or three year part time role where is compensation will be proportional to his output. You are interested in what he will do for the group today and tomorrow, not what he did yesterday.

[NJDoc]

Vagabond MD wrote:

You are interested in what he will do for the group today and tomorrow, not what he did yesterday.

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Thanks ...always good advice from THE Vagabond .

[uptoolate]

We had 10-12 in our group with a managing partner that was paid a stipend but your scenario never came up in my years there.  Our group would have said forget it though.  Would have been a few chuckles followed by a 2 minute discussion and a unanimous thumbs down.  Partner would have been welcome to work less but would have taken the appropriate pay cut while drawing the same management stipend with the knowledge that they would be replaced in this role if job was not getting done satisfactorily.