Transition from academics to private practice, need your help/advice

[RJ]

Both my wife and I are employed physicians. My wife is doing very well in her field (good life style surgical field), but her academic environment is in a tail spin due to issues beyond her control. She is thinking about leaving academics for private practice. She is being a courted by a very respectable private practice in town to join them after one of the partners (3 partner practice) retires at the end of this year. She has had several meetings with managing partner and was pretty much told "we will give you anything you want"- I am very skeptical about this. They already somewhat agreed on starting salary. Now they have a meeting coming up to "hash out final details" before contract is put together and sent to respective attorneys. Neither one of us have ever dealt with private practice set up. My questions are:

1. What would be acceptable bonus structure to ask for? What should be the length of the guarantee?

2. We want partnership track spelled out in the contract. Lots of practices around here hire associates with a promise to talk about partnership in a few years and just keep churning associates. What's the best way to achieve that?

3. Practice's managing partner is also a managing director/partner of s surgery center (a very very busy single speciality ASC). He is offering "a piece of the surgery center" as well. What specific arrangement should we ask for?  Surgery center is owned 49% by physicians and 51% by a large company.

4. Can anyone recommend a good reasonable contract attorney in CA?

Overall, just looking for some good advice given the situation.

TIA for your time.

[ACN]

I just signed a contract with a PP group out of fellowship.  I saw multiple contracts during this time.  Here is how they were structured:

 

1.

• Salary * 2-3 years.  Bonus structure a %% once your collections exceed salary + overhead.  %% increases every year.  I've seen some offer 50%, others were as high as 90%.


• Salary * 2-3 years.  Bonus a %% after you exceed a random $$ of collections.  This contract made you collect 4* your salary then receive 30% bonus.


• As an established physician in town, I'm surprised they are giving you a salary.  I'd assume your wife would be busy from day 1 since she has a patient population already established.

2.

• I doubt you'll get very specific language guaranteeing you partnership track.  Every contract that I was offered basically said after your 2-3 year contract ends, you *MAY* be offered a partnership stake.

3.

• Again, doubt you'll get a guarantee, however, it seems that most PP groups would want you in their ASC.  Basically, the bylaws of the ASCs I interviewed at stated you must be a partner in #2 before being allowed to buy in.


• I would ask what the buy-in structure is, $$ amount, how many years, what %%.


• Does each partner have the same %%?  What are the quarterly distributions?

4.

• There is another thread asking for contract lawyers in CA somewhere here.

[RJ]

Thank you! Sound advice.

Yes, she will be busy from day one as she is the same subspecialty as the retiring doctor. Other 2 partners do not do procedures that she does, so they need another person of the same subspecialty.

We are not sure yet how much share each partner has (I am assuming equal partners) and what the quarterly distributions are. But will definitely find out.

[q-school]

why are you so skeptical?  is your spider sense normally accurate?

it seems like a good solution to a problem.  if you trust them to be fair, you will work out all these things and they won't purposefully take advantage of you.  if you don't trust them, well, then you have a decision to make and will have a protracted discussion about lots of aspects of practice.  it is not possible to contractually specify everything that can make you upset.

i think most practices offer a salary for the first year.  it essentially could be an advance draw on your AR depending on how it is structured, but is a way to transition someone into the practice.  however, if it is sketchy, it could be a way of transferring undesirable, uninsured patients to you from other partners.  oh, you are on salary anyways.  doesn't matter who you see.   value of existing patient panel differs significantly by specialty.

buy in/ buy out.  age of partners.  time to retirement.  profit and loss in previous years, both for practice and ASC.  call schedule.  all the normal things you should look at.

maybe it's me but i read more concern than excitement in the post.  that might just be me though.  i'm a suspicious sort. 

[CryptoMD]

RJ wrote:

Both my wife and I are employed physicians. My wife is doing very well in her field (good life style surgical field), but her academic environment is in a tail spin due to issues beyond her control. She is thinking about leaving academics for private practice. She is being a courted by a very respectable private practice in town to join them after one of the partners (3 partner practice) retires at the end of this year. She has had several meetings with managing partner and was pretty much told “we will give you anything you want”- I am very skeptical about this. They already somewhat agreed on starting salary. Now they have a meeting coming up to “hash out final details” before contract is put together and sent to respective attorneys. Neither one of us have ever dealt with private practice set up. My questions are:

1. What would be acceptable bonus structure to ask for? What should be the length of the guarantee?

2. We want partnership track spelled out in the contract. Lots of practices around here hire associates with a promise to talk about partnership in a few years and just keep churning associates. What’s the best way to achieve that?

3. Practice’s managing partner is also a managing director/partner of s surgery center (a very very busy single speciality ASC). He is offering “a piece of the surgery center” as well. What specific arrangement should we ask for?  Surgery center is owned 49% by physicians and 51% by a large company.

4. Can anyone recommend a good reasonable contract attorney in CA?

Overall, just looking for some good advice given the situation.

TIA for your time.

Click to expand...

I think ACN really covered it. Just to add to random points...

1. If you believe that she can be busy from day one and the practice is healthy, I personally would want to get paid a % of my collections as quickly as possible. With a salary, most groups are not going to pay you a "bonus" or % of your collections until you've paid back the costs they're sinking into bringing you on, around 3x or more of your base.

so Doctor A takes a $200k base and gets 40% collections after $600k in collections. Doctor A collects $900k in year one and ends up grossing $320k

Doctor B takes $100k over 6 months and then gets 40% collections after he/she brings in $300k. Doctor B also collects $900k year 1 but grosses $340k

Doctor C takes a straight 40% of collections and collects $900k. That doctor grosses $360k

The bonus structure your wife should get is going to be entirely dependent on the practice's overhead. I know folks that run lean and could give you 50-60% of every dollar you bring in once you've paid back what you cost the practice and others that can't give you more than 30-35%.

 

2. I would want buy-in/buy-out costs in my first contract for two reasons. One, many docs still think their charts are worth something...in most cases they aren't. Many practices have heavily inflated valuations because of it. Second, your wife's production should not increase her own buy-in price. Example, practice says it's worth 40% gross collections and you will pay 25% of that number in order to own 25% of the practice. Now your wife adds a million dollars to the gross collections, she should not be penalized for increasing the value of the practice. Like ACN said, you probably aren't going to find some partnership track guarantee in that first contract, but I don't think it's unreasonable to have an established buy-in/buy-out price in that first contract. I'd ask for it at least.

I think that's all I have to add

[SValleyMD]

Just as important questions deal with work structure. I know my former academic colleagues/bosses wouldn’t last five minutes in my job as would be such a culture shock and work load change..

Obviously it’s hard to know the specifics of her field but in mine the questions would be among others:

- who admits pts (consult vs primary service), Hospitalist help?
- number of clinic pts per day
- autonomy of making clinic schedule
- How many outside transfers? Taking phone call for other hospitals?
- mid level support? Mid level supervision required ? which can be hassle
- call schedule and burden (obviously)
- ability to cancel clinic?
- time off?
- who decides on addition physician recruitment?
- rvu thresholds?
- what current docs doing rvu wise?

[I Find This Humerus]

This will vary greatly depending on specialty no?

[Hatton]

In regards to 2.  Concerning partnership track.  There are practices that churn new associates.  I would ask who has left the practice in the last few years and why.

[RJ]

Thank you everyone for great suggestions.

I've spoken to a few people who went through partnership tracks/buy in also. I was advised to ask for a contract with defined end date which will force practice to at least start talking about partnership/future direction. Does that sound reasonable?

Also, I was told one example of buy in valuation is one's total collections in year 2. Let's say she collects $500K year 2, that's her buy in. This structure forces the practice to make sure busy quicker, so that buy in is higher. Any other buy in structures we should be aware of?

Thanks again.