Bring It On: Adding an Associate or Partner to Your Physician Practice – May 17, 2017

Is it time to bring on an associate or partner physician to your practice? There are many reasons you might consider it. For example, your practice might have become so busy that you have little time with your family — or for yourself. Perhaps your practice volume has grown so much that you need help managing it, or maybe retirement is around the corner and you’re thinking about eventually selling. In any case, it’s important to look at the pros and cons before taking this important step.

Evaluate Goals

Bringing on an associate is a significant decision not unlike hiring an employee, but with higher stakes. Before beginning the process, ask yourself:

  • What do you hope to achieve?
  • To achieve that goal, what credentials do you expect a partner or associate to hold?
  • If the plan is to increase overall patient visit volume, what effect will the increase have on total expenses?
  • What patient volume level is necessary for the practice’s optimal profit margin?
  • Can your office infrastructure (that is, office, examining room, reception room and office staff) handle additional patients?
  • Can your office location and community accommodate your practice’s growth?
  • Are you prepared to manage another physician?Finally, are you willing and able to give up a portion of control and decision making in your practice?

Finding a Good Match

After answering these questions to your satisfaction, it’s time to think about where to find a partner or associate. You already may have someone in mind. If not, resources include journals in your specialty, online information and recruiting firms that specialize in physician practices.

Of course, it’s a given that you’ll want to bring on an experienced physician with excellent technical qualifications. But, just as in hiring an employee, and perhaps even more so in the case of a partner or associate, personality is a huge factor. You want to get along with your partners. In addition, it’s important to ensure that the partner or associate understands what your goals are.

For example, if part of your plan is to spend less time in the office, it’s important that the doctor you’re adding to your practice understand that. If the goal is to increase patient volume, he or she needs to know that as well.

Another consideration similar to personality is your practice’s culture. This is the philosophy on which your practice is based. Culture can manifest itself in many ways — for example, whether your interactions with patients and office staff are formal or informal, how staff customarily handles daily operations, and whether staff is willing to extend themselves to assist patients and ensure their satisfaction.

To get a better sense of this, it’s often useful not only to conduct a traditional interview but also to meet the potential associate in a social setting with your staff. Do you and the candidate approach patient care with the same philosophy? Can the candidate meet the goals you’ve set? Is he or she willing to do so? Is the candidate comfortable living and working in the community where your practice is located?

Compensation Concerns

How the partner is to be compensated likely will involve negotiation. Generally, you can take the following three approaches to associate compensation:

  1. Pure salary strategy. This places all the risk on you. The question becomes whether the associate will generate enough income to warrant the salary.
  2. Pure percentage of production strategy. With this approach, the associate takes on more of the risk. But it’s difficult to predict if or how volume will increase or shift. This method, which is probably the least common, can run afoul of antikickback laws, so you’ll need to seek legal advice if you consider this a viable option.
  3. Base salary plus an incentive. This is the most common approach. The associate is paid a base salary and receives a bonus based on a negotiated level of income generated. The risk is shared between the senior partner and the associate, and an income threshold of approximately three times the associate’s base salary is common. For example, if the agreement holds that the associate’s base salary is $50,000 a year, a bonus will be awarded when he or she has generated $150,000 of practice revenue. Typically, the bonus consists of 15% to 25% of each dollar made above that threshold payment. And the agreement might also stipulate that, after the associate generates $150,000 of practice income, he or she is to start earning 15 to 25 cents on every dollar he or she brings in, to be paid out monthly, quarterly or annually.

Other factors to be negotiated include:

  • Vacations,
  • Malpractice insurance,
  • Health and disability insurance,
  • CME allowances,
  • Dues and subscriptions,
  • Vehicle/gas and other allowances, and
  • Fees for licenses and boards, managed care privileges and hospital applications.It should go without saying that any contract should be in writing. These types of employment agreements fall under several state and federal regulations, so consult an attorney familiar with medical practice agreements.

Integrating Into the Practice

After you make the new associate or partner part of the practice, it doesn’t stop there. It’s important to integrate him or her into the life of your practice. Make an effort to introduce him or her to patients as well as local colleagues. Review practice procedures and protocols together and agree upon them. Educate staff on the associate’s role and how his or her specialties and relationship with the practice should be presented to patients.

Obviously, any associate you agree to bring on will have a stake in the success of the practice. Stay open-minded, and provide him or her with clear and consistent feedback.
 
Contact Mike Lorenz at mlorenz@cohencpa.com for more information.
 
Cohen & Company is not rendering legal, accounting or other professional advice. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts and circumstances.