Strategies and tactics for obtaining a partnership and/or equity in an allergy medical practicce

1. Starting in Practice, Part 2
Partnership and Beyond
Tao Le, MD, MHS
University of Louisville
Central Allergy & Asthma

2. Disclosure
• No relevant relationships
• I didn’t have to negotiate a partnership

3. What is Partnership?
• Ownership stake in a practice
• Typically offered in 2-3 years
• There may be a junior vs. full partner level
• There is usually a buy in
• Practice may offer financing
• There may be a buy out when you retire

4. Benefits
• Income
• Opportunities for governance,
responsibility
• Employment security

5. Risks
• Administrative duties (ie, bureaucracy)
• Financial and tax liabilities
• Legal liabilities

6. Setting the stage
• Ask about practice philosophy to partnership
• Ask about previous physicians who made or did
not make partner
• Make sure employment agreement specifies
– Path to partnership
– Timing
– General method of practice valuation
• Know the tax, financial, and legal implications
• Ultimately requires mutual trust and open
communications

7. Valuation methods
• Practice valuation
– Tangible assets
– Accounts receivables
– Intangible assets or “good will”
– Liabilities
• Discounted cash flow analysis
– A method of evaluating a practice’s value based on
projections of future cash flow
• See PM Resource Guide

8. Exact Buy In Example
• Practice with 4 partners
• Valued at $2 million
• New doctor buys 1/5 of practice  $400K
• Payment options
– Lump sum (+/- bank loan)
– Payment from reduced practice income

9. Inexact Phased Buy In
• No practice valuation assigned
• Salary reductions phased in over several
years

10. Example Phased Schedule
• Year 1 – 60% of full owner income
• Year 2 – 70%
• Year 3 – 80%
• Year 4 – 90%

11. Buy Out
• May be triggered by retired, death or disability
• Pay out calculated on same valuation method
• Pay out typically is structured as deferred
compensation
• Paid out over time – 2-5 years
• Pay out may be reduced/restructured if:
– Partner is leaving to start new practice in same service
area
– Pay out threatens solvency of the practice

12. FINAL WORDS
• Negotiate parameters of buy-in at before joining
the practice
• Get competent legal, financial, tax advice
• Do your due diligence
• Get it in writing

13. Resources
• A Physician’s Guide to Employment Contracts
http://www.mmaonline.net/Portals/mma/Publications/Reports/Physicians_Guide_to
• National Society of Certified Healthcare Business Consultants
http://www.nschbc.org/
• The 10 Biggest Legal Mistakes Physicians Make in Buy-ins
https://www.wilentz.com/files/articlesandpublicationsfilefiles/92/articlepublicati
onfile/sfx169b.pdf
• Tying the Partnership Knot: Making It a Win for Both Practice and Associate
http://www.aafp.org/fpm/2009/0300/p23.html
• Negotiating Your Buy-In to a Medical Practice and Practice Valuation
http://www.wadegold.com/Uploads/WadeGoldUplds/PdfUpload/Negotiating
%20Your%20Buy-In%20and%20Practice%20Valuation%20(00088709).pdf

14. Discussion