Career: The Partnership Track – Is It Really for Everybody?
How to weigh the pros and cons and select the right career course for you
By Robert Anthony
So you've just finished your residency, and now you have to consider your next step. Or perhaps you've been in a group practice for a few years, and the other physicians are inviting you to move up. Or maybe you've been working in a group practice for too long, and you're simply ready for something else.
If any of the above situations sound familiar, you're likely facing the same question: Should I become a practice partner?
Just as most people move from dating to marriage to children as their lives progress, physicians traditionally move from school to residency to partnership. But is this track necessarily right for everyone? How can you decide what's best for you?
Everybody's (not) doing it
These aren't idle questions. A recent survey by Merritt, Hawkins & Associates, a physician staffing firm in Irving, Texas, reveals that 60 percent of physicians over age 50 are planning to leave their practices within the next three years.
There's a trend here. William Frank, president and CEO of ThePhysicianCareerNetwork, a consulting firm headquartered in Englewood, Colo., teaches a class called "Non-clinical Careers for Physicians" that identifies at least 500 different occupations suitable for doctors. Recently his classes have sparked a lot of interest.
"The interesting, and surprising, thing is, it's really physicians of all ages," Frank says. "From physicians who are midway into residency who have identified that medicine is not for them to those who have been practicing for a year or two — maybe they've even done a second residency, and it's still not working."
But that doesn't mean all — or even most — physicians are attempting to "escape" traditional patient care careers. Physicians leave practices for many reasons. Some find they genuinely don't enjoy medicine, while others discover more fulfillment in areas of medicine that don't involve direct patient care. The fact remains that the vast majority of physicians still see patients, and most of those physicians are partners within group practices.
A balancing act
Still, everyone admits there are some definite advantages to being salaried. After all, a partnership is an investment — and investments don't always pay off.
"The partners get paid after everything else gets paid," says Chester Cedars, a partner in a two-physician family practice in Lone Tree, Colo. "So if you have a month or two where your collections are a little light ... the partners have to skip a check."
A salaried physician in a group practice doesn't have such worries. "[The advantage] is your guaranteed salary," says Cedars. "Even if the practice owners have to skip their salary, they have to pay you because they have a contract to pay you that much."
Of course, salaried physicians don't benefit as much when practices are thriving. In general, physicians who choose to remain salaried take a pay cut over the long term.
But many physicians are willing to forgo that extra income for other perks. "The first benefit would be life balance," says Frank.
Practice partners must make important administrative decisions that can take lots of time. Salaried physicians don't have to deal with business details.
"There are a lot of good things about [being a salaried employee], especially if you're working for a hospital or a place where you don't have to worry about any employees," says Stacy Childs, one of three physician partners at Urology Clinic, PC, in Steamboat Springs, Colo. "You don't have to worry as much about your productivity. ... Even though you may not be making quite as much as they think you should for the corporation or the hospital, still they need you there."
Like many other professionals, physicians equate more personal time with a better work/life balance. That can be especially important to female physicians with children. "A lot of women are not looking to work 40, 50, or 60 hours a week," says Cedars. "They're looking for a lighter work schedule to allow them some family time."
"That sounds like a sexist statement, but it's not," adds Smith. "Every statistic shows you that female physicians work between 25 percent and 28 percent less than their male counterparts. It's not that they're going off and trekking Nepal — there's a reason it happens."
Not being at the office all the time does not necessarily mean partnership is out of the question. "Specialty to specialty, it varies," says Smith. "In specialties that are more female-dominant, I find them highly flexible ... in pediatrics, in obstetrics, a little bit in internal medicine. ... In neurosurgery, not so much."
The decision to pursue partnership or remain salaried is a personal one. "All of this has to be suited to the makeup and the temperament of the individual," says Frank. "I think there's certainly an ego reward to saying, 'I'm a partner,' in whatever the firm might be. There's less status attached to saying, 'I'm a staff physician at XYZ practice.'"
So if a physician decides to pursue the partnership track, is it necessarily at the expense of losing that work/life balance?
Mark Smith, vice president of recruiting for Merritt, Hawkins & Associates, doesn't think so.
"I find the majority of physicians want to balance work and family," he says. "The vast majority of younger physicians are requiring it. It's just the change in the culture we have of new graduates who are coming out saying, 'I'm only going to work so much, I'm going to take this much vacation, and I'm only going to take this much call.' The market has [responded to] that quite a bit."
Gone are the days of newly minted partners working 20 to 30 hours a week more than their senior counterparts. Smith says work distribution within partnerships is now fairly equitable. "Since as a partner you typically make more for doing the same thing, there aren't very many reasons not to [become a partner]," he argues. "It comes down to do you want to continue paying rent or buy the house?"
Finding 'The One'
But how do you know whether a particular practice is the right one for you?
"In one respect, being a partner is like being married," says Cedars. "It's a professional marriage. When one of the partners leaves, it can be like a divorce. And before you get married, you should know if that practice is The One."
First ask yourself if you can see yourself working within a specific practice long term. Make sure you like the people with whom you work. You should begin to be able to answer that question during what is sometimes referred to as the "buy-in" period — the year or two between when you start at a practice and when you are eligible for partnership.
Frank adds that physicians are most likely to find the best fit with practices that share their values. That can mean many different things, from approaches to patient care to business philosophy.
Money, of course, can be another great divider.
A practice Smith worked with included physicians who were all retired military personnel. Because the partners had sizable pensions, increasing profitability was not a big priority for them.
"Make sure the group's culture parallels your goals," says Smith. "To come in and think you're going to do something totally different and change the group isn't a wise move."
Kim Fagan, a primary-care sports medicine physician in Birmingham, Ala., learned that lesson the hard way. Five years ago, with three children under age 8, she left a very successful multispecialty practice to go solo. "I was the only nonsurgeon in the practice, and the only primary-care physician," says Fagan of her former position. "I also happened to be the only female. Some of the issues that I was having were foreign to them."
When red flags go up
It's normal for partners within any business situation to disagree, but how they handle their differences is crucial to their collective success. "People who are very easygoing are better partners," says Childs, "but the people who tend to be partners are Type A [personalities]."
Frank says some red flags that may go up when considering investing in a practice as a partner include high turnover and "entrenched leadership" that is unwilling to relinquish power.
Childs adds that physicians who seem preoccupied with maintaining control are not likely to make good business partners. "How do the other partners try to control a situation?" he asks. "When you go out to dinner, do they ask you where you want to go, what kind of food you like, or do they say, 'We're going to go here'?"
Childs knows a thing or two about getting along with physician partners. He's been a partner in three different practices. "People just don't get along, especially young people," he says, noting that he and his current partners "get along famously because ... we've already made all the mistakes. We've seen the jerks; we've been jerks ourselves."
Childs also notes that the benefits of partnership go beyond potential monetary rewards. "You have instant consultation," he explains. "When you're solo, it's a little bit scary when you are making some decisions about patient care and you can't run it by somebody. You can get on the phone and call somebody, but they're not looking at the X-rays with you, and they're not getting the whole story all the time, so you're not getting all the right advice."
It's your (financial) future
But deciding to pursue the partnership track is at its core a business decision. Don't be afraid to ask pointed questions about a practice's finances before deciding to invest in one.
"There's really nothing that a young physician doesn't have the right to know the answer to," says Frank. "If you ask a question and you're treated like that's none of your business, I think that's a red flag."
Examining specific areas within a group's business practices should give you a good idea of whether you are making a sound financial decision. Among them:
Sealing the deal
- · Average income — First, determine the average annual income of the partners in the practice you are considering joining. "Everybody wants to join a winning team, so let's make sure it's a winning team first," says Smith.
- · Accounts receivable — Look at the practice's accounts receivable history. It's helpful to know what its patient base is and the procedures it most commonly performs, but that information is meaningless if the practice can't collect on what it bills. Pay special attention to A/R records from the past 90 days. What's been collected? What's been written off? Childs recommends retaining an accountant to review the figures with you.
Also, consider payer mix. Practices with high percentages of low payers like Medicaid will struggle with collections.
- · Overhead and debt load — A practice's overhead is the sum cost of all those things that are needed just to keep the practice running — employee salaries and benefits, utilities, monthly lease or mortgage payments, etc. A practice's debt load is the ratio of the business's assets to its debt. Ask to see a list of all the equipment (medical and office) the practice owns, along with an estimate of its depreciated value. Any practice should be able to give you exact figures on both these items. Beware the ones that can't — or won't.
- · Goodwill — Also known as the "buy-in" cost, this is the price tag put on the intangible value of the practice. "Goodwill is that I've been here 15 years and built this practice; therefore it has an intangible value of another $200,000 that you owe me," explains Smith.
The problem is that there is no set algorithm for putting a dollar figure on what is essentially a subjective estimate.
Ask how the practice arrived at its goodwill figure. Ask your potential business partners to show you how it was calculated. "If somebody tells you, 'I don't know; let's figure it out later,' buyer beware," warns Smith. However, most practices do not ask physicians they have invited to become partners to pay buy-in costs. As the physician shortage has sparked competition among practices looking to recruit new doctors, some specialties have decided not to make their candidate pool even smaller by asking for a buy-in. This isn't the case with very high-paying specialties in very desirable locations.
"A buy-in could be $10,000 and a horrible investment," says Smith. "Or it could be $1 million and a great investment. What's your return on that investment?"
- · Real estate — If the practice owns the building in which it operates and offers you the opportunity to purchase a share, consider it as you would any real-estate deal. Is it in a good area? Is it likely to appreciate in value? Has it been well maintained and updated, or is it the same building the original partners bought in 1973, complete with faulty wiring? Think of it as if you were purchasing a rental property.
If the practice makes buying into its property a condition of partnership, Smith recommends asking why: "If it was mandatory, I would question it. If it was a good deal, I'd want to get into it anyway."
Finally, get everything in writing. Because you are likely to work for one to two years at a practice before you are offered a partnership, it's important to outline the details of how your position with the practice will change before you become a partner. You don't need a full contract, nor should you expect every detail of the deal to be listed ad nauseam, but there should be a general, written agreement articulating both your expectations and those of your new partners.
"One thing that happens with young physicians is that they don't look out for their own best interests," says Frank. "They leave some of these things open-ended."
If you are joining a practice and want to ensure that you will be invited to become a partner, draw up a letter of understanding between you and the practice that includes a date by which you both agree the practice either will or will not offer you partnership.
Sound overly cautious? "The great news is that the vast majority of people out there are providing real, solid opportunities and very fair, equitable practice equity positions," says Smith, "but there are a few you want to be paying attention to. Some of them are looking to take advantage of you. We're looking for that 10 percent or 5 percent, whatever it is, that are just not good deals."
Robert Anthony, a former associate editor for Physicians Practice, has written for the healthcare and practice management industries for five years. His work has appeared in Physicians Practice, edge, Humana's Your Practice, and Publishers Weekly. He is based in Baltimore, Md.
Reproduced with the permission of Physicans Practice
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