Sooner or later, a growing medical practice will need to take on another associate or partner to support that growth and keep the practice profitable long term. The risk, of course, is that you pick the wrong person and end up throwing a wrench into the works. Here are some ways to help ensure you select wisely.
Ask the right questions – Bringing on an associate or partner is a weighty decision. Before beginning the process, ask yourself:
- What do you hope to achieve?
- To achieve that goal, what credentials do you expect an associate or partner 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, the physical space allocated to the waiting area, exam rooms, physician offices, and staff work and break areas) handle additional patients?
- Can your office location and community accommodate your practice’s growth?
- Are you prepared to manage another physician or work with another partner?
Do the research – After answering these questions and deciding to move forward, think about where to find an associate or partner. You might already 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 — personality is a huge factor. You want to get along with an associate and be able to closely collaborate with a partner. In either case, the person needs to understand and share your goals.
Consider compensation structure – An associate or partner’s compensation will likely involve negotiation. Such discussions can be particularly complex with partners, requiring comprehensive professional advice. For simplicity’s sake, let’s focus on associates. Generally, you can take one of three approaches:
- Pure salary strategy. This places all the risk on you. The question becomes whether the associate will generate enough income to warrant the salary.
- 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 anti-kickback laws, so you’ll need to seek legal advice when seriously considering it.
- 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 the person has generated more than $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, the physician will start earning 15 cents to 25 cents on every dollar brought in, to be paid out monthly, quarterly or annually.
It should go without saying that any contract should be put in writing. These types of employment agreements are typically subject to both federal and state regulations, so consult an attorney familiar with medical practice agreements.