Partnership: Asking the Right Questions

Partnership: Asking the Right Questions

Nearly 50% of fellows will join a private practice following completion of their fellowship. For most, partnership is a much anticipated reward for those starting a career in private practice. Partnership can be equated to ownership and physicians often find emotional and economic value in being a business owner.

When you join a practice you will be expected to earn the opportunity to become a partner by working on behalf of the practice as an associate. Partnership is not automatic to every associate and carries a monetary and “sweat equity” value. The practice will require you to meet a specific set of criteria to be eligible to become a partner and this varies greatly from practice to practice. We cannot stress enough the importance of completely understanding your practice’s requirements to becoming a partner and managing those expectations. Additionally, you will need to know how much it will cost you (buy-in) and what is the return on your investment (ROI) to ensure it is worth your time and money.

Here are just a few things we believe you should know the answer to if you are interested in becoming a partner in a private practice:

  1. What type of partnership is offered? Not all partnerships are the same. Here are a few examples:
    • Each physician keeps their own productivity less overhead expenses, which are divided among the partners. 
    • All revenue is put into one pot and divided equally among the partners less overhead expenses. Generally, in this case each physician receives a base salary and the profits remaining are divided quarterly, bi-annually or annually.
    • Each physician keeps their own productivity for hospital and office revenue and the revenue from the dialysis center is divided between the physicians.
  2. What is the track to partnership? Most practices offer a 2 year track to partnership but a 3 year track is also not uncommon. In some cases it can take you additional time to become a full partner. Examples include:
    • After partnership you have full voting rights but your base salary might be staggered over two or three more years
    • It can take 5 years to become fully financially vested and receive a full partner share of the medical directorship revenue
  3. Is there a Buy-In? It is important to know what the buy-in is or how it will be configured in order for you to determine your ROI. A few examples of how this can be set up include:
    • Sweat equity is one type of buy-in. Meaning you don’t pay anything monetarily but you may take extra calls, have a longer track to partnership, or have a revenue threshold you are required to meet.
    • Monetary buy-in is an amount of money you pay to become a partner. This amount can be determined by different formulas, such as:
      •  A set amount determined by the partners
      • A percentage of accounts receivable
    • How will you pay for it?
      • Loan from the practice?
      • Cash direct from you? All at once? In installments?
  4. How is ancillary income to the practice managed?
    • Medical Directorship income
      • Is this shared between partners?
      • Are directorships kept separately by each physician?
      • Will you get your own directorship?
    • Joint Ventures – purchasing business ownership in a dialysis clinic or a vascular access center.
      • As a partner, do you have the opportunity to invest in a dialysis clinic or a vascular access center?
      • Is it a separate investment or is it included in your buy-in?
    • Real Estate
      • As a partner, will you have the opportunity to invest in any real estate the practice owns? (i.e. building the office is located in)
      • Is it a separate investment or is it included in your buy-in?
  5. What is the ROI? Buying into a practice is an investment in your future. You want to ensure you will receive a return on anything you invest into the practice. You need to know what you are getting for your investment. Here are a couple of examples:
    • Example 1 – If you buy into a practice for $50,000 and you get a share of the medical directorship revenue as a benefit to your partnership at $25,000 per year, you then know that it will take 2 years for you to receive a return on your investment and thereafter a profit for your investment.
    • Example 2 – you buy into the practice at $50,000 and you get to keep your own productivity and share overhead expenses. You also have the potential of a new medical directorship assignment if one presents itself in the future. In this case you are not really getting anything for your investment financially and need to think about whether the brand of the practice and promise of a future opportunity is enough to warrant the buy-in.

Every practice model is unique and it is important for you to know what exactly you are working towards and whether being a partner is right for you. DaVita SOURCE is here as a resource for you and can help you compare your opportunity to previous or current partnership models, as well as help you determine if the partnership aligns with your long-term professional goals.  

If you have specific questions about partnership or have questions about how to bring this up in conversation, please feel free to contact the SOURCE team via e-mail at fellowshipoutreach@davita.com.

2019-12-01T13:22:39-07:00 August 22nd, 2016|12 Months before Graduation|2 Comments

2 Comments

  1. Rosario Campos March 18, 2018 at 10:23 pm - Reply

    My son is currently an employee of a private group practice. After 6 months on the job, he was appointed covering medical director and will officially be named Medical Director when agreement with DaVita is finalized. He was told that he will not be compensated.

    As an employee, should he be compensated for the additional responsibilities that he will handle? One of the partners said that being a medical director could be applied as his “buy-in” into the partnership. He is not sure yet if he would want to be a partner in the next year or two. Should he negotiate for a salary before accepting the title?

    • Morgan Colwell
      Morgan Colwell March 19, 2018 at 3:03 pm - Reply

      Thank you for your inquiry. Unfortunately, we cannot comment or respond to an individual’s specific situation. We offer these communications as general overviews only. If you have a question about a specific situation, we recommend seeking guidance from independent professionals such as attorneys or CPAs.

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