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How to resolve partnership issues
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Addressing doctor workload, compensation and other squabbles will help your group practice.
There are myriad of partner issues to resolve in any group ophthalmology practice, such as compensation, minimum workloads and staffing. Most of these are nailed down, at least generally, in the written shareholder or partner agreements that everyone signs when they become an owner in a group practice. However, years or even just months after the contract’s ink has dried, it is typical for questions and arguments to erupt.
It is unlikely that every contingency will be covered in your original documents, and it is incumbent upon every administrator of a large practice to secure a periodic legal audit to ensure the old contracts are still suitable to changing times and circumstances.
Partner issues most often arise because of just one disaffected or misbehaving partner or a small, like-thinking cluster of individuals in a large practice. Here are some of the most common issues I see bubbling to the surface as I make my rounds to practices around the country each year. Even in the strongest and most jovial settings, it is common for one or more of these issues to fester.
How much of the practice should we each own?
There is no one formula for success. There are happy, stable practices that split the pie evenly and equally happy practices with one majority owner and several junior partners. The argument for equality is more often existential than financial. It generally feels fairer to be equal owners. Many doctors say, “We’re all peers. We’re all equals. Let’s all own the practice equally and balance out our different economic values in the compensation formula.”
With every passing year of field work, I must admit that the argument for equality weighs stronger on my mind. I have observed that practices with equality of ownership are marginally more tranquil than practices with differential shares or both junior and senior owners.
However, in some settings — because of wide differences in productivity or the wariness of a founding partner — it can make sense to apportion ownership to each doctor’s individual productivity. After all, logic says the doctor who is generating the most work, and in most circumstances is paying for the most overhead, should have a proportionately louder voice in the boardroom.
How should decisions be made?
Few new partnership or corporate documents initially cover decision-making in sufficient detail, so the group must fine-tune the rules throughout the years. In mature, amended agreements, there should be sufficient detail regarding how decisions are made to allow for unambiguous group and individual action.
This fine-tuning should set down the decision and spending authorities of department heads, individual doctors, the administrator, the practice’s managing partner and the board itself. Subject, as always, to the recommendations of your legal adviser, board votes should be categorized into at least two varieties: “small” decisions and “large” decisions (decisions with a higher cost or great potential impact, such as the removal of a partner). The former can be passed by a simple majority and the latter by a super-majority, for example, six out of nine votes.
If we develop a new building, optical business or ASC, should we all own it?
As a guiding principle, I strongly urge clients to share all practice business opportunities with all partners, even if some partners are not as involved as others. For example, if a multi-subspecialty group practice has a pediatric ophthalmologist who will make scant use of a new ASC, this doctor should still have an opportunity to buy into the unit. Of course, in many circumstances there should be an opportunity, but not an obligation, to partner in a new ancillary service.
For example, it would likely be unreasonable for a group of doctors in their 40s to force a partner in his or her 60s to buy into a new office building. In some circumstances, it might also be unreasonable for the same doctors to force their younger partner who is just starting out to help pay for an expensive piece of new capital equipment.
What is the best formula for how we get paid?
Every system under the sun has its proponents and detractors, from pure equal-split to pure “eat-what-you-kill” and everything in between. There are hundreds, if not thousands, of models. Depending on the individual practice, one methodology is usually better and fairer than the others.
But check the same practice in a year, and odds are great that something will have changed to make the adopted system now less fair. That is why I urge larger and more dynamic client practices to formally review their compensation formula at least annually and to allow any doctors who think they have been put at a disadvantage to come to the board at any time for a more timely review.
Assigning new patients
I didn’t think much about this topic until a few years ago, when I heard that one physician in a group practice was paying off the front desk staff to steer surgical patients his way. Your practice should have formal, written receptionist and phone staff rules for how patients are assigned. Your practice should also have significant group discussion and some formality when it comes to which doctors get to provide specific subspecialty services.
My favored approach is to simply say, “Each optometrist and physician in our practice is allowed to provide any and all eye care services for which he is appropriately licensed and trained, subject to the oversight of the practice’s medical director and peer review.” Arrangements to shunt subspecialty care to only the doctors fellowship trained in that discipline may leave the practice overly dependent on a single key subspecialist and the other doctors blocked in their professional growth.
Apportioning practice resources: Marketing, staff and technology
Since at least the advent of refractive surgery more than 30 years ago, internal practice battles have raged over who is going to get the largest ad budget and the best staff. The resource allocation winners have often been those doctors with the longest tenure in the practice or the greatest political backing, not those with the best business plan for a new and profitable patient service.
As fees fall and expenses rise, it is important to rationally fund each new opportunity, not based solely on its backer in the practice, but based on its potential for a reasonable return.
How far should one partner’s collections be allowed to fall before being reverted to an associate?
This question is the flip side of the question at the start of an associate’s career: How high must an associate’s production rise before he or she can “make partner?” There is no easy answer to these two related questions.
Even after an employee-associate has been in the practice for 2 or 3 years, the most common pre-partner trial period, he may lack the productivity to support not only his own salary, but his buy-in.
As a broad generalization, the math works out this way: Once an associate rises above, or a partner falls below, personal collections equivalent to 50% of the average of the total group, a transition in status is indicated. The percentage threshold could just as easily be 60% or 70% if your aim is to limit ownership to the highest producers.
For example, if three partners and one associate practice together, and the average collections of the three partners is $700,000 per year, and the associate collected $350,000 or more in the past 12 months, he might reasonably be a candidate for partner. It gets a little more complex with a senior physician, of course, who may have an intangible “rainmaker” value as a continued partner in the practice, even after his or her personal productivity falls below 50% of the average. Every situation deserves individual review and individual rules.
All these various areas for potential conflict work together, obviously, as a collective package deal for each partner. With so many overlapping issues, each physician’s true feelings may be masked during negotiations.
John B. Pinto is president of J. Pinto & Associates Inc., an ophthalmic practice management consulting firm established in 1979. He can be reached at 619-223-2233 or pintoinc@aol.com.