Getting it right in today’s tougher recruiting environment

“We act as though comfort and luxury were the chief requirements of life, when all that we need to make us happy is something to be enthusiastic about.”

– Albert Einstein

Einstein was right, again, at least with respect to finding a happy, companionate match between your practice and a successful ophthalmologist job candidate.

John B. Pinto

Although we are in the midst of recession, and practices everywhere are hunkering down for as-yet-unknown health reform impacts, ophthalmic job opportunities are still relatively abundant. Any candidate with an open mind about geographic locations can choose between many suitors. Even practices in the most fortunate circumstances — great business enterprises, super reputations, located in enviable coastal communities — are finding it hard to coax top-flight new and mid-career doctors into the fold.

So the burden is now decidedly still on the employing practice to understand the mindset of today’s candidate, especially the new grads, and drive the interview and vetting process to the finish line.

It is important to understand that most doctor-candidates are going through this job-hunting process for perhaps only the first or second time in their life. They are understandably on guard and defensive. In the current young generation of providers, they can be wary, having heard war stories about their pals being promised the world and then roughly treated.

Even when the candidate and practice are well-matched, there are dozens of potentially off-putting terms to settle on. Any new employment or partnership term a candidate is seeing for the first time, or does not yet understand, is often assumed to be an act of employer subterfuge.

Your candidates are surgeons and learned professionals. So they want a lot of data. Most are not business people, so they need plain English. As ophthalmologists, they are numbers-driven, but anything that seems unclear in the numbers (and business math is pretty braided stuff compared with medical math) makes a candidate uncomfortable.

If you are the employing practice, it is important to have just one anchor representative of the organization in all contacts with the candidate. If two people are representing the practice (for example, the administrator and one of the partners), and especially if your recruiting contacts take place over many months, it is easy for both the practice and the candidate to lose track of what is on the table.

Spell out the details

Even the simplest partner-track associate deals are complex. It is best to have all the details spelled out in one simple “first step” terms document that is typically prepared by the employing practice, rather than going straight to a formal, definitive employment agreement. Here is a stripped-down, sample terms memo:

From: David Smith, MD

To: John Jones, MD

Re: Your Partner-Track Associate Position

This memo follows up our great discussions here in Smithville and outlines our current thinking regarding a position for you here with our practice and potential terms for you to join us as a partner-track associate. This is neither an offer of employment, nor a final confirmation of terms should you be employed, but is simply a starting point for our final discussions preparatory to developing a formal employment contract.

1. We both desire that you step into a partnership-track position, based in Smithville, Ga., an important satellite community of our main office. The initial contract term will be for 2 years.

2. It is our expectation that by the end of the first year you should be performing an average of 15 major surgical cases per month and that this could rise to 20 cases or more per month by the end of your second year.

3. This surgical volume, as well as the attendant clinical volume, rising to 400 or more patient visits per month by the end of the first year, will be highly dependent on your initiative to go out into the professional and general community and become known.

4. In your current practice, you report that you are now comfortable seeing 40 or more patients per day with appropriate assistance, and you are keen to have a higher-volume practice. We will work hard to get you up to these levels of productivity as soon as possible.

5. You are available for employment on or around Jan. 1, 2010, assuming activation of a Georgia license. We will help work on this and related credentialing details on your behalf.

6. It is anticipated that each provider in the practice, both shareholders and associates, will have equal call sharing; you will be responsible for after-hours calls about one out of every 10 weeks.

7. You will commit your full-time efforts to the practice; you will have no outside business interests without advance written approval from the board.

8. You report a willingness to work closely with referring doctors in the region; we hope to expand our referral sources through your addition as a full-time provider in Smithville and in the surrounding communities.

9. Subject to our mutual approval, we anticipate that an equal shareholder position would first be offered at the 2-year mark. We anticipate that we will commence formal ownership discussions after your first 18 months with the practice.

10. As currently anticipated, valuation of the core medical/surgical practice for the purpose of determining the cost of your purchase of an owner interest would be:

• Goodwill at 50% of net annual profit available for physician distribution for last 12 months preceding the month in which final partnership agreements are signed
• Capital equipment and leasehold improvements at their independently-appraised, fair market value
• Accounts receivable at their historically recoverable amount
• An offset for any practice liabilities
• There will be no ASC or real properties involved in this transaction.

Using the above valuation approach, the total current estimated practice value is in the range of ±$1.8 million. In the event of a practice buy-in, we plan to extend 5-year loan terms at an interest rate of prime plus 1%.

11. Each doctor in our practice, both associates and owners, has defined business management and development responsibilities beyond their clinical responsibilities, and it is expected that they make appropriate time commitments for these.

12. Compensation during the initial 2-year associate-ship period will be a base salary of $175,000 and bonus compensation of 35% of all professional fees and associated testing collections above three-times base salary, paid quarterly.

13. You will receive all normal medical staff benefits, including family health coverage. Moving expenses up to $10,000 will be compensated, although these will be reimbursable back to the practice if you separate without cause or are terminated with cause within the first year of employment.

14. During the first year of employment, you will receive 4 weeks of combined education, vacation and sick leave; this will expand to 5 weeks in the second year.

15. Professional dues and meetings and related professional expenses will be covered at actual cost, up to $4,000 per year. Business cell phone, pagers, auto mileage, referring doctor entertainment and similar reasonable expenses will be reimbursed to you by the practice. If there are any additional professional expenses you would like to outlay, we will, to the extent approved by the practice’s accountant, have such costs expensed out of your salary with pre-tax dollars.

16. Either party will be able to terminate the employment agreement for any reason upon 90-days advance notice. Termination provisions in both the associate and owner stage employment agreements will provide for a reasonable non-compete restrictive covenant. We will direct our attorney to prepare non-compete language with prohibitions equivalent to the strongest permitted under Georgia case law.

17. Compensation and benefits as an owner in the practice will be negotiated among all the owners in future years, but our current approach is as follows: 70% of available profits are divided among the owners pro-rata to personal collections; 30% of available profits are divided pro-rata to ownership of practice shares.

Final step

Once you are far enough along in negotiations to be confident that you have found a finalist, this recap of terms should be prepared for the candidate, accompanied by a summary of your practice’s financial and volumetric performance. Be prepared in today’s more competitive climate to be negotiating terms directly with the candidate’s business adviser. Such work is now a significant part of the typical consultant’s client portfolio — we have now entered an era in which the top surgeon candidates are hiring their own “agents” for representation.

Forty years ago, young eye surgeons received an annual paycheck of less than $50,000, a pat on the head and an admonishment from the senior partner: “Work hard, keep your nose clean and trust us — someday you’ll be part of the club.” How times have changed.

• John B. Pinto is president of J. Pinto & Associates Inc., an ophthalmic practice management consulting firm established in 1979. Mr. Pinto is the country’s most-published author on ophthalmology management topics. He is the author of John Pinto’s Little Green Book of Ophthalmology, Turnaround: 21 Weeks to Ophthalmic Practice Survival and Permanent Improvement, Cashflow: The Practical Art of Earning More From Your Ophthalmology Practice, The Efficient Ophthalmologist: How to See More Patients, Provide Better Care and Prosper in an Era of Falling Fees, The Women of Ophthalmology and the new book, Legal Issues in Ophthalmology: A Review for Surgeons and Administrators. He can be reached at 619-223-2233; e-mail: pintoinc@aol.com; Web site: www.pintoinc.com.