Outline highlights typical flow for practices to add partner-track associate physician
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“Perfect partners don’t exist. Perfect conditions exist for a limited time in which partnerships express themselves best.”
– Wayne Rooney
“Great partnerships thrive because the people need each other.”
– Courtney A. Kemp
Once upon a time, there was one chief gateway to practicing as an eye surgeon. The vast majority of new ophthalmologist graduates entered the profession as candidates for equal partnership in a private independent practice.
Today, other pathways are starting to predominate over this tradition:
- Working as durable employees in health systems, staff model HMOs and corporate practices.
- Joining a private practice that is no longer admitting new partners.
- Taking an academic or military post.
For the private practices still hiring traditional partner-track associates — and the associates themselves — there are a number of correct steps to take and wrong turns to avoid. Here is a checklist of the basic contemporary hallmarks of the traditional approach, from the first inquiry to the hire and on to eventual partnering.
1. First, there is a necessary reality check for employer practices: It is getting harder, slower and more expensive than ever to secure a partner-track associate. A generation ago, numerous job candidates could be secured in the space of a few months of advertising on your own or hiring a headhunter. And base salaries of around $200,000 were sufficiently attractive. Today? Expect fewer candidates, even with a base salary offer of more than $350,000 and the support of a professional recruiter.
2. Before you commence recruitment, it is critical to draft prospective employment terms, at least in the form of a punch list of the major components. Typical today for a practice in an “average” setting (ie, not the most attractive coastal/urban locations and not, at the other extreme, in rural settings) is the following for a general ophthalmologist candidate working full time (whether a new graduate or mid-career):
- Write down the work scope: hours, locations, expected clinic and surgery volumes. Will the new doctor have a ready-made practice or have to build their own referral sources?
- A base salary of $275,000 to $400,000 (note that subspecialty base salaries can skew much higher).
- A bonus of ±30% of net professional fee revenue collections (omitting refunds and special service costs such as premium IOLs, laser centers and the like) in excess ±2.5 times base salary.
- A $10,000+ relocation stipend.
- A signing bonus (although not universal, increasingly common).
- Five weeks of paid time off for vacation, illness and continuing education.
- A ±$5,000 continuing education stipend.
- Individual or full family health insurance coverage.
- A 60-plus-day reciprocal notice of termination.
- A noncompete agreement, subject to state and federal regulations.
3. At any point in the recruitment process with serious candidates, it is reasonable to supply a draft employment agreement. This can be generic, with lots of blanks to fill in if you are early in the process, or a completed, near-final draft for the candidate’s formal review.
4. The candidate associate should also be provided with prospective future partnership terms that are either spelled out in the initial employment contract or a side letter. These terms are typically proffered in good faith but are nonbinding and include things like:
- Timing: When will partnership first be made available to a productive, successful partner-track associate? The overwhelmingly typical time frame is 2 years, but it may be shorter or longer.
- What will convey to a new partner, stock in the core practice only or also in associated real estate, optical, ASC or similar ancillaries?
- What percents of each item will convey? Equal ownership is most typical but not obliged.
- Pricing (or pricing methodology) and payment terms.
- The compensation model for partners. Remember that the sharing of practice profits is typically pro rata to individual production, but there are hundreds of variations on this basic approach.
- Founders’ rights, if any, to be claimed by the legacy owners of the practice (such as tie-breaking rights or safety from termination once their shares are diluted).
- If at a late career stage, the founders’ intentions as to retirement timeline and expected final buyout terms should be disclosed.
5. Ideally, you should reveal to your top candidate(s) up front your intentions about the longer-term future of the practice. In well-run larger practices, this might be a formal multiyear business plan. But even in boutique-scaled practices, you can simply address the following dimensions of the future:
- Service mix.
- Provider mix (OD vs. MD coverage).
- Desired growth rates (the average practice grows about 5% annually).
- Your stance with respect to health systems and local private equity development.
- Number of office locations.
- The source of new patients and stance with respect to optometric comanagement.
- Your position regarding owning vs. leasing office property.
- Any goals regarding an ASC or office-based operatory.
- Succession planning.
6. Before the hire, it is quite reasonable and customary to provide your candidate with a cross-section of practice financial and volumetric data. Although some practices are shy about this step, it is increasingly seen as routine, allowing the candidate to be confident that they are investing their time working toward partnership in an organization that is well run and thriving. Typical reports include recent financial statements, procedure count reports, billing management data, performance benchmarking and the like.
7. If all goes well, you and your candidate will move on to signing a formal employment agreement. This can be readily prepared by your local general legal counsel or by any of the available national specialists.
8. Of course, signing off an employment agreement is just the beginning. Only about half of partner-track associates actually move on to become partners. As the employing and supervising MD, you and your practice administrator should orbit your new colleague closely, following these guidelines that can increase the odds for eventual partnership success:
- The supervising practice owner and the associate doctor should meet at least biweekly in the early months, everything from a quick chat over coffee to an extended sit-down discussion.
- The associate’s medical records should be spot-checked for several months to assure proper documentation, coding and care pathways.
- All practice providers should meet at least quarterly to go over medical quality assurance issues and business housekeeping and simply bond as colleagues.
- The new doctor ideally receives overall practice financial data throughout the associate period. They should also receive their own detailed performance stats, graphed monthly. These should include total and new visits, collections, average collections per visit (the so-called “average ticket”), surgical cases and surgical density (the number of visits transited per surgical case).
- New associates should pursue supervised outreach activity for referral development, and they should get involved with practice projects, all in preparation for eventual ownership.
- At formal intervals (not less often than every 6 months), partner-track associates should receive a formal performance review. This review should basically boil down to either: “Good job; you are on track to become a partner,” or “We have concerns; here are some things that will need to improve for you to be approved for partnership.”
9. The typical timeline to partnership is 2 years. Three years or longer is less common but is seen when the associate’s practice is slow-growing or the associate’s behavior causes the employing practice to delay partnership for a probationary extension.
10. Finally, given the high cost of hiring doctors today and the 50-50 odds of a partner-track associate actually making it to partnership, it is important to make any hiring mistakes as quickly as possible. If your new doctor is not fitting in with the group or carrying their load despite your best coaching efforts, cut your losses.
- For more information:
- John B. Pinto is president of J. Pinto & Associates, Inc., an ophthalmic practice management consulting firm established in 1979. He is the country’s most published author on ophthalmology management topics, including John Pinto’s Little Green Book of Ophthalmology: Strategies, Tips, and Pearls to Help You Grow and Manage a Practice of Distinction, UP: Taking Ophthalmic Administrators and Their Management Teams to the Next Level of Skill, Performance, and Career Satisfaction (with Corinne Wohl), Simple: The Inner Game of Ophthalmic Practice Success, and Ophthalmic Leadership: A Practical Guide for Physicians, Administrators, and Teams. He can be reached at 619-223-2233; email: pintoinc@aol.com; website: www.pintoinc.com.
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