american anesthesiology/mednax

[Mman]

When someone quits your practice, for how long do they get the 1/n of the AR? Some collections might take 2 or 6 months to arrive. Are you going to get paid for 6 months after you leave?

After a 500k buy in, I would expect you get 1/n of AR for a full year more or less.

We both know it is not going to happen. I suspect you guys are getting 1/n of 1 month of AR which is a joke ~50k. So, what happened to my 500k buy in?

Our buy outs are the same as our buy ins with the only small differential of what the actual AR is at each time. The last 5 years it's averaged about 200K or so on either end.

The way we calculate our buy outs is the same as buy ins. Take the total AR the day they leave and project out what total collections will be from it going forward (we tend to cut that off at 12 months) and pay them the lump sum. We have our own formula for what we think we will collect from a given amount of AR (based on case mixes, current contracts, etc) that we use for both buy ins and buy outs.

You are overly jaded and cynical and the entire world doesn't work the way you think it does.

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[urge]

Because should they leave you give them A/R of 125.

?

Every partner will have his own share of the AR when they leave. Still don't see how anyone is upside down. No matter how you slice it and dice it, assuming everyone works just as hard, you are making a profit out of the employee if you pay him less than what partners make.

 

[urge]

Our buy outs are the same as our buy ins with the only small differential of what the actual AR is at each time. The last 5 years it's averaged about 200K or so on either.

That sounds doable.

 

[pjl]

Urge, they start getting paid right away, not delayed for their individual billings to come in. So we front them basically an AR. The alternative would be to make them not get paid for 1-3 months while collections start. So if they left at 1 year, if we cut the salary off they would still get their AR, so we would be paying them that 125 even though they are done woking, and would have been given that first months salary. It doesnt really matter, as it is just a thought exercise, but it sounds like Mmans group does the same.

 

[deleted126335]

You are overly jaded and cynical and the entire world doesn't work the way you think it does.

Not all of the world. Just a lot of it.

 

[voodoomagic]

OK

That guy sounds like the biggest

AMCs collect 30-50% more for each Insured patient (non CMS) they bill for. The playing field isn't level so there is no way smaller/medium sized groups can compete against the AMC because the better reimbursement rates leads to lower/no subsidy from the hospital.

Most of us don't see any point working for a lower salary than the AMC offers just to stay independent; on the contrary, I'd rather be an employee rather than partner without the headaches if the pay was the identical. Let someone else worry about Obamacare, Medicare cuts, lack of hospital subsidy, insufficient staffing, dealing with the CRNAs, etc.

Perhaps, the AMC is just a transition to the hospital employed model anyway. If I had to choose between being a hospital employee vs working for an AMC I'd choose the hospital based job as long as the salary was on par.

Did you sell out? Your old posts were quite vehemently supportive of our profession.

 

[BLADEMDA]

That guy sounds like the biggest

Did you sell out? Your old posts were quite vehemently supportive of our profession.

PM if you want the answer.

 

[voodoomagic]

this a great thread on the reality of business in the current anesthesia environment.

I too find it naive to talk about morals and ethics when selling a business. Their is nothing unethical or immoral about selling a business to another reputable business. I would suggest the need to separate the reality of running a business with the practice of medicine. The people I owe are my wife and children and then my parents and siblings.

Our Group sold 2 years ago. Was a great decision given the increasing cost of running a business, the increased GVT compliance issues, the increased Co-Pays that the OBAMA Care generation of insurance forces that no one pays and the increase in GVT payer mix. Our new employees get a better starting wage from day one, no buy in time. They don't have to worry about running a business only taking care of patients.

But there are morals and ethics involved aren't there [...]?
You were a beacon of said concepts. Hence the reaffirmation of who you owe? At any cost to other families?

"taking care of patients"... sounds like you're an ambitious one wanting to climb the ranks of Mednax.

 

[Carbocation1]

MEDNAX Announces Acquisition of Large Anesthesiology Practice in New Jersey
September 28, 2015 06:45 AM Eastern Daylight Time

http://www.businesswire.com/news/ho...e-Anesthesiology-Practice-Jersey#.VgyYaflViko

 

[Scotty_G]

I know that group well and they didn't have it great beforehand lol. Sucks for majority of those attendings

 

[Consigliere]

As predicted.......all future anesthesiologists will be employees of an AMC or a hospital.

 

[IlDestriero]

NJAA employs 90 full-time clinicians (70 anesthesiologists, 13 anesthetists, two nurse practitioners and five physician assistants) that provide a full spectrum of anesthesia services at Saint Barnabas Medical Center
“It was essential for us to partner with a national medical group with leadership that understands the complexity and diversity of our group, and shares our same vision for the future. Additionally, MEDNAX’s research, education and quality initiatives will support our practice’s goals and ultimately help us to better respond to the needs of our hospital partners.”

------

I suspect the understanding of the complexity and diversity of the group will equal 40+ lay offs of MDs and and ad on Gasworks for 40+ new CRNAs.
I hope the loot was worth it.
(The numbers are probably worse, but I don't feel like thinking it through.)

 

[deleted171991]

Another 40 anesthesiologists inflating an already bad NJ market.

 

[BLADEMDA]

Another 40 anesthesiologists inflating an already bad NJ market.

http://www.barnabashealth.org/Medical-Education/Saint-Barnabas-Medical-Center/Anesthesiology.aspx

If they keep the residency program and fellowships intact as I suspect they will be doing then the layoffs will be in the magnitude of 5-10 not 30-40.

14-16 residents total at St Barnabas?

 

[Scotty_G]

They are not keeping the residency program and do not have any anesthesia fellowships. Rutgers (formerly UMDNJ) state institution will be acquiring the residency program. It is a small residency program anyway.

 

[criticalelement]

I know that group well and they didn't have it great beforehand lol. Sucks for majority of those attendings

Scotty what are you talking about. Those partners had to have been making 600 plus in livingston. Are you freakin kidding me?

The associates probably had it bad though.... 4 weeks vaca.. 6pm out everyday.. LOL.. what kind of an ass h o le would take that job? I bet you if it was a cash over it was well over 90 million dollar deal.. Each partner probably got 5 -7 mil up front

 

[Ezekiel2517]

Scotty what are you talking about. Those partners had to have been making 600 plus in livingston. Are you freakin kidding me?

The associates probably had it bad though.... 4 weeks vaca.. 6pm out everyday.. LOL.. what kind of an ass h o le would take that job? I bet you if it was a cash over it was well over 90 million dollar deal.. Each partner probably got 5 -7 mil up front

You are correct, the senior partners were making that much. The younger guys got abused - long hours, not good pay, and 3 or 4 yr partner track. Very predictable this group would sell

 

[deleted171991]

You are correct, the senior partners were making that much. The younger guys got abused - long hours, not good pay, and 3 or 4 yr partner track. Very predictable this group would sell

May this be a lesson to all the suckers who sign up for partnership tracks that are longer than a year.

 

[Mman]

The associates probably had it bad though.... 4 weeks vaca.. 6pm out everyday.. LOL.. what kind of an ass h o le would take that job? I bet you if it was a cash over it was well over 90 million dollar deal.. Each partner probably got 5 -7 mil up front

If you can tell me what percentage of MDs were partners I can tell you what they got paid. I'd guess no way it was $5-7M unless they were > 70% non partners.

 

[criticalelement]

If you can tell me what percentage of MDs were partners I can tell you what they got paid. I'd guess no way it was $5-7M unless they were > 70% non partners.

no way they would sell unless they were getting that much. NO F in way... This hospital is a MONSTER. My guess 100 million dollar deal.. It is something obscene Im sure.
A similar hospital in the neighboring county sold their anesthesia group for something like 85 million 5 years ago/

 

[aneftp]

no way they would sell unless they were getting that much. NO F in way... This hospital is a MONSTER. My guess 100 million dollar deal.. It is something obscene Im sure.
A similar hospital in the neighboring county sold their anesthesia group for something like 85 million 5 years ago/

No one gets 5-7 million if it involves more than 4-5 partners in a big practice (aka more than 20 partners).

I have heard of 5-7 million dollar payoffs but one particular group in Orlando only had 3-4 principal owners and it more like the main guy getting 7-8 million and the other 2-3 getting 3 million and other 10-12 "employees" MDs getting nothing. (They used to get good bonus at end of the year and that's why they stayed as employees

 

[Man o War]

I know of a group bigger than this who sold out recently and each partner got 2 million, and had to agree to stay for 5 years for a salary in the high 300-low 400 range to get that 2 million. I would be very surprised if these partners got 5 million each.

 

[Man o War]

May this be a lesson to all the suckers who sign up for partnership tracks that are longer than a year.

Exactly.

 

[criticalelement]

No one gets 5-7 million if it involves more than 4-5 partners in a big practice (aka more than 20 partners).

I have heard of 5-7 million dollar payoffs but one particular group in Orlando only had 3-4 principal owners and it more like the main guy getting 7-8 million and the other 2-3 getting 3 million and other 10-12 "employees" MDs getting nothing. (They used to get good bonus at end of the year and that's why they stayed as employees

If you are making 600 plus.. why would you sell for 2-3 mil? Doesnt make sense.


This whole thing is going to collapse. I am certain of it.

 

[Wiscoblue]

I think the mednax guys tell you that the 2-3 million which you get will be treated as a capital gain rather than earned income. Huge difference in tax. If the guys are within 5 years of retirement, the math probably works out for them. But all the non partners get screwed in the deal.


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[Scotty_G]

There were many partners but only small amount of "senior" partners in the group

 

[deleted171991]

If you are making 600 plus.. why would you sell for 2-3 mil? Doesnt make sense.


This whole thing is going to collapse. I am certain of it.

Because it's either you take 2-3 mil now, or nothing later.

The only value an anesthesia group has is the service contract. Once that expires or it's cancelled by the hospital, they are nobodies. That's why this is a bad specialty to go into.

 

[Mman]

no way they would sell unless they were getting that much. NO F in way... This hospital is a MONSTER. My guess 100 million dollar deal.. It is something obscene Im sure.
A similar hospital in the neighboring county sold their anesthesia group for something like 85 million 5 years ago/

The amount of the buyout is solely determined by # of docs and what their salary was in the past. Then you divide that lump sum into however many are partners. That's why a pyramid with a few partners and many MDs will generate a bigger cut for those smaller number of partners. And yes it is taxed @ 15% capital gains instead of 39.6%.

 

[deleted171991]

You mean at a 23.8% (not 15%) tax rate, right?

 

[Man o War]

If a majority of the voting partners are 5 years or less from retirement, it makes total sense. They probably got stock options as well. If you ever meet any of the salespeople these AMCs send out to poach contracts, you will find that they are incredibly smart and convincing. They are a formidable opponent for even the most long standing and secure groups.

 

[Mad Jack]

BLADE. I am not niave, I know the risk but have some friggin b@lls and some morals. If you have a decent contract and good lawyers in your corner then a hospital can't just void a contract without cause. Now if a contract is up for renewal then obviously it's fair game but to simply have an administrator stroll in and void a legal document is unlikely. In my region contracts are three to five years, heard of one being ten years. If your group is up for renewal obviously you see it coming.

Contacts don't last forever. It's either sell out now and get something for it or get pushed out later and get nothing, all so you can what, give some new grads a couple of years of nice private practice before the contract is over and an AMC takes over?

 

[mostwanted]

I know of a group bigger than this who sold out recently and each partner got 2 million, and had to agree to stay for 5 years for a salary in the high 300-low 400 range to get that 2 million. I would be very surprised if these partners got 5 million each.

Was this Dallas?

 

[aneftp]

Whatever the tax rate is 15% vs 23.8%. It's still lower than the 39.6% plus obamacare surcharge taxes.

And to the OP who says they won't sell out for 2-3 million. I would sell out.

Think about it. You are going to be getting roughly 1.5-2.2 million up front in cash. That's cash.

Assuming the average age of the anesthesiologist is around 50. Most already have nice nest eggs (barring divorce etc). That brings most anesthesiologist net worth to 3-4 million easily with the buyout plus pre existing assets.

And you know you are obligated to work 3-5 years @ $300-350k for AMC. That's still income.

99%of people can retire off 3-4 million and live a comfortable lifestyle. (Buyout plus pre existing assets).

Now if you don't sell out. Continue making 600k being taxed 39.6% plus obamacare after 400k. Do yourself some math. You would have to work roughly 10-12 years to make up the 2-3 million dollar buyout vs working only 5 years for AMC.

The buyout shortens your retirement goals significantly.

 

[Arch Guillotti]

The amount of the buyout is solely determined by # of docs and what their salary was in the past.

This doesn't make any sense to me.

What about accounts receivable?

"Salary" may be very different from total compensation as well.

 

[Man o War]

Was this Dallas?

No. Wrong region

 

[Man o War]

Whatever the tax rate is 15% vs 23.8%. It's still lower than the 39.6% plus obamacare surcharge taxes.

And to the OP who says they won't sell out for 2-3 million. I would sell out.

Think about it. You are going to be getting roughly 1.5-2.2 million up front in cash. That's cash.

Assuming the average age of the anesthesiologist is around 50. Most already have nice nest eggs (barring divorce etc). That brings most anesthesiologist net worth to 3-4 million easily with the buyout plus pre existing assets.

And you know you are obligated to work 3-5 years @ $300-350k for AMC. That's still income.

99%of people can retire off 3-4 million and live a comfortable lifestyle. (Buyout plus pre existing assets).

Now if you don't sell out. Continue making 600k being taxed 39.6% plus obamacare after 400k. Do yourself some math. You would have to work roughly 10-12 years to make up the 2-3 million dollar buyout vs working only 5 years for AMC.

The buyout shortens your retirement goals significantly.

Anyone who says they would never sell out has likely never been part of tense contract negotiations with an administration who doesn't value anesthesia services. Go through a couple cycles of that, and you probably won't say that anymore.

 

[BLADEMDA]

This doesn't make any sense to me.

What about accounts receivable?

"Salary" may be very different from total compensation as well.

The AMC lets you keep your ARs. Salaries are negotiable and the senior partners may be getting $400K plus benefits as employees of Mednax in addition to their buyout package. Mednax has practices where the employees earn $400K plus benefits.

 

[Mman]

This doesn't make any sense to me.

What about accounts receivable?

"Salary" may be very different from total compensation as well.

AR is yours to collect on your own. American (and others) have a very simple formula.

The only inputs are:
--total income per year of all MDs in the last few years (you are correct I meant total comp and not salary)
--desired total comp to stay on with american
--% of docs that are partners

That's it.

If you had 10 docs making $600K per year and they were willing to stay on for $400K per year, American will give them the delta ($200K per doc) x how many years they sign for (say 5 years) as a $1M lump sum payout each (capital gain) with a package of $400K per year for a 5 year contract.

If you have fewer partners, they make a lot more because there are fewer sharing in that payout. If only 1/3 of the docs are partners, each partner gets a 3x bigger payout than you'd calculate based on salary difference.

Another quick example: 20 docs @ $800K per year, 10 partners and 10 not. They will all work for $400k per year after x 5 years. That means each partner gets $4M buyout ($400K difference per doc x 5 years x 2 for 1/2 the docs not getting anything).

 

[Man o War]

If you are making 600 plus.. why would you sell for 2-3 mil? Doesnt make sense.


This whole thing is going to collapse. I am certain of it.

I hope so, their supervision ratios are dangerous in my opinion, and they don't hire the strongest CRNAs. I've never been uncomfortable supervising until I moonlit for an AMC. Never again.

 

[deleted162650]

The bigger issue is what happens when that initial 5yr contract expires. They have to give you decent terms up front so you'll sign on the dotted line. Once that's up however don't expect they're just gonna keep giving you 400k outta the goodness of their hearts. The buyout money is basically just a big pay day loan and unless you're a partner w/ a bunch of employee docs under you it doesn't make a whole lotta sense (especially if you plan to work longer than 5 years).

 

[Mman]

The bigger issue is what happens when that initial 5yr contract expires. They have to give you decent terms up front so you'll sign on the dotted line. Once that's up however don't expect they're just gonna keep giving you 400k outta the goodness of their hearts. The buyout money is basically just a big pay day loan and unless you're a partner w/ a bunch of employee docs under you it doesn't make a whole lotta sense (especially if you plan to work longer than 5 years).

My assumption is once your initial contract is up they will pay you whatever the going rate for your services is. So if they can find somebody cheaper, they will. That's why groups with mostly younger partners are much more reluctant to sell out. The math is only a slam dunk sure thing if you are already close to retirement or in a group with very few partners and lots of employees (which means you get so much money it doesn't matter). A normal group with a normal spread in ages will have a hard time making the math work.

 

[ERRES2288]

AR is yours to collect on your own. American (and others) have a very simple formula.

The only inputs are:
--total income per year of all MDs in the last few years (you are correct I meant total comp and not salary)
--desired total comp to stay on with american
--% of docs that are partners

That's it.

If you had 10 docs making $600K per year and they were willing to stay on for $400K per year, American will give them the delta ($200K per doc) x how many years they sign for (say 5 years) as a $1M lump sum payout each (capital gain) with a package of $400K per year for a 5 year contract.

If you have fewer partners, they make a lot more because there are fewer sharing in that payout. If only 1/3 of the docs are partners, each partner gets a 3x bigger payout than you'd calculate based on salary difference.

Another quick example: 20 docs @ $800K per year, 10 partners and 10 not. They will all work for $400k per year after x 5 years. That means each partner gets $4M buyout ($400K difference per doc x 5 years x 2 for 1/2 the docs not getting anything).

In that last example you gave, what's in it for the employees? Why would they sign a contract for 5 years if they get nothing? They could get 400k without a 5 year binding contract.

 

[Mman]

In that last example you gave, what's in it for the employees? Why would they sign a contract for 5 years if they get nothing? They could get 400k without a 5 year binding contract.

The employees don't have to sign a contract. It's the partners that got bought out that do. Then again American doesn't really care if they leave early because they will just replace them with someone the same cost or cheaper. American just does the math on their side to figure out what revenue they can realistically collect. The buyout is cheaper to them than what they will collect anyways. The salary numbers are just numbers. They actually let the partners decide for themselves what salary they want with the rest as the buyout. The higher the salary, the lower the buyout. The lower the salary, well, the lower the salary forever.


The funny thing is I suspect American can/will change their math going forward. The way it works now, the market values their annual earnings at a 23:1 ratio as measured by their stock price/market cap. An extra $10M in revenue should increase their market cap by $230M. So why do groups sell out to them for such a discount? Because it's enough. But as groups go by the wayside and acquisition targets shrink, American can/will increase what they are willing to pay because it will still be profitable for them.

 

[criticalelement]

The amount of the buyout is solely determined by # of docs and what their salary was in the past. Then you divide that lump sum into however many are partners. .

The amount partners make is your above equation. The dollar amount of the buy out has to do with a lot of things the least of being how many paying patients you have and how much they are paying you. In other words, what is your revenue and how many customers you have? You buy an anesthesia group just like you are buying any other type of business. You ask very similar questions.. In fact not every anesthesia group can be sold for many reasons.

 

[criticalelement]

re existing assets).

Now if you don't sell out. Continue making 600k being taxed 39.6% plus obamacare after 400k. .

You can bring your effective tax rate to in the high teens to low 20s if 1099 with everything expensed out and ira fully funded

 

[sevoflurane]

Whatever the tax rate is 15% vs 23.8%. It's still lower than the 39.6% plus obamacare surcharge taxes.

And to the OP who says they won't sell out for 2-3 million. I would sell out.

Think about it. You are going to be getting roughly 1.5-2.2 million up front in cash. That's cash.

Assuming the average age of the anesthesiologist is around 50. Most already have nice nest eggs (barring divorce etc). That brings most anesthesiologist net worth to 3-4 million easily with the buyout plus pre existing assets.

And you know you are obligated to work 3-5 years @ $300-350k for AMC. That's still income.

99%of people can retire off 3-4 million and live a comfortable lifestyle. (Buyout plus pre existing assets).

Now if you don't sell out. Continue making 600k being taxed 39.6% plus obamacare after 400k. Do yourself some math. You would have to work roughly 10-12 years to make up the 2-3 million dollar buyout vs working only 5 years for AMC.

The buyout shortens your retirement goals significantly.

Very true.

 

[Mman]

You can bring your effective tax rate to in the high teens to low 20s if 1099 with everything expensed out and ira fully funded

effective tax rate on your average dollar earned isn't the same as the marginal rate on the last dollars earned

 

[Mman]

The amount partners make is your above equation. The dollar amount of the buy out has to do with a lot of things the least of being how many paying patients you have and how much they are paying you. In other words, what is your revenue and how many customers you have? You buy an anesthesia group just like you are buying any other type of business. You ask very similar questions.. In fact not every anesthesia group can be sold for many reasons.

Not exactly. They don't care only how much partners make. They care what total comp per doc is since they acquire all the docs, not just the partners. They also don't need to care particularly about # of customers and revenue and such since that's already built in to what the docs earned the last few years. Besides, their revenue is guaranteed to be higher per patient than the group they buy out since they have higher commercial rates.

The reason not every anesthesia group can be sold is mostly based on partner mix (vs employed docs) and partner age. Payer mix doesn't have a lot to do with whether it can be bought, merely what the price tag will be.

 

[aneftp]

You can bring your effective tax rate to in the high teens to low 20s if 1099 with everything expensed out and ira fully funded

Yes. I know the tax game having been self employed almost 10 years myself.

But at the end of the day there are only so many CME courses, so many computer purchases, so many leases on cars you can make. I've told the story before how my buddy brags about paying around 10% effective tax rate and buying $30k of flat screen tv with Pc port (so he can claim business ) (when flat screens costs were $5000 a pop). What the heck are normal people going to do with 6 flat screens back in the day. Or doing exotic lease on Lamborghini with $50k downpayment and paying $1000/month X 24 months.

Just driving effective tax rate down wisely can sometimes become a silly game of wasteful spending.

 

[BLADEMDA]

So, if Mednax came around to your group (or future group) and offered you $400K for 5 years plus $1.2-2 million buyout NOW what would you say? What if the last negotiations with the hospital had not gone well? What if they want to cut your stipend or increase your services? What if the CEO decides to go with another group or an AMC anyway in 3-4 years?

The fact of the matter is that a bird in the hand with millions of dollars vs WHAT IF down the road is a tempting offer. Watch the video: