When to walk away?

[Pir8DeacDoc]

I'm finishing up my second year in private practice. I've mentioned in some other posts about being a partner etc in my practice but it all fell through in the evelventh hour. My wife and I really like where we live and have made a very nice set of friends. I'm having a lot of thoughts about walking away from my current practice. Things were promised to me during my initial contract and plans for partnership which have not been followed through on. At this point, I would likely be taking a job with more hours and less pay, but a significant trust has been broken with me and I'm just not sure I can get past that. Am I trading the devil I know for the devil I don't? Any other thoughts?

---

Members don't see this ad.

 

[Winged Scapula]

Not ENT, but I had something similar happen during partnership negotiations, and although a "significant trust" wasn't broken, I still think about it.

For me, in the end, it was not worth disrupting what was otherwise a great practice and working relationship and I went through with the partnership. I am happy with the situation now. However, I admit that from time to time I still think about it and am very careful when discussing finances now, assuming that I might find something in which I am taken advantage of.

If you feel that a significant breach has happened, you may not be able to recover. I believe that a professional partnership is akin to a marriage and once you've broken a trust, its hard to regain.

Please feel free to PM if you wish to discuss in more detail privately.

 

[DrBodacious]

That sounds like a headache. If the other doc is essentially breaching your contract and daring you to sue him, that is really bad. Is it partnership status that is being withheld? Or real estate buy in? Or have the buy-in costs been increased?

I am a year behind you, but I went through the process of buying a solo practice, and have since had a few discussions with different people about practice mergers. Personalities vary on this stuff. Some docs, by nature, tend to feel entitled and will play the hardline to their own detriment. Or, if a doc is doing well enough on his own efforts, it is difficult to convince them to change his/her practice model or offer other people a piece of the pie. The main leverage you have is if you are saving this doc money in decreased overhead. But there are other pros like adding stability to the practice, increased volume for ancillary services, patient cross-coverage, exit strategy for retirement. If you can show him that you are prepared to take a different route that will make better business sense for you, you have a chance to call his bluff and win. The trick with business deals is being personal without letting the business needs being taken personally.

If practicing together isn't going to work out, I would consider if it would be in both of your interests to cross cover night call, and try to keep the bridges from being burned there.

There are obvious downsides to disrupting referral patterns - for example, if you are marketed as part of this current practice, having to rebrand yourself. But, setting things up for long term profitability (and quality of life) is obviously going to hugely outweigh short term losses.

 

[Pir8DeacDoc]

Appreciate the thoughts so far.
Essentially my situation is a change in the cost of buy in (a significant change) as well as an insistence of a majority/minority status of the partnership. My take is I'm not going to pay half the bills and be a minority partner. When trust is broken there seems no good way to protect oneself as a minority partner. My lawyers is confident I'd be taken advantage in ways never imagined if I accept a minority status. I like my practice, love my patients, and like the area. Just not going to set myself up long term for a huge blow up once I've been here 5 years and I'm very settled. I know nothing is perfect but the mood has turned quite sour. The bad part of the situation is I have a non-compete I will have to spend lawyer time and money to get out off and there really isn't room here for another practice. Plus, without hospital support solo surgical practice is almost impossible from an overhead standpoint. The entire thing just sucks. But that's how life works itself out sometimes.

 

[OtoHNS]

Appreciate the thoughts so far.
Plus, without hospital support solo surgical practice is almost impossible from an overhead standpoint.

This is not at all true. If you rent a small office, have 2-3 employees, and buy used equipment and instruments, you can easily be profitable even in your first year. Particularly if you already have an established pool of patients that know and like you and a decent referral base of primary docs.

I'm in solo practice and doing very well (I did have support starting out but it would have been doable even without the support).

This book is a good overview of starting a solo practice and basic stuff you need to know about the business side of your practice. You'll need to secure a line of credit to hold you over for the several months until your new insurance contracts will kick in. You could consider working some locums jobs for a few months in the interim between leaving your current practice and opening your new office.

As far as the contract negotiations, it may be hard to do much unless you have some of your partner's earlier promises in writing (even email would work). For the cost of the buy-in, it's really just deciding for yourself if the return on investment is worth it. You can try negotiating them down as well.

The more concerning issue IMO is the insistence on a minority share in the partnership while continuing to pay an overhead share consistent with a full partner. I would not advise signing up for that situation unless the deal is really sweet otherwise.

It's important for you to try to understand what your partners want out of the situation. If they can still get what they want with a compromise, you may all end up satisfied. But if they really just want you to be their little bitch, you're better off getting out of there pronto. It may pay to appeal to their sense of fairness.

I think it's definitely worth the money to talk this out with a good lawyer and really understand your options as far as contract negotiations and contesting the noncompete.

 

[DrBodacious]

Appreciate the thoughts so far.
The bad part of the situation is I have a non-compete... Plus, without hospital support solo surgical practice is almost impossible from an overhead standpoint.

With the non-compete, if you start your own practice, it is on the other doc to come after you. I do not have any legal background, but the conventional wisdom is that non-competes do not hold up very often in litigation. The gist of what I have heard is that non-competes are not legal unless the terms of the non-compete is "reasonable," meaning distance from the practice and time period. This may mean that opening a practice next door is unreasonable, but it is not reasonable to prevent a doctor that is serving the community to start a practice across town. Plus, if you can point to a breach of a prior agreement that forced you out, I would think you are in a very good position.

I had hospital support, but also could have gotten by without it. You can get lease to own on office equipment, rent office space, and start lean with employees - you should be able to keep expenses around $20k a month. $150K or so combining cash and line of credit should get you started until you are making a profit I would think. You would be suprised how easy it is to get a line of credit. If one bank gives you a hard time, try another and you should be able to get multiple offers. I guess another question is if you don't want to work with the current guy and there isn't much demand otherwise, would you want to be in solo practice long term...?

 

[Pir8DeacDoc]

Do you take much time off? My concern is solo practice would eat into my lifestyle significantly. I'm not opposed to work, I just don't want to be doing it all the time.

My lawyer is fairly confident we could get out of the non-compete. The issue is how much time and money it costs. Plus, as you mentioned there isn't a huge market for another ENT here. This practice will be looking to bring in someone to fill my spot quickly (it may not be that easy based on our location). But this is the main place people refer. The patients just come here no matter who the doctor is. I am considering opening up shop up the road a half hour or so..

 

[DrBodacious]

I am on call every 4th night (shared in town). I took 4 weeks off last year and met my salary gauruntee. One way one of the guys in the forum here (sorry forget who) posted about a couple years ago was to consider the average collection per patient encounter (averaging clinic visits, procedure visits and surgery). Lets say you average $100 per patient encounter (which is pretty conservative - I collect significantly more despite averaging in small visits like allergy shots). $20K a month = $5k a week. $5K dived by $100 per encounter = 50 encounters a week. So you could see 12 patients a day for 4 days in clinic, and then do 2 tonsillectomies one day and have the rest of the day off - this would be your break even point. Any thing more is profitable and you can use to increase your volume, and finance ancillary equipment and staff (audio booth/audiologist), hire a business manager when things take off, hire a PA, etc. If you have down time you can use it to network with doctors in town and eventually the problem of free time is solved.

There is still a lot of wiggle room for time off. Sure, every week you take off is a big opprotunity lost - you could have $20-$25K in collections in a productive week doing average things. But that is the reality that any employer has. Hiring a PA and/or a business manager are big headach/time savers as far as quality of life but may cost you some profit compared to making the business phone calls and mundane patient phone calls yourself.

 

[OtoHNS]

As far as Dr B's numbers, I think $20K/month in overhead is reasonable if you're not blowing money on fancy new equipment, a giant office, or redundant staff. $100/pt encounter is VERY conservative in my opinion, you'll probably average 2-3 times that. You can run the numbers on your last 6 months collections to get a better idea with the reimbursements in your area.

If you've already been out in practice for a couple of years, you should already have a fairly large pool of established patients and also have developed a reputation in your community. Assuming that you're good and patients/referring docs like you, you should be able to keep a substantial chunk of that business even if you open a new practice. You will need to make a marketing/education push to let your referring docs and patients know about your new situation. Talk to your lawyer and read your contract about getting records of your existing patients from your current practice- ideally you would want to send them all letters informing them about your new practice. Make sure you inform your existing patients legally/within the limits of your contract.

Also for the noncompete- don't forget that it will also be an expensive proposition for your partners to pay a lawyer to sue you. If their chance of winning is a long shot anyway, they may be all bark and no bite when it comes to actually suing you.

My lifestyle is pretty good. I take call for after hours questions/emergencies from patients 24/7 but my patients are great and are very respectful of my time. I don't get called often and I basically never get BS calls at night or on the weekend. I don't take any ED or hospital call, unless it's for a postop issue or other ENT-related emergency on one of my existing patients. The majority of my surgeries are done at an ASC, and I do a lot of in-office procedures. I purposefully limit my practice almost completely to outpatient otolaryngology. For vacations, I don't operate the week before I leave and I have my clinic nurse carry the after-hours cellphone while I'm out of town. I have several friends in the ENT community who are willing to cover any emergencies while I'm gone (hasn't ever been a need for this). I've not had any issues yet with this system. My practice is steadily busy at this point but nowhere near overwhelming. I am planning to hire a PA or NP in the next year or two once I have a greater need for assistance.

 

[Fah-Q]

I am planning to hire a PA or NP in the next year or two once I have a greater need for assistance.

Why would you hire and train your replacement?

 

[DrBodacious]

$100/pt encounter is VERY conservative in my opinion, you'll probably average 2-3 times that.

Yep, thanks for pointing out this to put my numbers in perspective. Last time I checked I want to say my average was $170-190 per encounter, but I also have about 15% medicaid in my payor mix and about 20 allergy injections per week, which collect about $8-12 dollars per encounter.

If you look at $100/encounter as a worst case scenario, you do not have to be very busy to get to a break even point in a "hanging your own shingle" low overhead situation.

Regarding the $20K a month overhead estimate - I took my first 4 months of practice this last year and averaged to get about $28K per month, which included some significant expenses that you may or may not choose to incur starting a solo practice, and could potentially do more economically that I did, so I rounded down to $20K.

• legal fees $11K
• malpractice insurance $11K
• accountant fees $3.2K
• PA wages $4.5K * part time *
• audiologist wages $2.7K * part time *
• postage for mass mailing $2K
• advertisement in Sunday paper $1.7K
• OTO board fees $4K
• computer purchases $10K
• EHR licenses and training $17.5K
• depreciation expense $4.5K

I think most of us are overly reluctant to tackle this type of stuff ourselves, it really isn't that difficult to start a practice, it is just new to most of us. If I avoided failure in my first year, almost anybody can do it.

So, the point to Pir8 is to not let a senior physician hang this stuff over your head. It may be worth spending a little to get partnership in this guys practice, but I would only agree to buying hard assets like medical equipment and office equipment. Real estate buy in is another factor (rental tennent improvments if office is rented or real estate if it is owned). Goodwill buy in is only reasonable if you will recoup the money back quickly from some source that you can clearly identify (e.g. ancillary service income that is up and running, stream of lucrative referrals from high paying insurances that would otherwise take many months to get on your own, etc). A lot of people would say any goodwill amount is for suckers, regardless. And the minority partnership idea is vague, but if your attorney says it is a bad idea, it probably is.

 

[Pir8DeacDoc]

you guys have been very helpful so far. I really do appreciate it.
To clarify somewhat my proposed deal, I was told an equal partnership with a very low buy in would be the deal. This has since become a much higher buy in and the insistence of the one other partner that he have a controlling 51% interest. So day to day I will pay half the overhead but will be outranked on any real decision in the office. My lawyer feels this bait and switch on the deal indicates bad will and being a minority partner would be setting myself up to get screwed over and over again with no real recourse.
Bad news for me is I have all my data from the last year and including my surgery patients, I am only averaging $110 per patient encounter (if I'm looking at my numbers correctly). Our practice makes its money on the repeat business of the allergy clinic (average about 90 shots a day) but we have A TON of medicaid. If I didn't take medicaid I'd likely only operate twice a month instead of weekly. I have done one in office balloon case and that was really enjoyable and paid quite well (though Virginia isn't a state where all payers are on board with that). I've considered trying to make myself into the balloon guy around here but I'm not convinced the market exists ?? ( though all of the Medicaid's here cover it without pre-authorization).

 

[DrBodacious]

Hey Pir8D - I would remove your allergy encounters before calculating your average collection per patient encounter - I bet this is why that number is low (combined with medicaid). It sounds similar to my situation, but more so.

A few more points to consider:

1. There is no value in buying "the patients" and "the referrals" in a medicaid-heavy practice (you could go anywhere and start a medicaid practice), so the increased buy in price seems silly. If the equipment and office have a lot of value causing him to ask for buy in for those, that by definition means that your overhead is too high, because medicaid can not support an expensive office. I would flat out refuse that offer. If there is a disagreement on the value, I would strongly recommend having the practice appraised without considering goodwill except for ancillary income that you would be privy to.

2. I doubt it, but is this guy selling you 49% of the revenue from the allergy practice? If he built that up with his patients, I suppose that is of some value. But, I would think he wouldn't want to sell you the revenue from his allergy patients and you both would split allergy revenue based on collections from your respective patients.

3. I can not foresee all of the disadvantages of being a 49% vs 50% partner. Things that come to mind are the decisions to kick you out of the practice, to bring a new partner in, or this guy deciding to sell his ownership to someone else. As long as the practice is run well and you have the right to be an equal party in negotiating cost-sharing with him, you could be okay there. In order for it to be conceivable to be a minority partner, you should have stipulations to protect yourself:

• Buy-out option that could be exercised by you at any time (maybe 30 days notice) so that you recoup you buy-in + inflation adjustment so that if you don't like the decisions the guy is making you can leave risk free
• Removal of non-compete clause
• If this guy has the option to kick you out, a stipulation on x___ months notice prior to you leaving the practice (over 6 months in my mind so you can set up a new clearinghouse for billing and other practice needs)
  
• Right to opt out of paying for new equipment that you know you will not use (I would set a limit like over $1000?, no need to nit pick over small purchases, but if he frequently breaks and replaces his 0, 30 , 45, 70, 90 and 110 degree endoscopes in 3 and 4 mm diameters, you might not want to pay for that)
• Stipulation that you become an equal partner if a third doctor is employed by or joins the practice (to prevent him from testing the waters with someone else/grooming someone to replace you, or putting you third in line)
• Stipulation that you become an equal partner prior to him selling his practice interest to anyone else
• Stipulation that you become equal partner after x___ years.
  
• First right of refusal to buy his share in the practice prior to him selling it to someone else
• Appraisal-based buy out of his part of the practice in the event of his death, disability or retirement
• Right to control what clinic personnel work with you
• Right to equal control of hiring new employees
• Right to independently hire employees that would work for you only and get paid through the partnership at your cost
• You have 100% ownership of your share of the AR and patient collections, and equal access to the bank account relative to his access

I wouldn't agree to a partnership without these stipulations (or something close to them), and I am not thinking of everything here, obviously. You could probably cover most of the bases up front with an attorney's help, but that gets expensive on the legal fees, especially if this guy is going to nit pick over the details of each point. The simpler option is to just be a 50/50 partner and then most of these things are pretty much implied.

If you do not already know, I would suggest trying to get a really good feel for why this guy wants to be a majority owner. Does he think you are not entitiled to the points I list above (totally unreasonable), or is he just fixated on the semantics of being a majority owner because he is the senior guy (silly, and a bad sign in my mind, but maybe just his personality). If all he wants is to be able to kick you out of the practice he started, maybe that is reasonable (assuming the non-compete is removed and there is a fair buy-out value and buy-out time frame).

 

[Winged Scapula]

Lots of fabulous advice here; something I wished I'd had several years ago.

Dr B is right; it is possible to start a solo practice without hospital support it's just very difficult. Second hand equipment, recruit your wife or another family member to help you out in the office (for free or reduced salary for the time being), line of credit etc, can all be had. I'm not sure if it was me referred to above but the idea of seeing what the average reimbursement was and then calculating what I needed to see to cover my overhead and take something home was what I did to make sure I was on track.

But bottom line IMHO is:

1) the concept of junior/senior partner is old fashioned and a way for the older guy to say "I was screwed, now it's your turn" by making you take more call, more Medicaid patients, not involving you in major decisions like employment, selling the practice or even purchases for the office (my partners and I agreed that $1000 was ok to spend without involving the others).

I think it's also common in people who start their own practice. They cannot let that go and it will always be "his" practice, regardless of who becomes partner.

I see NO advantage to be a minority partner but having all the responsibilities of an equal partner.

2) Even if you were able to get him to agree to all the points in Dr B's excellent response above, I don't know how you would ever feel fairly treated and be able to move on and trust. As I told you in the PM, my situation was much less unfair and I still harbor some resentment. That's women for ya, never letting it go but it's a real concern.

 

[Pir8DeacDoc]

Wanted to update and get some further thoughts if anyone has them. No big changes overall though I have been exploring other practice options locally and within a 2 hour radius.

The hospital system that I work at (but am not employed by) has a location 30 minutes north of here. Their current ENT is looking to retire in the next 24 months and they would love a plan of succession. I'm sure it's been covered other places but what are the overall thoughts on employment models? The hospital is willing to rent me space as a private practice physician, take me as an employee for a few years and then let me move to PP, or be a hospital employee the entire time. The advantage of the employee component is a willingness to pay off my student loans and guarantee me $$ for a few years. Then if I get a nice practice going and my debts are settled I could rent space from them and do my own thing. They are happy to have me sending scans to their radiologists and doing surgeries at their hospital. Anyone have thoughts in either direction of this situation?

 

[DrBodacious]

Thanks for the update. It is obviously a personal choice of hospital-employed vs self-employed. I gave some of my personal take on it in a recent thread, and I like being self-employed.

It can depends on how the hospital structures their employed positions. That could mean a salary guarantee, where they loan you money to support your salary & overhead and forgive the debt over time. That is what I have, and it is great for me. If "employed" means that you literally get paid a salary, and someone else manages the practice business and has the final say over your entire practice from the clinic hours to the hiring/firing of employees to the supply and equipment orders, that sounds too restrictive for me. On the other hand, other people might be able to "go with the flow" on things like that.

The options the hospital would present you depend on how badly the hospital wants you, and how they have treated other physicians in the past. And then, regardless of how the deal is structured, there can be more or less headaches depending on how supportive the administrators are.

Something that would be helpful (maybe not the easiest to do) would be to talk to one or more physicians who have been employed by the hospital and get their feedback on how it worked for them.

 

[Pir8DeacDoc]

You guys have been tremendously helpful.

Anyone have thoughts on being a generalist at a tertiary care hospital? My residency program recently contacted me and has the need for a general ENT and wanted to know if I'd be interested. I loved it there but am not sure how a general ENT would fit in among a group of fellowship trained docs? Would I get anything worth doing or the junk none of the super-specialists want to tackle? This position wasn't present when I was in training so I'm not sure what it would look like.

 

[neutropeniaboy]

Thoughts on academic generalists. This is going to vary from department to department. Some generalists have very thriving practices in departments where there is a plethora of patients. Be wary of the departments that have multiple subspecialists, because most patients will want to see the physician who specializes in something, especially pediatrics. This isn't wrong, but it's the way it is. In some situations, the generalist gets all the crap that the specialists don't want.

We have three generalists in our practice. I would say that they generally get the patients and cases that they want -- doing sinus surgery, tympanoplasties and thyroids. They do balloon cases too. They tend to send out the mastoids, revision sinus and cancer cases, but they seem to be pretty happy and get resident support, which always makes any attending feel like they are getting some respect.

I'd seriously consider both.

You obviously have to know how you will get paid. How many years are you going to have your salary guaranteed? How is the compensation plan determined: collections v. collections/RVUs v. RVUs? Are there opportunities to reduce your FTE status by working at the VA or being some kind of director in the future? Call expectations. Academic requirements. Etc. Things that I'm sure you'll think about.

Obviously my position is biased since I would not really consider private practice, so a university practice is what I would recommend.

 

[Pir8DeacDoc]

I'm sure it's been well documented, but what do you guys in PP consider an average week in terms of number of surgical cases? My surgical volume at my current job has dwindled dramatically recently to where I do 3-4 cases a week (and I'm not talking big cases- tubes, tonsils, skin cancer excision, etc). I'm still doing well financially because of our ancillaries, but I hate the idea of getting rusty or not staying sharp. I'm two years out and I still want to keep on top of things. As is documented above, this is another in a line of issues I'm facing at my current gig. While making good money and not working hard feels ok for awhile, I realize in the long run it will hurt me as a surgeon and make me nervous to advance my practice.

 

[DrBodacious]

I'll bite. Things seem to come in waves, but I average 3 to 5 bigger cases (FESS, tymps, mastoids, thyroids, parotids, septoplasty, rhinoplasty, morbid tonsils, UPPP) on my hospital day, and 3 to 8 outpt surgery center cases on ASC morning (3 days a month), plus friday afternoon I do office procedures. Three full clinic days, plus my PA feeding me medicaid tubes and tonsils seems to keep me going. Things seem to have been pretty stable over the last 6 mo. I have met docs who are twice as busy as me, but that seems pretty tough.

 

[resxn]

Long time, no post, but this is probably as good of a one to respond to as has interested me in a while.

Typical Per Week: 2 thyroid or parathyroids. 1-2 FESS and/or Septo and/or Turbs. 2-4 Tonsillectomy/Tonsillotomy. 2-4 Tubes. 2-4 Excisional somethings. 0.5 MDL somethings. 1 of something else: parotid, recon soft tissue trauma, keloid, sleep apnea, some -oma, etc.

So like Bodacious, Inpt procedures around 2-4, outpt procedures 4-10. Thus, slow week 6 cases, busy week 14 cases. Not sure what others do for ancillaries but here's where the other 50% of my income comes from in order of value:
1 - partner is ASC
2 - hearing aid sales
3 - In-office CT imaging
4 - Independent neuromonitoring company (for my own thyroids/parotids)
5 - Partner in compounding pharmacy
6 - allergy
7 - partner in sleep clinic
8 - partner in chemorads group (share profits on ancillary services tied to pt's receiving oncology services--helps private docs compete against the Ivory Tower)