Is the "partnership track" dead?

[dantt]

I hope it isn't true but over the last few years, it seems most partnership tracks are highly flawed, unfair, and eventually lead to nowhere. The outcome is arguably as bad or worse than private equity employment with many tracks leading to that anyway with no recourse.

In ophthalmology, what makes a "fair" partnership track? Should the salary be "market rate" employment or is it justifiably lower since the associate is paying "sweat equity"? Isn't that what good will pays for? "Is it true that "good will is going away"?

What happens if the partnership track leads to nowhere as most do? (are there any statistics on this?) Is this just a gamble/leap of faith every potential partner has to take? It seems most of the large groups have been sold to private equity and the ones that haven't are structured very similarly (corporate) anyway and if the small ones involve you actually running everything, why not just start or buy your own practice? If you just need more experience before starting on your own, why not just join a large employed practice and gain your experience with a well functioning practice there? There is a looming shortage of ophthalmologists. Why should one waste several years of one's life when it's actually not that hard to start your own practice?

What are reasonable terms to make potential partnership tracks more fair? Some things I have considered over the last few years.
Market rate salary
Restricted covenant (or lack thereof)
Production bonuses paid regularly rather than only once a year (is there any reason to not pay regularly other than leaving open the option of not paying?)
Continuing to be paid your proportion of collections that come in once you leave.

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[AQ888]

add to the list a "PE clause in the contract" . Something to protect you if the practice does decide to sell before they make you partner. This is a very relevant discussion in ophthalmology right now.

 

[RetinaDude]

When looking at group practices, you need to learn about how many have left, or not. In my group, we’ve only had docs leave because of retirement, and not because they did not make partner.

Market rate is just that, it varies by market. As an ophthalmologist, you start in San Fran and your starting salary may be $125,000. Go to North Dakota and it may be $500,000. This cannot be standard across the board because of supply and demand. Also, starting salary is no where near as important as the associated bonus structure and the long term potential partner salary.

I don’t like restrictive covenants either

You are not paid a percent of your collections, after you leave, because you don’t actually own them as an employed doc. When you buy into the partnership, you buy into your accounts receivables. Also, when you retire from your partnership, the practice pays you for your AR (because you own those collections).

Yes, there are bad practices out there, but I believe there are a lot more good ones. Every practice in my area has successfully recruited ophthalmologists, had the doc come in and work hard, and then made them a partner. These same docs then stick around for years and years making a lot of money and doing a lot of surgery.

 

[dantt]

When looking at group practices, you need to learn about how many have left, or not. In my group, we’ve only had docs leave because of retirement, and not because they did not make partner.

Market rate is just that, it varies by market. As an ophthalmologist, you start in San Fran and your starting salary may be $125,000. Go to North Dakota and it may be $500,000. This cannot be standard across the board because of supply and demand. Also, starting salary is no where near as important as the associated bonus structure and the long term potential partner salary.

I don’t like restrictive covenants either

You are not paid a percent of your collections, after you leave, because you don’t actually own them as an employed doc. When you buy into the partnership, you buy into your accounts receivables. Also, when you retire from your partnership, the practice pays you for your AR (because you own those collections).

Yes, there are bad practices out there, but I believe there are a lot more good ones. Every practice in my area has successfully recruited ophthalmologists, had the doc come in and work hard, and then made them a partner. These same docs then stick around for years and years making a lot of money and doing a lot of surgery.

Thanks for replying. A lot of bad actors out there unfortunately.

When I'm stating out market rate, I'm literally talking about local rates. I'm talking about compared to local PE, VA, university, etc. The rationale of paying less is not that there's not enough money coming in. It's to "make it so you want to be a partner" and sweat equity. My point is why take the lower salary to "pay your dues" when you you're unlikely to be offered membership? Broken system.

The issue of AR is not universal but important when most of your compensation is production. You don't start getting your production bonus until you've collected your threshold which requires you to wait for them to come in. If you bill for it in your last month of work, why should you not be able to collect it when it comes in? Otherwise, there's no incentive to work. Lose-lose. This is of course in comparison to many other practices which let you continue to collect 1 month, 3 months, 6 months after you leave. Things to think about for the newbies who have no idea how these things work and what different employers out there do.

 

[mjohnsonets]

Signs of a "fair partnership":
- More partners than associates in a practice
- Associates that were recently made partners (particularly docs with less than 5 years experience)
- Willingness to discuss details of the partnership

The biggest one: transparency - most of the practices I know with tried and true, reasonable, achievable, partnership tracks that also have no interest in PE are VERY willing to open their finances to potential associates. They also discuss specific financial details of what it takes to become a partner and how the buy-in is calculated or about what it will cost. I know this may be odd to some because financial info is sensitive and I agree but you get candidates to sign an NDA before viewing the info.

I tend to come across more straightforward partnership tracks outside of major metros. Based on historical trends, these practices are also less threat from a PE buy out but not guaranteed.

This post is not saying that practices that don't have any of these cases aren't fair partnerships. These are just positive signs.

 

[Dusn]

Dantt - I think your concerns are completely legitimate. I don’t have much to add because you said them so clearly already.

Of all my friends in ophthalmology, the ones who are doing the best are the ones who have started their own practices.

 

[dantt]

Signs of a "fair partnership":
- More partners than associates in a practice
- Associates that were recently made partners (particularly docs with less than 5 years experience)
- Willingness to discuss details of the partnership

The biggest one: transparency - most of the practices I know with tried and true, reasonable, achievable, partnership tracks that also have no interest in PE are VERY willing to open their finances to potential associates. They also discuss specific financial details of what it takes to become a partner and how the buy-in is calculated or about what it will cost. I know this may be odd to some because financial info is sensitive and I agree but you get candidates to sign an NDA before viewing the info.

I tend to come across more straightforward partnership tracks outside of major metros. Based on historical trends, these practices are also less threat from a PE buy out but not guaranteed.

This post is not saying that practices that don't have any of these cases aren't fair partnerships. These are just positive signs.

In addition to financials, I'd also ask to see the operating/partnership agreement. This is where you might see things such as golden parachutes when particular partners retire, how decisions are formally made, etc. That's not to say those things are not fair but it should not become a surprise later.

 

[RetinaDude]

Thanks for replying. A lot of bad actors out there unfortunately.

When I'm stating out market rate, I'm literally talking about local rates. I'm talking about compared to local PE, VA, university, etc. The rationale of paying less is not that there's not enough money coming in. It's to "make it so you want to be a partner" and sweat equity. My point is why take the lower salary to "pay your dues" when you you're unlikely to be offered membership? Broken system.

The issue of AR is not universal but important when most of your compensation is production. You don't start getting your production bonus until you've collected your threshold which requires you to wait for them to come in. If you bill for it in your last month of work, why should you not be able to collect it when it comes in? Otherwise, there's no incentive to work. Lose-lose. This is of course in comparison to many other practices which let you continue to collect 1 month, 3 months, 6 months after you leave. Things to think about for the newbies who have no idea how these things work and what different employers out there do.

When you first become an employee of a practice, you will cost that practice money initially. They are taking a risk on you and you in them. The harder you work, and the quicker you build your practice, then it becomes that you are not costing the money practice but actually making money for yourself and the future partners. Or, you can go out on your own and be really deep in a financial hole, as well as not get many of the other benefits of ophthalmology (especially retina) partnership.

As far as your second paragraph is concerned, if AR was treated like that, it would seem you are going into the practice with the belief you will leave….since you want to be paid the money after you’ve left. Hopefully you’re going into it with the idea of staying long term, and thus your AR simply rolls over the when you are partner and you continue to collect it. AR continues to roll in for months (sometimes years) down the road. Plus, once you leave, there’s still newly hired staff that have to be paid for (or fired since you left), and plenty of other expenses. It’s something you should ask about when you interview. But, like I said, if I had a candidate asking me this, I’d be thinking ”is this person planning to leave early???” In my practice, if we like you, there’s no deviant plan to not make you a partner, so that’s why I would be perplexed with your line of thinking.

Just do your homework. As Mr Johnson said, look for transparency. We have no problem showing candidates our partnership agreement, talking to all partners (and our associates, soon to be partner, docs), showing how associate bonuses are calculated, showing what each of the partners make, etc…. We want you to join, work hard, be happy, become a partner….a fully equal partner……, and earn lots of money

 

[dantt]

When you first become an employee of a practice, you will cost that practice money initially. They are taking a risk on you and you in them. The harder you work, and the quicker you build your practice, then it becomes that you are not costing the money practice but actually making money for yourself and the future partners. Or, you can go out on your own and be really deep in a financial hole, as well as not get many of the other benefits of ophthalmology (especially retina) partnership.

As far as your second paragraph is concerned, if AR was treated like that, it would seem you are going into the practice with the belief you will leave….since you want to be paid the money after you’ve left. Hopefully you’re going into it with the idea of staying long term, and thus your AR simply rolls over the when you are partner and you continue to collect it. AR continues to roll in for months (sometimes years) down the road. Plus, once you leave, there’s still newly hired staff that have to be paid for (or fired since you left), and plenty of other expenses. It’s something you should ask about when you interview. But, like I said, if I had a candidate asking me this, I’d be thinking ”is this person planning to leave early???” In my practice, if we like you, there’s no deviant plan to not make you a partner, so that’s why I would be perplexed with your line of thinking.

Just do your homework. As Mr Johnson said, look for transparency. We have no problem showing candidates our partnership agreement, talking to all partners (and our associates, soon to be partner, docs), showing how associate bonuses are calculated, showing what each of the partners make, etc…. We want you to join, work hard, be happy, become a partner….a fully equal partner……, and earn lots of money

You bring up very good points and I'm sure those reading are appreciative. What benefits of partnership do retina specialists get that you don't get on your own (other than having close clinical partners cover you)? To those thinking about going out on their own, it's not uncommon for small practices in the community to be accessible to other doctors, have available their cell phone numbers if there are issues, etc.

It's unfortunate, but I think negotiating your exit is just as important as your compensation and other terms of employment. You plan to be there long term but its very easy to overlook what it will look like if you leave and one must not make that mistake (think about AR and most importantly noncompete). I'm sure Matt and any others familiar with these things will agree.

I think most groups are honest so it's unfortunate all docs have to look at all of them with the same degree of skepticism. One of my colleagues from my first job knew PE was on the radar and asked multiple times including one last time right before they packed the moving truck. "We're not interested in PE. It is not part of our culture." Turns out they were in active negotiation and they signed the LOI several months later. Faith in humanity lost.

 

[TheLesPaul]

New associates do not cost the practice that much. It is a matter of 3-6 months before the associate pays for himself/herself. I think most partnerships have an overinflated sense of their self-worth and importance. Many new associates are doing the majority the sweat equity to build their patient base anyway, but then end up having pay the group for that privilege. Starting on your own does not have to be a "deep hole".

 

[RetinaDude]

New associates do not cost the practice that much. It is a matter of 3-6 months before the associate pays for himself/herself. I think most partnerships have an overinflated sense of their self-worth and importance. Many new associates are doing the majority the sweat equity to build their patient base anyway, but then end up having pay the group for that privilege. Starting on your own does not have to be a "deep hole".

Not sure what type of practice setting you are in but, as someone who has hired quite a few new associates over the years, I can tell you they cost a lot more than you believe. Yes, a new doc eventually pays for himself/herself, but you take a little hit the first 6-12 months. And I call BS on most new associates are “doing the majority of the sweat equity”. Yes, they have to contribute but we put A LOT of work in before they arrive, and afterwards. It takes a lot of work, on both sides, to make it work. Hopefully everyone is on the same page and we would toward a goal of achieving partnership.

Its A LOT of work to start your own practice from scratch. It can be done but it’s a whole lot easier to walk into an established practice, where a lot of the nuances have already been dealt with, and you hit the ground running seeing pts. If you’ve never done it, I encourage you to do so, and enjoy the fruits of your own labor

 

[percyeye]

New associates do not cost the practice that much. It is a matter of 3-6 months before the associate pays for himself/herself. I think most partnerships have an overinflated sense of their self-worth and importance. Many new associates are doing the majority the sweat equity to build their patient base anyway, but then end up having pay the group for that privilege. Starting on your own does not have to be a "deep hole".

This is not true at all. Unless the associate has their schedule full day 1 then they might be costing you money. With overhead and how they will actually be pulling patients away from the owners/partners it can be quite some time until they pay for themselves let alone make a profit for the partners. You have to be pretty strategic when hiring someone and realize that in the beginning you may lose money on them.

 

[dantt]

There is no dispute that hiring an associate is an investment. The philosophical questions are who should bear the risk of hiring? The employer or the employee? A hospital, PE, physician owned practice without a partnership track, all bear those same risks of hiring. Why should an employee take a lower salary for the "chance" to become a partner? If the relationship proves mutually beneficial, they will be paying when they buy in.

 

[TheLesPaul]

This is not true at all. Unless the associate has their schedule full day 1 then they might be costing you money. With overhead and how they will actually be pulling patients away from the owners/partners it can be quite some time until they pay for themselves let alone make a profit for the partners. You have to be pretty strategic when hiring someone and realize that in the beginning you may lose money on them.

It might be subspecialty specific but if you pay an associate 200K, then they only have to collect 16K a month before they are paying their own salary. That is 10 pts a day, 4 days a week, of mixed level 3/4 E/M coding WITHOUT any procedures, testing, etc. Add 3 month's time for the A/R to catch up. This should easily be achievable in 6-12 months if a practice truly has need of an associate even if you add the additional 10-20K for malpractice, health insurance, etc.

Unless you are introducing a new subspecialty and thereby hiring different staff or buying new equipment, the overhead cost to have a new associate should be marginally different apart from their salary.

Not sure what type of practice setting you are in but, as someone who has hired quite a few new associates over the years, I can tell you they cost a lot more than you believe. Yes, a new doc eventually pays for himself/herself, but you take a little hit the first 6-12 months. And I call BS on most new associates are “doing the majority of the sweat equity”. Yes, they have to contribute but we put A LOT of work in before they arrive, and afterwards. It takes a lot of work, on both sides, to make it work. Hopefully everyone is on the same page and we would toward a goal of achieving partnership.

Its A LOT of work to start your own practice from scratch. It can be done but it’s a whole lot easier to walk into an established practice, where a lot of the nuances have already been dealt with, and you hit the ground running seeing pts. If you’ve never done it, I encourage you to do so, and enjoy the fruits of your own labor

I was in a group practice and am now solo. I encourage anyone who is not part of the solo eye docs group to join if they are serious about starting on your own. I felt I had to recruit my own patients anyway in the prior situation. If I am pounding the pavement and hustling to get referrals, why should I have to pay a multiple on that sweat equity to buy into the practice? The fixed cost of equipment/etc was not worth the 'buy-in' price. Ophthalmologists are also in general, shady and not to be trusted business-wise. Honorable practices are the exception, not the rule, as I have seen with folks who graduated in my time.

 

[percyeye]

It might be subspecialty specific but if you pay an associate 200K, then they only have to collect 16K a month before they are paying their own salary. That is 10 pts a day, 4 days a week, of mixed level 3/4 E/M coding WITHOUT any procedures, testing, etc. Add 3 month's time for the A/R to catch up. This should easily be achievable in 6-12 months if a practice truly has need of an associate even if you add the additional 10-20K for malpractice, health insurance, etc.

Unless you are introducing a new subspecialty and thereby hiring different staff or buying new equipment, the overhead cost to have a new associate should be marginally different apart from their salary.



I was in a group practice and am now solo. I encourage anyone who is not part of the solo eye docs group to join if they are serious about starting on your own. I felt I had to recruit my own patients anyway in the prior situation. If I am pounding the pavement and hustling to get referrals, why should I have to pay a multiple on that sweat equity to buy into the practice? The fixed cost of equipment/etc was not worth the 'buy-in' price. Ophthalmologists are also in general, shady and not to be trusted business-wise. Honorable practices are the exception, not the rule, as I have seen with folks who graduated in my time.

You're going to have to help me with the math here. How is $16K a month going to cover their salary? Will they have any techs helping them? Will they be doing their own billing and coding or will that need to be done by someone else? Adding another provider to the EHR costs money. Will they use any equipment, supplies/ COGs etc? Utilities? Is there any office manager that costs the practice money? Marketing for a new associate and letting the community know they are available? Again they will be pulling patients away from the owners. Are they going to want any benefits like health insurance, 401K? Because the owners are going to help cover the 2-4% match and that comes out of the owners pocket. Peripheral benefits like cover cell phone or even gas money if there are multiple locations? So I think there are more costs then you would think when bringing on another Doc.

 

[PLA2]

It might be subspecialty specific but if you pay an associate 200K, then they only have to collect 16K a month before they are paying their own salary. That is 10 pts a day, 4 days a week, of mixed level 3/4 E/M coding WITHOUT any procedures, testing, etc. Add 3 month's time for the A/R to catch up. This should easily be achievable in 6-12 months if a practice truly has need of an associate even if you add the additional 10-20K for malpractice, health insurance, etc.

Unless you are introducing a new subspecialty and thereby hiring different staff or buying new equipment, the overhead cost to have a new associate should be marginally different apart from their salary.



I was in a group practice and am now solo. I encourage anyone who is not part of the solo eye docs group to join if they are serious about starting on your own. I felt I had to recruit my own patients anyway in the prior situation. If I am pounding the pavement and hustling to get referrals, why should I have to pay a multiple on that sweat equity to buy into the practice? The fixed cost of equipment/etc was not worth the 'buy-in' price. Ophthalmologists are also in general, shady and not to be trusted business-wise. Honorable practices are the exception, not the rule, as I have seen with folks who graduated in my time.

How hard is it for me as a new grad to start out in solo practice?

 

[TheLesPaul]

You're going to have to help me with the math here. How is $16K a month going to cover their salary? Will they have any techs helping them? Will they be doing their own billing and coding or will that need to be done by someone else? Adding another provider to the EHR costs money. Will they use any equipment, supplies/ COGs etc? Utilities? Is there any office manager that costs the practice money? Marketing for a new associate and letting the community know they are available? Again they will be pulling patients away from the owners. Are they going to want any benefits like health insurance, 401K? Because the owners are going to help cover the 2-4% match and that comes out of the owners pocket. Peripheral benefits like cover cell phone or even gas money if there are multiple locations? So I think there are more costs then you would think when bringing on another Doc.

Presumably if you are adding an associate, you already have techs, a biller/coder, supplies, an office manager, a website team, and are already paying for rent/utilities as well. It is marginally more than what you are paying already. Are you hiring new ancillary staff every time you add an associate right at the outset? Add $1k/m for another EHR license. Gift baskets to referral docs -- one-time cost of $1K. Most practices don't vest their employees in 401k (if they even have them) for a year out. Health insurance for a new associate -- with practice paying 75% of the premium -- $400/m. Malpractice - 7K. Hence the additional 10-20K I mentioned in my additional post. I have never heard of cell phone or gas money. Do you provide that for your associates?

So -- if total compensation = 200K + 30K of benefits....

...then they need to collect 19K/m to pay for themselves. that is 12 patients a day, 4 days a week, not including testing/procedures. If your associate can't see that many patients in 3-6 months, then maybe you don't need an associate...

 

[Openglobetrotters]

This is not true at all. Unless the associate has their schedule full day 1 then they might be costing you money. With overhead and how they will actually be pulling patients away from the owners/partners it can be quite some time until they pay for themselves let alone make a profit for the partners. You have to be pretty strategic when hiring someone and realize that in the beginning you may lose money on them.

I think it’s going to be also location dependent. I know some practices where associates were profitable for the practice after 6 months, but the practices were either big group with multiple offices, efficient practices or in a non-metro area. The associates were busy after 2-3 months. My understanding is the infrastructure is already in place for the associates to succeed. Hiring techs seem to be continued process as many have turn overs.

I can see how it may be different for a solo practice to hire it’s first associate to be a different story however

 

[percyeye]

Presumably if you are adding an associate, you already have techs, a biller/coder, supplies, an office manager, a website team, and are already paying for rent/utilities as well. It is marginally more than what you are paying already. Are you hiring new ancillary staff every time you add an associate right at the outset? Add $1k/m for another EHR license. Gift baskets to referral docs -- one-time cost of $1K. Most practices don't vest their employees in 401k (if they even have them) for a year out. Health insurance for a new associate -- with practice paying 75% of the premium -- $400/m. Malpractice - 7K. Hence the additional 10-20K I mentioned in my additional post. I have never heard of cell phone or gas money. Do you provide that for your associates?

So -- if total compensation = 200K + 30K of benefits....

...then they need to collect 19K/m to pay for themselves. that is 12 patients a day, 4 days a week, not including testing/procedures. If your associate can't see that many patients in 3-6 months, then maybe you don't need an associate...

There aren't many scenarios in the medical field where there is 0% overhead. The typical overhead for an Ophthalmology practice is 55-60%. By adding partners and associates it can improve this or make it more efficient by splitting overhead. But an owner typically doesn't add an associate and then they keep all the overhead and pay the associate 100% of their earnings and we can show some math on this.

If the owner produces $1,000,000 a year at 40% net profit that = $400K earnings and $600K in overhead

If you add an associate that produces $19K a month plus the owners standard production, overhead will go up a little bit so now we are at $1,230,000 production and at 40% net that = $492,000 profit - (associate pay) $230,000 = $262,000 profit for owner. So the owner just lost -$138,000 by adding an associate.

The point is whether you add an associate or not in this scenario there is $600K in overhead and it has to be paid by someone. An associate is probably going to need to produce $600K a year or $50K a month until they even "pay for themselves."

 

[dantt]

There aren't many scenarios in the medical field where there is 0% overhead. The typical overhead for an Ophthalmology practice is 55-60%. By adding partners and associates it can improve this or make it more efficient by splitting overhead. But an owner typically doesn't add an associate and then they keep all the overhead and pay the associate 100% of their earnings and we can show some math on this.

If the owner produces $1,000,000 a year at 40% net profit that = $400K earnings and $600K in overhead

If you add an associate that produces $19K a month plus the owners standard production, overhead will go up a little bit so now we are at $1,230,000 production and at 40% net that = $492,000 profit - (associate pay) $230,000 = $262,000 profit for owner. So the owner just lost -$138,000 by adding an associate.

The point is whether you add an associate or not in this scenario there is $600K in overhead and it has to be paid by someone. An associate is probably going to need to produce $600K a year or $50K a month until they even "pay for themselves."

The math is the same whether it is a "partner track" position or not. Why should taking a lower salary be a requirement to be offered an opportunity to buy in?

 

[RetinaDude]

Presumably if you are adding an associate, you already have techs, a biller/coder, supplies, an office manager, a website team, and are already paying for rent/utilities as well. It is marginally more than what you are paying already. Are you hiring new ancillary staff every time you add an associate right at the outset? Add $1k/m for another EHR license. Gift baskets to referral docs -- one-time cost of $1K. Most practices don't vest their employees in 401k (if they even have them) for a year out. Health insurance for a new associate -- with practice paying 75% of the premium -- $400/m. Malpractice - 7K. Hence the additional 10-20K I mentioned in my additional post. I have never heard of cell phone or gas money. Do you provide that for your associates?

So -- if total compensation = 200K + 30K of benefits....

...then they need to collect 19K/m to pay for themselves. that is 12 patients a day, 4 days a week, not including testing/procedures. If your associate can't see that many patients in 3-6 months, then maybe you don't need an associate...

I recall when I was hired, right off the bat 4-5 new techs had to be hired. Also, additional billing was required as well. I believe another front desk was hired too, to accommodate the additional pts and scheduling. You need To have these staff members in place or else you are hindering your new doc from the start. You want to give your new doc every chance possible to be successful. Even if you are only paying these new employees $30,000-$40,000/year, that’s an additional $120,000-$280,000 in new revenue that must be produced to cover their salaries. This does not even count their benefits……health insurance alone runs about $900/month for each employee. Yes, we do match their 401k contributions. They are not vested yet but they are getting the match and will be 100% vested soon enough. Plus, a new associate requires an expanded office space and new equipment to accommodate the hopeful continued growth. New, or additional, supplies will definitely be needed. Marketing material, to announce the new associate, will be needed. The associate doc’s cell phone is covered as part of the practice because of the need to cover call. So many items to cover with new revenue. And don’t give gift baskets to referring docs. Don’t give any gifts to referring docs. The government frowns upon these moves and you do not want the government becoming curious about your activities to lure business.

 

[RetinaDude]

The math is the same whether it is a "partner track" position or not. Why should taking a lower salary be a requirement to be offered an opportunity to buy in?

I’m not being snarky here, just trying to make sure I understand exactly what you are asking/stating. Are you saying a new associate should be making the same amount as a full partner from the get go???

 

[dantt]

I’m not being snarky here, just trying to make sure I understand exactly what you are asking/stating. Are you saying a new associate should be making the same amount as a full partner from the get go???

The whole point I started this thread. Why should an employee take a "partnership track" position that pays lower than market rate (compared to hospital practice, PE practice, other private practices that may not offer a partnership) when chance of actually staying and buying in are so low?

The traditional advice repeated many times has been to not worry about your associate salary. Focus on what you'll make as a partner.

My advice. Do so at your peril!!!

 

[TheLesPaul]

There aren't many scenarios in the medical field where there is 0% overhead. The typical overhead for an Ophthalmology practice is 55-60%. By adding partners and associates it can improve this or make it more efficient by splitting overhead. But an owner typically doesn't add an associate and then they keep all the overhead and pay the associate 100% of their earnings and we can show some math on this.

If the owner produces $1,000,000 a year at 40% net profit that = $400K earnings and $600K in overhead

If you add an associate that produces $19K a month plus the owners standard production, overhead will go up a little bit so now we are at $1,230,000 production and at 40% net that = $492,000 profit - (associate pay) $230,000 = $262,000 profit for owner. So the owner just lost -$138,000 by adding an associate.

The point is whether you add an associate or not in this scenario there is $600K in overhead and it has to be paid by someone. An associate is probably going to need to produce $600K a year or $50K a month until they even "pay for themselves."

I don't think overhead scales linearly like that. The 19K that the associate generates costs much less than the first 100K cost you to generate. Unless you are hiring new staff/leasing new space at the outset, that portion of the overhead is a fixed cost and adding an associate who can produce should dilute it.

I recall when I was hired, right off the bat 4-5 new techs had to be hired. Also, additional billing was required as well. I believe another front desk was hired too, to accommodate the additional pts and scheduling. You need To have these staff members in place or else you are hindering your new doc from the start. You want to give your new doc every chance possible to be successful. Even if you are only paying these new employees $30,000-$40,000/year, that’s an additional $120,000-$280,000 in new revenue that must be produced to cover their salaries. This does not even count their benefits……health insurance alone runs about $900/month for each employee. Yes, we do match their 401k contributions. They are not vested yet but they are getting the match and will be 100% vested soon enough. Plus, a new associate requires an expanded office space and new equipment to accommodate the hopeful continued growth. New, or additional, supplies will definitely be needed. Marketing material, to announce the new associate, will be needed. The associate doc’s cell phone is covered as part of the practice because of the need to cover call. So many items to cover with new revenue. And don’t give gift baskets to referring docs. Don’t give any gifts to referring docs. The government frowns upon these moves and you do not want the government becoming curious about your activities to lure business.

Your situation is very different from what I experienced, and in your scenario -- yes a new associate does have a significant upfront cost. When I was an associate, there were no additional ancillary staff hired for 1 year, billing was outsourced for 4.5%, and unbeknownst to me the practice owner was paying himself an above-market rent from my collections. Of course no 401k, cell phone, marketing budget, or new equipment was purchased. Perhaps why you were successful partnered in your practice and I left mine.

Maybe this conversation should be -- in a good scenario, the practice owners are making a significant investment in their associate (staff, salary, benefits), and if not -- associate beware.

 

[RetinaDude]

I don't think overhead scales linearly like that. The 19K that the associate generates costs much less than the first 100K cost you to generate. Unless you are hiring new staff/leasing new space at the outset, that portion of the overhead is a fixed cost and adding an associate who can produce should dilute it.



Your situation is very different from what I experienced, and in your scenario -- yes a new associate does have a significant upfront cost. When I was an associate, there were no additional ancillary staff hired for 1 year, billing was outsourced for 4.5%, and unbeknownst to me the practice owner was paying himself an above-market rent from my collections. Of course no 401k, cell phone, marketing budget, or new equipment was purchased. Perhaps why you were successful partnered in your practice and I left mine.

Maybe this conversation should be -- in a good scenario, the practice owners are making a significant investment in their associate (staff, salary, benefits), and if not -- associate beware.

100% agree with your statement about how the conversation should be. It sounds like you did not get the support you should have been given. And if that’s the case, you are somewhat doomed from the get go. In my practice, we’ve made it a point to do everything possible to make our new docs successful. Besides what I mentioned above, we shove as many new pts as possible their way. And these are not the crappy ones (ie, no insurance, terrible PVR, etc…). We make sure no one doc is burdened with an unfair share. Same with call, it is shared equally.

Im sorry your first practice go around didn’t work out for ya

 

[KHE]

There aren't many scenarios in the medical field where there is 0% overhead. The typical overhead for an Ophthalmology practice is 55-60%. By adding partners and associates it can improve this or make it more efficient by splitting overhead. But an owner typically doesn't add an associate and then they keep all the overhead and pay the associate 100% of their earnings and we can show some math on this.

If the owner produces $1,000,000 a year at 40% net profit that = $400K earnings and $600K in overhead

If you add an associate that produces $19K a month plus the owners standard production, overhead will go up a little bit so now we are at $1,230,000 production and at 40% net that = $492,000 profit - (associate pay) $230,000 = $262,000 profit for owner. So the owner just lost -$138,000 by adding an associate.

The point is whether you add an associate or not in this scenario there is $600K in overhead and it has to be paid by someone. An associate is probably going to need to produce $600K a year or $50K a month until they even "pay for themselves."

Something seems puzzling here....

An associate producing $19k a month seems incredibly low. My associates produce about $70,000 a month and we are optometrists for God's sake. They didn't produce that at the start but they were producing about $40,000 per month on a reduced patient flow schedule.

Also, an associate shouldn't have 60% overhead as the owner doc does because things like the rent do not increase. The electric bill does not increase, at least not substantially.

What is the average collections per patient in an average, comprehensive ophthalmology practice?

I would respectfully submit that an owner who is taking a $130,000 paycut to hire an associate really doesn't need an associate. So unless there's some other benefit that I'm not seeing (the owner is reducing hours or something like that) that doesn't seem like a practice that needs an associate.

 

[TheLesPaul]

Something seems puzzling here....

An associate producing $19k a month seems incredibly low. My associates produce about $70,000 a month and we are optometrists for God's sake. They didn't produce that at the start but they were producing about $40,000 per month on a reduced patient flow schedule.

Also, an associate shouldn't have 60% overhead because as the owner doc does because things like the rent do not increase. The electric bill does not increase, at least not substantially.

What is the average collections per patient in an average, comprehensive ophthalmology practice?

I would respectfully submit that an owner who is taking a $130,000 paycut to hire an associate really doesn't need an associate. So unless there's some other benefit that I'm not seeing (the owner is reducing hours or something like that) that doesn't seem like a practice that needs an associate.

this is exactly what I was trying to convey

 

[EyeYEyeYEye]

Can anyone imagine a set of circumstances or plausible reason(s) for a practice to hire an associate before they are needed?

 

[dantt]

Can anyone imagine a set of circumstances or plausible reason(s) for a practice to hire an associate before they are needed?

Sure. Doc is a super star.

 

[TheLesPaul]

Can anyone imagine a set of circumstances or plausible reason(s) for a practice to hire an associate before they are needed?

some practice owners consider 'not wanting to take call', 'not wanting to do XXX type of cases', and 'wanting to slow down' as reasons that they 'need' an associate

 

[Yohoyoho]

It might be subspecialty specific but if you pay an associate 200K, then they only have to collect 16K a month before they are paying their own salary. That is 10 pts a day, 4 days a week, of mixed level 3/4 E/M coding WITHOUT any procedures, testing, etc. Add 3 month's time for the A/R to catch up. This should easily be achievable in 6-12 months if a practice truly has need of an associate even if you add the additional 10-20K for malpractice, health insurance, etc.

Unless you are introducing a new subspecialty and thereby hiring different staff or buying new equipment, the overhead cost to have a new associate should be marginally different apart from their salary.



I was in a group practice and am now solo. I encourage anyone who is not part of the solo eye docs group to join if they are serious about starting on your own. I felt I had to recruit my own patients anyway in the prior situation. If I am pounding the pavement and hustling to get referrals, why should I have to pay a multiple on that sweat equity to buy into the practice? The fixed cost of equipment/etc was not worth the 'buy-in' price. Ophthalmologists are also in general, shady and not to be trusted business-wise. Honorable practices are the exception, not the rule, as I have seen with folks who graduated in my time.

Hello. I'm new here to this forum. What is the "solo eye docs group"?

 

[PLA2]

Hello. I'm new here to this forum. What is the "solo eye docs group"?

Solo Eye Docs

solo practice eye doctor ophthalmology clinic startup entrepreneur how to

www.soloeyedocs.com

Solo Eye Docs Group

There are two ways to get help to start a solo practice. The first is the paywall protected parts of the blog. There is a donation required to SSF or ophthpac of $1200 to read this. All of this inf…

solobuildingblogs.com

 

[Yohoyoho]

thanks!!

 

[Openglobetrotters]

Hello. I'm new here to this forum. What is the "solo eye docs group"?

He also gives a course at AAO on solo practice each year so far

 

[Brathmore]

It might be subspecialty specific but if you pay an associate 200K, then they only have to collect 16K a month before they are paying their own salary. That is 10 pts a day, 4 days a week, of mixed level 3/4 E/M coding WITHOUT any procedures, testing, etc. Add 3 month's time for the A/R to catch up. This should easily be achievable in 6-12 months if a practice truly has need of an associate even if you add the additional 10-20K for malpractice, health insurance, etc.

Unless you are introducing a new subspecialty and thereby hiring different staff or buying new equipment, the overhead cost to have a new associate should be marginally different apart from their salary.



I was in a group practice and am now solo. I encourage anyone who is not part of the solo eye docs group to join if they are serious about starting on your own. I felt I had to recruit my own patients anyway in the prior situation. If I am pounding the pavement and hustling to get referrals, why should I have to pay a multiple on that sweat equity to buy into the practice? The fixed cost of equipment/etc was not worth the 'buy-in' price. Ophthalmologists are also in general, shady and not to be trusted business-wise. Honorable practices are the exception, not the rule, as I have seen with folks who graduated in my time.

If you could send me a PM on how to join the solo eye docs group, I'd appreciate it. Thanks!

 

[TheLesPaul]

Solo Eye Docs Group

There are two ways to get help to start a solo practice. The first is the paywall protected parts of the blog. There is a donation required to SSF or ophthpac of $1200 to read this. All of this inf…

solobuildingblogs.com

 

[Etorphine]

BIG MESSAGE TO ALL YOUNG GRADS:
-you are in high demand due to shortage of ophthos, with old drs retiring at staggering rates
-demand path to partnership is in writing, with a finite short amount of time 1-2 years
-NEVER agree to indemnification
-include a clause for what happens if bought out by PE; restrictive covenant does not apply
-demand to get pre-arranged buy in price (that way they don't fool you a few years in)

young ophthos have the upper hand due to market numbers right now

do NOT budge on these factors above...if they tell you that is not standard, tell them in mother russia, they call that tough sh ****skis!

 

[dantt]

BIG MESSAGE TO ALL YOUNG GRADS:
-you are in high demand due to shortage of ophthos, with old drs retiring at staggering rates

Agreed.

-demand path to partnership is in writing, with a finite short amount of time 1-2 years

Agreed. But this is and will never guarantee a partnership offer.

-NEVER agree to indemnification

Agreed. This is definitely something you should make non-negotiable.

-include a clause for what happens if bought out by PE; restrictive covenant does not apply

Agreed. This may or may not be negotiable.

-demand to get pre-arranged buy in price (that way they don't fool you a few years in)

Agreed. Sometimes there's a set pre-arranged buy in price. Sometimes it's a formula. Sounds fair in theory but there are always a bunch of gotchas.

young ophthos have the upper hand due to market numbers right now

Agreed.

do NOT budge on these factors above...if they tell you that is not standard, tell them in mother russia, they call that tough sh ****skis!

I agree to everything you say above but realistically speaking, I practice would not be able to give you everything requested above, especially the partnership guarantee. The sad reality is being on the partnership track requires a lot of trust; trust that is usually poorly placed. Hence why I believe the partnership track is dead.

 

[mjohnsonets]

BIG MESSAGE TO ALL YOUNG GRADS:
-you are in high demand due to shortage of ophthos, with old drs retiring at staggering rates
-demand path to partnership is in writing, with a finite short amount of time 1-2 years
-NEVER agree to indemnification
-include a clause for what happens if bought out by PE; restrictive covenant does not apply
-demand to get pre-arranged buy in price (that way they don't fool you a few years in)

young ophthos have the upper hand due to market numbers right now

do NOT budge on these factors above...if they tell you that is not standard, tell them in mother russia, they call that tough sh ****skis!

You could potentially get all of these in a suburban or rural practice but in a major metro, it is very unlikely a practice would agree to all these. Ophthalmologists are in high demand generally but in many areas (popular metros in particular), there is enough turnover and docs wanting to move there that causes that balance to shift in favor of the employers.

 

[Etorphine]

You could potentially get all of these in a suburban or rural practice but in a major metro, it is very unlikely a practice would agree to all these. Ophthalmologists are in high demand generally but in many areas (popular metros in particular), there is enough turnover and docs wanting to move there that causes that balance to shift in favor of the employers.

well yea dont move to NYC, LA, SF. you're just asking for it then...but theyre good points for 98% of rest of country if don't mind living within 1-1.5 hr of a metro.

too many young grads being preyed upon by greedy old farts

if the practice gives excuses why they can't agree w/ above points, just say "good luck with your search!" and move onto next job offer.

Great article in CRS today about how greedy old farts cant find someone to buy practice as planned due to stagnant stream of new young MDS creating shortage, and many practice owners simply having to close down the business when they retire without a buyer

 

[dantt]

You could potentially get all of these in a suburban or rural practice but in a major metro, it is very unlikely a practice would agree to all these. Ophthalmologists are in high demand generally but in many areas (popular metros in particular), there is enough turnover and docs wanting to move there that causes that balance to shift in favor of the employers.

We always appreciate your experience and advice on these matters...I don't want to spread excessive doom and gloom on these forums but your definition of a suburb in this context is probably different from what most people think.

When posters say don't move to NYC, LA, SF because of saturation, this actually means most of Southern California from Santa Clarita down to San Diego and east to Riverside and the San Bernadino mountains. SF includes SF, Oakland, San Jose, out to Antioch.

Major metro area means Seattle-Tacoma, Portland, SF Bay Area, So Cal, Phoenix, Las Vegas, Salt Lake City, Denver, Kansas City, Dallas, Houston, San Antonio, Austin, Minneapolis, Chicago, St Louis, New Orleans, you get the point. I'm not saying that you can't find a decent job in these places but they are competitive and just as likely to churn associates, sell to PE, large non-competes, etc.

 

[mjohnsonets]

We always appreciate your experience and advice on these matters...I don't want to spread excessive doom and gloom on these forums but your definition of a suburb in this context is probably different from what most people think.

When posters say don't move to NYC, LA, SF because of saturation, this actually means most of Southern California from Santa Clarita down to San Diego and east to Riverside and the San Bernadino mountains. SF includes SF, Oakland, San Jose, out to Antioch.

Major metro area means Seattle-Tacoma, Portland, SF Bay Area, So Cal, Phoenix, Las Vegas, Salt Lake City, Denver, Kansas City, Dallas, Houston, San Antonio, Austin, Minneapolis, Chicago, St Louis, New Orleans, you get the point. I'm not saying that you can't find a decent job in these places but they are competitive and just as likely to churn associates, sell to PE, large non-competes, etc.

I agree with what you're saying but I do know there are good practices in all locations where you can grow your career. I think going to a metro needs to come with an understanding you'll have to hustle compared to your colleagues that went elsewhere if you want a strong practice. All great things have some level of challenge because of they didn't, they wouldn't be all that valuable or great.

I do wish more young docs would consider smaller or medium-sized cities/areas. The partnership tracks in these areas are typically more straightforward and achievable. I can tell you there are many docs in these areas willing to do whatever they can to make it work and truly great people besides being great clinicians and surgeons. The patients in these areas have a huge need that needs to be filled and many docs in these areas report how much more appreciative their patients are. However, most people don't tend to move to areas smaller than where they grew up, and when you look at the number of people living in a major metro MSA as a whole in the US that tells you where most docs are going to look in the future.

Since we're talking about smaller areas a little I felt the need to do a shameless plug about where I live. Sorry for the short hijack of the thread. Roanoke, VA has an MSA of about 300,000 people and it's a fantastic place to live. I like to tell people, it's probably not a 10/10 on anything but it's a solid 7-8/10 on everything which makes it a nice and easy place to live. We've had a lot of people young, middle-aged, and retirement aged move from places like DC, NYC, and Denver who love it recently. We have a real community here where people get along very well from all walks of life, politics, and socio-economic status. Our airport connects to Charlotte, Chicago, NYC, DC, and Atlanta and with TSA pre-check I can get from my car to my gate in less than 10min. In terms of cost of living, this is what $455,000 will get you: Salem house. This is in Salem, a suburb. We have mountains in the backdrop about every direction you look. We also have great schools including two very strong private schools.

Just wanted to point out what some of the smaller areas have to offer and I'm a particular fan of this one if anyone is looking for places to move. There are practice options in the area.

 

[Etorphine]

When posters say don't move to NYC, LA, SF because of saturation, this actually means most of Southern California from Santa Clarita down to San Diego and east to Riverside and the San Bernadino mountains. SF includes SF, Oakland, San Jose, out to Antioch.

Everyone wants to move to CA and help support the 34% of the nation's welfare recipients, Green new deal, and soon to be universal basic income. God bless ‘em

 

[TheLesPaul]

I think a lot of my colleagues don't want to move to a city where you have to connect through another US city to go internationally. That leaves the same list of 10-12 cities which are relatively busy...

 

[dantt]

As far as your second paragraph is concerned, if AR was treated like that, it would seem you are going into the practice with the belief you will leave….since you want to be paid the money after you’ve left. Hopefully you’re going into it with the idea of staying long term, and thus your AR simply rolls over the when you are partner and you continue to collect it. AR continues to roll in for months (sometimes years) down the road. Plus, once you leave, there’s still newly hired staff that have to be paid for (or fired since you left), and plenty of other expenses. It’s something you should ask about when you interview. But, like I said, if I had a candidate asking me this, I’d be thinking ”is this person planning to leave early???” In my practice, if we like you, there’s no deviant plan to not make you a partner, so that’s why I would be perplexed with your line of thinking.

Plot thickens. Let's say theoretically practice has Medicare/insurance payments frozen due to audit. Payments don't get made until after associate leaves. Does associate get the money? According to the contract no as money is not "received " while they're there. Time to lawyer up?

 

[RetinaDude]

Plot thickens. Let's say theoretically practice has Medicare/insurance payments frozen due to audit. Payments don't get made until after associate leaves. Does associate get the money? According to the contract no as money is not "received " while they're there. Time to lawyer up?

If you are in practice, you are going to be audited. Whether it’s Medicare, private insurance, or self (hired consultant), you will have audits occur. It’s just the nature of the business . But, only a very very small number of charts are ever audited at one time so it’s not like all payments from Medicare, or whoever, come to a stop. In over twenty years of practice, I’ve never heard of or seen that happen. And even if it did, the amount of money would be relatively small considering the few actual charts audited. Not sure what would occur with an associate, in the scenario you mentioned, but it would likely cost more to hire an attorney vs the small amount of money the young associate would be out. Plus, most associates are paid after they reach a certain threshold of collections. These small chart reviews would likely have very little impact on that.

Look at this another way. When Medicare audits, they only look at a handful of charts (as I mentioned above). If they find something wrong, they then extrapolate this out. In their mind, if you are committing fraud on 10% of the charts they audited then it must be that 10% of all of your charts are fraudulent (simple thinking but you get the point). So they would levy a penalty on the entirety of the practice and not just the small number of charts audited. If the young associate is going to lawyer up for money supposedly owed him/her (after the associate leaves the practice) then this doc must also be prepared to lawyer up to contribute to paying the penalty for supposed fraudulent behavior as well.

 

[dantt]

If you are in practice, you are going to be audited. Whether it’s Medicare, private insurance, or self (hired consultant), you will have audits occur. It’s just the nature of the business . But, only a very very small number of charts are ever audited at one time so it’s not like all payments from Medicare, or whoever, come to a stop. In over twenty years of practice, I’ve never heard of or seen that happen. And even if it did, the amount of money would be relatively small considering the few actual charts audited. Not sure what would occur with an associate, in the scenario you mentioned, but it would likely cost more to hire an attorney vs the small amount of money the young associate would be out. Plus, most associates are paid after they reach a certain threshold of collections. These small chart reviews would likely have very little impact on that.

Look at this another way. When Medicare audits, they only look at a handful of charts (as I mentioned above). If they find something wrong, they then extrapolate this out. In their mind, if you are committing fraud on 10% of the charts they audited then it must be that 10% of all of your charts are fraudulent (simple thinking but you get the point). So they would levy a penalty on the entirety of the practice and not just the small number of charts audited. If the young associate is going to lawyer up for money supposedly owed him/her (after the associate leaves the practice) then this doc must also be prepared to lawyer up to contribute to paying the penalty for supposed fraudulent behavior as well.

"I know a friend" all Medicare payments frozen for past few months until satisfactory audit. The amount is not insignificant.

 

[RetinaDude]

"I know a friend" all Medicare payments frozen for past few months until satisfactory audit. The amount is not insignificant.

I hope your “friend” has legal counsel because that means its probably a lot more significant than a simple audit. If all payments were frozen, every time a simple audit was done, we’d all be screwed

 

[i-doctor]

On a somewhat related tangent, I know a few ophthalmologists who’ve decided not to renew their DEA licenses to save money and also to eliminate any regulatory or legal scrutiny. They only have their state medical licenses. No narcotic prescribing privileges, so if patients need narcotics they can go to the ER.

 

[KHE]

I agree with what you're saying but I do know there are good practices in all locations where you can grow your career. I think going to a metro needs to come with an understanding you'll have to hustle compared to your colleagues that went elsewhere if you want a strong practice. All great things have some level of challenge because of they didn't, they wouldn't be all that valuable or great.

I'll give you the optometry perspective on this....

I live/practice in Connecticut, half way between Hartford and New Haven. Attracting doctors to this area (all specialties) is very very hard. Even though we are an hour from New York City, an hour and half from Boston, have access to great schools, reasonable real estate costs, healthcare, entertainment, restaurants, cultural activities, sports, casinos, beaches all within an hour, we might as well be on the moon.

Almost all young doctors want to live in New York City, Boston, SoCal or the "Bay Area."

It got a little bit easier during Covid because people will fleeing big city en masse but now that most things are "back to normal" it's back to the same issues.