Is the "partnership track" dead?

[Trefoil]

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Yup very true. Right now a lot of those 3-5 year commitments are coming to an end for the selling partners and they are drifting off into retirement. If you look at job boards for some of the PE groups there are many unfilled positions.

I agree with everything that you have said, and I think most young ophthalmologists I have spoken to are in the same boat. I actually do blame the retiring generation for selling to PE. It amounts to choosing money over the profession. I don’t really care if PE pays better. I don’t want to work for some investor who is subsequently making decisions that will affect the care I can provide. Honestly, I feel the same about big hospital systems. They are also profit driven.

I’ll start my own practice in a small town over any of this PE nonsense. Fine, you are 70 and you made a few million dollars to pad your retirement, I’m sure your kids will love spending the money you made them by selling out the younger generation of your profession.

 

[MstaKing10]

I agree with everything that you have said, and I think most young ophthalmologists I have spoken to are in the same boat. I actually do blame the retiring generation for selling to PE. It amounts to choosing money over the profession. I don’t really care if PE pays better. I don’t want to work for some investor who is subsequently making decisions that will affect the care I can provide. Honestly, I feel the same about big hospital systems. They are also profit driven.

I’ll start my own practice in a small town over any of this PE nonsense. Fine, you are 70 and you made a few million dollars to pad your retirement, I’m sure your kids will love spending the money you made them by selling out the younger generation of your profession.

Just playing devils advocate: your practice in a small town will be a non-profit?

 

[Trefoil]

Just playing devils advocate: your practice in a small town will be a non-profit?

Sure you have been shilling PE this entire thread.

 

[TheLesPaul]

We have a lot more latitude as practice owners to adjust fees for patients in need. Every practice owner in this thread can point to the thousands of dollars of free care they have provided to their community. If only we could get a tax break for it!


Re: PE -- I remember hearing presentations from potential suitors in a prior practice. None of the guys had been with the firm for more than 12 months. I doubt any of them would be in their position for more than 2 years. You are just a stepping stone in their journey to the C-suite -- they have no personal investment in you.

 

[solitude]

would be interesting to hear from people who are members of practices bought by PE. EVERYTHING I have heard from my friends in these situations has been negative so far. Even more senior folks. Anybody have different experience?

 

[dantt]

would be interesting to hear from people who are members of practices bought by PE. EVERYTHING I have heard from my friends in these situations has been negative so far. Even more senior folks. Anybody have different experience?

At my former practice, the neuro-oph person got a land rover after they signed the LOI (in retrospect, the neuro-oph buying a land rover should raised a big red flag but I never heard of PE then). Another person got a Taycan and was shopping a retirement home in Scottsdale vs. San Diego. They seemed pretty happy.

 

[solitude]

At my former practice, the neuro-oph person got a land rover after they signed the LOI (in retrospect, the neuro-oph buying a land rover should raised a big red flag but I never heard of PE then). Another person got a Taycan and was shopping a retirement home in Scottsdale vs. San Diego. They seemed pretty happy.

but are they happy now, working in the practice a few years later?

 

[MstaKing10]

Not all PE is made the same. Our experience has been very positive. Zero day to day clinical changes. We are in complete control of how our practice runs on the clinical end. Funny some mentioned their ability to control how they care for self pay patients as if PE practices no longer do so. I am in full control of my rates for self pay patients, just yesterday enrolled several patients in free drug and wrote off any charges or balances to help them out. I don't get calls or emails from executives asking me why I did that. Never. Our compensation structure has changed a bit (for the better) and there have been some real strides made in payor negotiations. Also we have open up two new locations, fully paid for by PE, with all the best equipment at no cost to us. Way nicer than our other older locations that we paid for ourselves and cut all kinds of corners on to save money. We are now considering opening up our own surgery center and clinical research site. None of that would've happened without PE backing.

Many of the discussions regarding profit, costs, overhead, etc were being had constantly PRIOR to PE. It gets me how private practice doctors claim PE is only after profit yet fail to mention they are doing the same thing. Difference is they keep all the profit and don't have to share with PE. That much is true and a very good argument against PE. On the other hand, PE has backed up a lot of our practice expenses, many major ones, at no direct cost to us, thus distributing risk away from us and on to PE.

The real mystery is what comes next. I am uncertain on that end and am concerned about that. Again, another good argument against PE. That said, private practice has some real tough landscape to negotiate with reduced reimbursement and increased costs and competition, so the future is murky regardless.

I do not believe that PE is the right answer for everyone, nor that it's the best set up. There are pros and cons to each. But there are some myths that are completely contrary to my own experience that warrant dispelling.

 

[TheLesPaul]

Not all PE is made the same. Our experience has been very positive. Zero day to day clinical changes. We are in complete control of how our practice runs on the clinical end. Funny some mentioned their ability to control how they care for self pay patients as if PE practices no longer do so. I am in full control of my rates for self pay patients, just yesterday enrolled several patients in free drug and wrote off any charges or balances to help them out. I don't get calls or emails from executives asking me why I did that. Never. Our compensation structure has changed a bit (for the better) and there have been some real strides made in payor negotiations. Also we have open up two new locations, fully paid for by PE, with all the best equipment at no cost to us. Way nicer than our other older locations that we paid for ourselves and cut all kinds of corners on to save money. We are now considering opening up our own surgery center and clinical research site. None of that would've happened without PE backing.

Many of the discussions regarding profit, costs, overhead, etc were being had constantly PRIOR to PE. It gets me how private practice doctors claim PE is only after profit yet fail to mention they are doing the same thing. Difference is they keep all the profit and don't have to share with PE. That much is true and a very good argument against PE. On the other hand, PE has backed up a lot of our practice expenses, many major ones, at no direct cost to us, thus distributing risk away from us and on to PE.

The real mystery is what comes next. I am uncertain on that end and am concerned about that. Again, another good argument against PE. That said, private practice has some real tough landscape to negotiate with reduced reimbursement and increased costs and competition, so the future is murky regardless.

I do not believe that PE is the right answer for everyone, nor that it's the best set up. There are pros and cons to each. But there are some myths that are completely contrary to my own experience that warrant dispelling.

If you don't mind answering the following questions bc I have never met anyone who had such a positive experience:

1) were you a partner when you were acquired, and are you financially independent now (i.e., you can quit working if you want to bc of the buyout)?
2) how long has your practice been with PE now, and have they undergone their 2nd sale yet?
3) did your practice have associates during the transition, and did they stay/are they happy? did they have to sign extensive noncompetes?
4) how much staff turnover did you experience, and what % of staff were let go during the integration?


I think your points about PE being able to distribute risk away from physicians in capital expansion is a good one. There is always more risk but more reward in doing things yourself. I guess the question to ask is, if you are financially independent and can walk away from medicine if you want -- you are likely to be much happier than an associate with a young family and a noncompete that keeps them from joining another practice within the same state.

 

[dantt]

but are they happy now, working in the practice a few years later?

One of them got disabled and was no longer able to practice and so was able to get out of their committment somehow. I hear their Taycan is very nice.

 

[solitude]

If you don't mind answering the following questions bc I have never met anyone who had such a positive experience:

1) were you a partner when you were acquired, and are you financially independent now (i.e., you can quit working if you want to bc of the buyout)?
2) how long has your practice been with PE now, and have they undergone their 2nd sale yet?
3) did your practice have associates during the transition, and did they stay/are they happy? did they have to sign extensive noncompetes?
4) how much staff turnover did you experience, and what % of staff were let go during the integration?


I think your points about PE being able to distribute risk away from physicians in capital expansion is a good one. There is always more risk but more reward in doing things yourself. I guess the question to ask is, if you are financially independent and can walk away from medicine if you want -- you are likely to be much happier than an associate with a young family and a noncompete that keeps them from joining another practice within the same state.

One more question, and thanks for chiming in and being willing to share your experience.

When you say compensation is better, can you explain that? Are you making more than before, despite the fact that they paid you and the other partners a bunch of money to buy the practice? What about newer associates and partners? Basically, how has the compensation structure been changed.

 

[owleye]

I'd be curious to hear any thoughts on the retina landscape in ~5 years. Will there be non-PE opportunities in metropolitan areas?

 

[dantt]

One more question, and thanks for chiming in and being willing to share your experience.

When you say compensation is better, can you explain that? Are you making more than before, despite the fact that they paid you and the other partners a bunch of money to buy the practice? What about newer associates and partners? Basically, how has the compensation structure been changed.

I think they mean the associate salary is higher than the old partner track salary. This is pretty common. There have alwats been some pretty crappy private practice jobs out there.

 

[MstaKing10]

If you don't mind answering the following questions bc I have never met anyone who had such a positive experience:

1) were you a partner when you were acquired, and are you financially independent now (i.e., you can quit working if you want to bc of the buyout)?
2) how long has your practice been with PE now, and have they undergone their 2nd sale yet?
3) did your practice have associates during the transition, and did they stay/are they happy? did they have to sign extensive noncompetes?
4) how much staff turnover did you experience, and what % of staff were let go during the integration?


I think your points about PE being able to distribute risk away from physicians in capital expansion is a good one. There is always more risk but more reward in doing things yourself. I guess the question to ask is, if you are financially independent and can walk away from medicine if you want -- you are likely to be much happier than an associate with a young family and a noncompete that keeps them from joining another practice within the same state.

1) Yes I was partner. Financially independent depends on your definition. If you mean no work for the rest of my life, think it depends how I manage my money I suppose. I'm still pretty young. In that sense no different than before the deal. But I got a nice head start.
2) Entering 3rd year, no second sale yet
3) We had an associate and he is quite happy. Partnership track accelerated, no expensive buy in, got shares in the new practice, and got a bump in salary.
4) As far as I'm aware, no staff left as a function of the deal. The usual turnover that has been an issue in the workforce post covid has hit us just like everyone else. This is independent of any PE deal.

 

[MstaKing10]

One more question, and thanks for chiming in and being willing to share your experience.

When you say compensation is better, can you explain that? Are you making more than before, despite the fact that they paid you and the other partners a bunch of money to buy the practice? What about newer associates and partners? Basically, how has the compensation structure been changed.

I'm not making more, but not much less either. The compensation formula was changed to reflect formulas used across many of the practices owned by the PE firm. It's actually a fairer formula than we used to have, and was arrived at only with the approval of all the doctors in our group.

 

[Dusn]

I'm not making more, but not much less either. The compensation formula was changed to reflect formulas used across many of the practices owned by the PE firm. It's actually a fairer formula than we used to have, and was arrived at only with the approval of all the doctors in our group.

Thanks for trying to provide some clarity!

How does an associate's salary now, under PE, compare to what a partner would have made before PE? (percentage-wise). Let's assume they're both equally hard working and 5 years into practice (or whatever it took to make full partner).

Also I don't understand how you can still be in complete control of your practice but PE is taking the financial risk? Can you immediately go out and buy an optos fa/icg, heidelberg OCT, OCTA, pascal laser, a nice b-scan and hire several new techs for each office and charge it to the PE credit card? I'm assuming they've got to be monitoring your spending and you're basically utilizing the equipment you had before the buyout?

 

[MstaKing10]

Thanks for trying to provide some clarity!

How does an associate's salary now, under PE, compare to what a partner would have made before PE? (percentage-wise). Let's assume they're both equally hard working and 5 years into practice (or whatever it took to make full partner).

Also I don't understand how you can still be in complete control of your practice but PE is taking the financial risk? Can you immediately go out and buy an optos fa/icg, heidelberg OCT, OCTA, pascal laser, a nice b-scan and hire several new techs for each office and charge it to the PE credit card? I'm assuming they've got to be monitoring your spending and you're basically utilizing the equipment you had before the buyout?

Regarding compensation: Good question. Not sure about it though as it varies depending on production. And it just started not long ago. I think I'll be better able to answer that question after a few quarters of doing things the new way.

You are correct, we have to submit a budget and then budget is approved at a corporate level. To this point, we have not had any issues with big purchases (Optos, OCT etc). Our group had incredibly low overhead prior to PE, and our process to acquire new equipment or open up a new office was incredibly painful, albeit, handled internally. Not sure which is better or worse.

 

[Slide]

I think we’re going to see PE firms tighten the screws, whether for second sales or to actually profit off running the clinics, soon. Cheap debt has serviced these acquisitions. With much higher rates, it’s going to be much tougher for PE to survive and backers are going to want to see profits sooner than later. I can’t see PE continuing the same way with 5-6% interest rates, minimum.

 

[solitude]

I think we’re going to see PE firms tighten the screws, whether for second sales or to actually profit off running the clinics, soon. Cheap debt has serviced these acquisitions. With much higher rates, it’s going to be much tougher for PE to survive and backers are going to want to see profits sooner than later. I can’t see PE continuing the same way with 5-6% interest rates, minimum.

agree. I appreciate what MstaKing is sharing, but it seems to make no sense from PE's perspective. Huge upfront payout, then pay more to associates, pay similar to partners, and provide lots of frictionless capital for expansion. Unless investing in practices is going to see massive increases in reimbursement from negotiation or practice effiencies - maybe true, but I doubt - PE is going to have to make their money somewhere. And it will be on the back of the MDs. Reimbursements seem to be barely or not even keeping up with inflation. Most PPs being bought by PE were already quite efficient, as MstaKing stated. Most docs in PP are already grinding through a ton of pts, 5 days a week. How are you going to bring in more revenue?? So either PE is going to lose a lot of money, or the MDs are going to lose a lot of money as they are the obvious source of practice expense. Maybe both will lose out here, I don't know. There is no such thing as a free lunch.

Some of what he said conflicts with what I have heard from friends. Associates are making more than before, but much less earning potential as partner. Partners making significantly less. Significant amount of compensation in "shares" in the giganto-consolidated-PE-practice-entity that may end up being worthless. Rather than cash. Forced to merge with other nearby groups of significantly less quality, for the sake of "efficiency" and insurance negotiations. Losing control over small and large decisions. Senior partners planning to retire early because unhappy. and on and on.

 

[LightBox]

I know someone who went through two bites... got around 22MM pretax overall. I'm sure that would be hard to turn down.

 

[RetinaDude]

I’m not a fan of PE, one bit, but $22M would be very hard to ignore.
From what I’ve heard, from other retina groups that have been purchased by PE, the associates make more money (to keep them on board), but the partners were looking at about 25% payout from their usual salary. On top of this, any “extra” money, such as ASC, real estate, etc…, is now in the pot for the PE folks and not the docs anymore. But, I’ve also heard some say the PE folks were able to negotiate higher rates, with local private insurers, and it helped offset the salary decrease. This is only in areas where PE has been able to “corner the market”.

 

[i-doctor]

I think a simplistic way to view the business model is to compare it to taking out a mortgage to buy a rental property, then rent it out on AirBNB to generate an income stream, then sell the house for a profit:

A) The P.E. company buys the practice on credit or the so-called leveraged buyout (similar to taking a mortgage to buy a house. It’s even more risky for the PE company because they don’t get to lock in a fixed low rate like you can on a mortgage.)
B) Income is generated to the PE practice from the doctors’ work. Obviously in order to get a positive return, income generated must be higher than the monthly loan payments (similar to rental income per month on the AirBNB property needs to be greater than mortgage/property tax payments to get a positive return)
C) Maintenance costs eat into profits significantly. Buying a new Yag laser because the old one is worn out is an expense/loss, whereas buying equipment to allow a new procedure to be performed so a new source of income is generated is a plus (similar to fixing the plumbing on the house is an expense/loss, whereas maybe putting in a swimming pool that will allow for increased rental charges might increase income)
D) The eventual sale at a hopefully high price

The whole thing implodes if interest rates get too high (both in the higher monthly debt payments and the eventual lower sale price), too many doctors quit or cut back with difficulty being replaced, or reimbursements tank.

As an aside, the buzz is that in ophthalmology P.E. is getting tired of dealing with —in their view—entitled, whiny doctors who get a lot of money and then subsequently quit or have really bad attitudes. They are increasingly looking at surgery centers as their best investments, better than the medical practices themselves. Practices without surgery centers will be less sought after.

 

[MstaKing10]

I’m not a fan of PE, one bit, but $22M would be very hard to ignore.
From what I’ve heard, from other retina groups that have been purchased by PE, the associates make more money (to keep them on board), but the partners were looking at about 25% payout from their usual salary. On top of this, any “extra” money, such as ASC, real estate, etc…, is now in the pot for the PE folks and not the docs anymore. But, I’ve also heard some say the PE folks were able to negotiate higher rates, with local private insurers, and it helped offset the salary decrease. This is only in areas where PE has been able to “corner the market”.

To piggy back on what someone said before, the debt servicing piece is a major concern. Again, not all PE is the same, but most are highly leveraged. And the increasing rates will make it increasingly difficult to scale or service their loans. They have workarounds and a seemingly endless line of credit but this is still a big issue.

When you say 25% payout, do you mean they are now paid 25% of what they used to be paid? That seems extreme. Keep in mind, the more salary you want on the back end, the less up front cash you will get on the front end when these deals are structured. This, that may have been purposefully negotiated but obviously I don’t know the details.

The compensation “pot” is a complex issue and managed differently even within the various groups under our PE umbrella. I will say that our pot did shrink initially, but has grown subsequently for a multitude of different reasons. Admittedly, the pot is not as large as it was prior to the PE deal.

In terms of associates increased pay, lower roof issue, I go back to my prior comment regarding my experience with buying in. To summarize, it was a long and expensive process, and I’m not sure mathematically what would be better, significantly underpaid early with an expensive buy in but higher income afterwards or a more even high income throughout.

 

[dantt]

As an aside, the buzz is that P.E. is getting tired of dealing with entitled, whiny doctors who get a lot of money and then subsequently quit or have really bad attitudes. They are increasingly looking at surgery centers as their best investments, better than the medical practices themselves. Practices without surgery centers will be less sought after.

Surgery centers cost a lot of money and require physicians to bring cases. Those surgeons who cashed out have no obligation to continue working hard or even bringing their cases there. Forcing physicians to operate at their centers may even represent corporate practice of medicine. There was rumors at my old place of lawsuits between the new PE firm who owned the practice and wanted to build and have the docs go to a new ASC and the old PE firm who owned 51% of the old ASC. Kind of reminds me of the UHC/teamhealth/hospital battles. Not really sympathetic to any side. 🍿 🍿 🍿

 

[The Eye Experts]

I'm new to posting on SDN - I'm looking for a surgical ophthalmologist to join my private practice with a short path to partnership.
Private equity buy-out offers are even coming to south Texas, but I don't want that for my patients.
My job listing is over here Full time surgical ophthalmologist, South Texas

Happy to talk to anyone who would like to visit my practice and of course will give all the details to serious inquiries.

 

[RetinaDude]

I'm new to posting on SDN - I'm looking for a surgical ophthalmologist to join my private practice with a short path to partnership.
Private equity buy-out offers are even coming to south Texas, but I don't want that for my patients.
My job listing is over here Full time surgical ophthalmologist, South Texas

Happy to talk to anyone who would like to visit my practice and of course will give all the details to serious inquiries.

I read your recruitment post and it sounds like you have a really nice set up. My group is in a more rural area and we’ve definitely had more trouble recruiting compared to practices in bigger cities……..well, now I think all practices, in all size cities, are now having trouble recruiting. For us, it’s helped reaching out to our former residency programs and asking if they’ve got any residents interested in returning to smaller towns. From there, we hope they want to pursue retina as well. By some small miracle, it’s worked, over the years…..sometimes longer than we like but it’s better than recruiting someone who doesn’t have spousal support or really wants to be in a bigger city

 

[The Eye Experts]

I read your recruitment post and it sounds like you have a really nice set up. My group is in a more rural area and we’ve definitely had more trouble recruiting compared to practices in bigger cities……..well, now I think all practices, in all size cities, are now having trouble recruiting. For us, it’s helped reaching out to our former residency programs and asking if they’ve got any residents interested in returning to smaller towns. From there, we hope they want to pursue retina as well. By some small miracle, it’s worked, over the years…..sometimes longer than we like but it’s better than recruiting someone who doesn’t have spousal support or really wants to be in a bigger city

Thanks @RetinaDude

Some of my hires have had ties to the area but sometimes it still didn't work out longterm.
Still searching though, because I would really like some help from another surgeon

 

[LightBox]

Thanks @RetinaDude

Some of my hires have had ties to the area but sometimes it still didn't work out longterm.
Still searching though, because I would really like some help from another surgeon

I think you'd garner a lot more interest if you state something like: "All the partners here make 7-figures."

Even people that don't like that area of the country would ponder your practice more. I know for me personally, I was not so geographically restricted coming out of training and would have loved a relatively-instant 7-figure job!

 

[dantt]

I think you'd garner a lot more interest if you state something like: "All the partners here make 7-figures."

Even people that don't like that area of the country would ponder your practice more. I know for me personally, I was not so geographically restricted coming out of training and would have loved a relatively-instant 7-figure job!

Don't forget starting/guaranteed salary. With all the info out there about the dangers of the partner track and a true shortage of ophthalmologists, nobody's going to really want to spin their wheels in a rural area on a partnership track when the guaranteed pay at the VA or university or countless PE firms is higher.

 

[RetinaDude]

Don't forget starting/guaranteed salary. With all the info out there about the dangers of the partner track and a true shortage of ophthalmologists, nobody's going to really want to spin their wheels in a rural area on a partnership track when the guaranteed pay at the VA or university or countless PE firms is higher.

When I was going through the interview process, looking for a job, I interviewed with a solo doc. This was a “sort of” rural area and he needed help because he was slammed. Only problem I had was he could not give up total control of his practice. He wanted us to split the partnership 51/49 for the first five years but “in essence, we’ll be equal partners”. I was like “no, if we were equal partners, we’d be 50/50 instead of 51/49”. He did not understand why that would concern me but I did not join him. Took him another 10-12 years before he finally found a local “hometown“ guy to join him

 

[PLA2]

Thanks @RetinaDude

Some of my hires have had ties to the area but sometimes it still didn't work out longterm.
Still searching though, because I would really like some help from another surgeon

What is your premium lens upgrade rate?