Is the "partnership track" dead?

[schistosomiasis]

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 know of a great way to become full partner immediately in a competitive urban area and have 100% equity and total control over your practice: start your own. Go solo. (Not?) surprisingly, most of my friends in solo practice are in the cities above rather than rural areas. That’s because my friends don’t waste their time thinking some senior partner in an urban competitive area will give them a good deal. Tons of friends in LA/ Bay Area/ PHX/ Denver/ Dallas/ Austin/ Chicago/ DC/ NYC doing very well.

When I gave my AAO course about how to start a solo practice last month, the room was packed to the gills. If more people were educated and knew it was possible, more would take the leap.

dantt, weren’t you the guy several years ago who posted several years ago in response to my pro solo practice posts about how great your job was and you’d eventually make partner and earn tons? Kinda funny how things change… this has been happening to folks besides you for decades.

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[dantt]

I know of a great way to become full partner immediately in a competitive urban area and have 100% equity and total control over your practice: start your own. Go solo. (Not?) surprisingly, most of my friends in solo practice are in the cities above rather than rural areas. That’s because my friends don’t waste their time thinking some senior partner in an urban competitive area will give them a good deal. Tons of friends in LA/ Bay Area/ PHX/ Denver/ Dallas/ Austin/ Chicago/ DC/ NYC doing very well.

When I gave my AAO course about how to start a solo practice last month, the room was packed to the gills. If more people were educated and knew it was possible, more would take the leap.

dantt, weren’t you the guy several years ago who posted several years ago in response to my pro solo practice posts about how great your job was and you’d eventually make partner and earn tons? Kinda funny how things change… this has been happening to folks besides you for decades.

Lesson learned 😉

Now to be fair there are a lot of great practices out there. It just requires a lot of trust which is justifiable short these days (and may have always been short). My old practice was very profitable and well run. I made market rate salary there which was very good (as high as some practice owners in the big cities, have gotten burned since then). Don't blame them for selling to PE. 100 million.

 

[solitude]

Lesson learned 😉

Now to be fair there are a lot of great practices out there. It just requires a lot of trust which is justifiable short these days (and may have always been short). My old practice was very profitable and well run. I made market rate salary there which was very good (as high as some practice owners in the big cities, have gotten burned since then). Don't blame them for selling to PE. 100 million.

What is going to happen to all these practices sold out to PE? Will changes in interest rates/market affect their quality of care and eventual viability? Already graduates don't want to join them, won't it be harder and harder to find highly skilled MDs to work for them?

 

[PLA2]

If I'm wanting to go into retina, will it be harder to do solo practice? @LightBox @RetinaDude @schistosomiasis

 

[TheLesPaul]

What is going to happen to all these practices sold out to PE? Will changes in interest rates/market affect their quality of care and eventual viability? Already graduates don't want to join them, won't it be harder and harder to find highly skilled MDs to work for them?

The firms don't care, they are out in 5 years. Someone will be left holding the bag in the end and eventually dump these practices off to a large hospital system for pennies on the dollar. After the hospital system runs the practices into the ground, they will spin the practices off because "ophthalmology doesn't make money". And so the wheel turns

 

[dantt]

What is going to happen to all these practices sold out to PE? Will changes in interest rates/market affect their quality of care and eventual viability? Already graduates don't want to join them, won't it be harder and harder to find highly skilled MDs to work for them?

Yes and no. Not everybody wants to run their own practice and as mentioned throughout this thread, the traditional partner track is fraught with peril.

 

[qwerty89]

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.

I think this phenomenon is partly because more and more grads are single at the time of graduation and therefore want to be in metropolitan areas to find a partner.

Also because more and more physicians are married to other highly educated and high income earners. In most fields the highest paid and highest level jobs are in big cities. Therefore unless the non-physician partner is willing to put their career on the back burner, the big cities and their suburbs offer both of them decent jobs.

IMO across specialties the people that take jobs in small town America are either people who grew up there or men with stay at home wives or with wives who work in healthcare (RN/PA/NP).

 

[alsonamedbort]

This is an interesting thread and quite germane to me right now, though I'm now on the hiring side rather than the employee side. I finished training in 2017 and moved back to my ultra-saturated coastal SoCal hometown. My first job was an HMO factory that has a history of churning through associates. The writing was on the wall from day 1 and I knew it wasn't a long-term fit. Fortunately, after about a year, I lucked into an opportunity to join a doc who had been in solo practice for 30 years and wanted an associate to eventually pass the torch to. I would echo the advice about a private equity clause, which is something I demanded and made me feel much more secure (despite my boss' assurances that he has no interest in PE which has fortunately proven to be true).

I also think how much a new associate costs you depends quite a bit on your payor mix. If you have an HMO or managed care conveyor belt feeding patients into the practice and it doesn't really matter who they see then production will ramp up much faster than at a Medicare/PPO/FFS setup where it takes a bit longer to get busy, meet referring docs, pound the pavement etc. I paid for myself my first year at the practice but that required me generating about 2.5x my base in revenue.

Now my boss is ready to retire and hand over the reins, we need a new associate to absorb his volume. I'm cornea-trained and I'm looking for a glaucoma specialist to complement my skillset so the practice can handle anything in the anterior segment. I'm not looking to cycle through associates like many other practices in town-- I genuinely want a partner who can get invested in the business and help me grow it. I think this is a much rarer opportunity today that it used to be. Most applicants I've spoken to have been rightfully wary of PE (in fact, several have been looking to escape PE-owned shops) and I think that speaks to a growing sense of disaffection and suspicion of corporate-backed practices. This is a good thing IMO. We're one of the few specialties that can remain independent, though the challenges seem to intensify every year (declining reimbursement, "co-management" with mega-practices, etc).

Anyway, I'm rambling. If you are a glaucoma specialist looking for a partnership opportunity, feel free to PM me

 

[RetinaDude]

If I'm wanting to go into retina, will it be harder to do solo practice? @LightBox @RetinaDude @schistosomiasis

No, I believe you could be quite busy, and successful almost anywhere. Of course, the smaller the city/area, the. Ore likely you are to get busy quicker……because there’s usually a much greater need. The only bad part about being solo retina is lifestyle. We get a lot of “emergency” cases (mac on RDs, endo, dropped lens, etc…) referred our way. When you have partners, it’s eSy because you see the pt in the office and then add them to your partner the same/next day. We all do the same for each other and it allows for a great lifestyle. As a solo doc, you don’t have that liberty. You are seeing a bunch of pts in the office, and these cases still have to be done. So, that means doing them after hours, or canceling clinic to go do the surgery….since you don’t have partners to help spread the work

 

[DrZeke]

Sure. Doc is a super star.

Loyalty to someone in a bind. Happens in academics a lot. Chair will hire someone they feel loyal to even if no room or need for them volume wise. Real screw you to the newest hire…

 

[DrZeke]

No, I believe you could be quite busy, and successful almost anywhere. Of course, the smaller the city/area, the. Ore likely you are to get busy quicker……because there’s usually a much greater need. The only bad part about being solo retina is lifestyle. We get a lot of “emergency” cases (mac on RDs, endo, dropped lens, etc…) referred our way. When you have partners, it’s eSy because you see the pt in the office and then add them to your partner the same/next day. We all do the same for each other and it allows for a great lifestyle. As a solo doc, you don’t have that liberty. You are seeing a bunch of pts in the office, and these cases still have to be done. So, that means doing them after hours, or canceling clinic to go do the surgery….since you don’t have partners to help spread the work

Retina can solo well, but there is no free lunch. Solo guys talk about their amazing life with nobody telling you what to do, but you have to then be responsible for everything. If the toilet overflows and your pipes are leaking, your practice isn’t going to fix it. You have to hire someone or do it yourself. When you’re just starting out that can be very rough if you only have 2 employees in the office.

The landscape of retina has changed a lot over the past 5 years. Physician owned private practice opportunities are lower and lower in major cities in particular. Some regions are overrun by PE. Thé job market has more than usual numbers of mid career people to compete with for coveted jobs. I still think practices love to hire new grads though because they haven’t yet been “touched” or “tainted” by another job.

Retina is still great IMHO, but you need to be careful and consider what you want out of your career and how important location really is. I’ve compromised on location a bit and I’m hoping it’s gonna work out and I will have my dream job.

Going solo is fine but you need to research the area and have a plan. And you need to know how to use a balance sheet and some business basics. Everyone says “oh anyone can do it”, but if you hate that stuff you’re not gonna be so happy. Some people gain great satisfaction from having project like that and building it from nothing.

I believe PE is a scourge in medicine and will eventually pass, but not without casualties…

 

[DrZeke]

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.

Yes !!! This!!! I just went through a job change and this is exactly right. It’s amazing to me how many practices want you to “get into bed “with them but won’t give you ANY details on the potential future.

Someone else here mentioned that an associate is a huge investment, and if so, you have to think if they are serious about me don’t they want me to have all the info so I can make the best decision and am not leaving in 2 years? I mean business is business and how things work, and how equitable things are and how the financials line up are important. Like it’s shocking to me how shady some people are and vague when it comes to this process.

For me some of the most transparent practices were multispecialty or larger. Small retina practices were a bit more smoke and mirrors… just my experience…it’s not a big deal to get an applicant to sign and NDA.

Some important advice about job selection:
1) pick the right time to talk about financials and be careful how it’s discussed. You can come off sounding greedy or weird. But ideally they bring it up first…
2) shadow shadow shadow - go see them in action. where do they operate, on what equipment? Go visit the ORs if you can
3) find out about scheduling/clinics/surgery - how many techs; how scheduling works, how call works
4) partnership track should be transparent. The path to partnership should be transparent
5) bonus structure should be transparent. “Discretionary bonus” is a bad term, run away…. Wtf even is that?
6) where will your referrals come from? How will you get busy? What systems are in place to help that? Will you have resources, or is it all - DIY.
7) a sample schedule should be available or an idea of where you are needed.

I thought I was informed when I found my first job but I could not have imagined the unknowns that cropped up. I could never have imagined I would be: working parttime with an average of 2 clinics per week, not have promised block time, be responsible for adding and finding my own clinics in locations to make a schedule more full, and have none of the promised clinical support I needed to run a subspecialty clinic.

Buyer beware

 

[percyeye]

Is there going to be a need to learn to negotiate partnership deals with the current lightning pace of practices selling out to Private Equity? Every day there are new headlines of large practices from mulit-specialty to Retina only etc selling out. By selling the practices and the ASCs what is the point of learning the newest techniques and upselling these lenses etc when at the end of the day you are bargaining for scraps about salary and benefits to a corporate overlord.

The only way out of this is for the newer crop of Doctors to refuse to work for these entities which we are seeing somewhat as the PE groups of large listings of job openings after the sellers retire. There will need to be some real entrepreneurship and have some new practices started up. I just don't understand how someone could devout the best years of their life to go and train somewhere like Bascom, Wills, Iowa etc and then eventually go and take a pittance salary from Goldman Sachs PE group.

 

[MstaKing10]

Is there going to be a need to learn to negotiate partnership deals with the current lightning pace of practices selling out to Private Equity? Every day there are new headlines of large practices from mulit-specialty to Retina only etc selling out. By selling the practices and the ASCs what is the point of learning the newest techniques and upselling these lenses etc when at the end of the day you are bargaining for scraps about salary and benefits to a corporate overlord.

The only way out of this is for the newer crop of Doctors to refuse to work for these entities which we are seeing somewhat as the PE groups of large listings of job openings after the sellers retire. There will need to be some real entrepreneurship and have some new practices started up. I just don't understand how someone could devout the best years of their life to go and train somewhere like Bascom, Wills, Iowa etc and then eventually go and take a pittance salary from Goldman Sachs PE group.

Negotiating your contract, employee or partnership, is something that we should all be well versed in regardless of practice set up (PE vs non PE). Ultimately, having a good contract attorney on your side is critical to help you navigate that piece.

I'm not sure where you are getting the impression that PE offers "scraps" or "pittance" salaries. They are quite competitive and often times significantly higher than a usual employed position. Most (if not all) have productivity built into the compensation structure to incentivize more work, production and ultimately more pay. Many still offer a partnership track which is much shorter and significantly less expensive than the traditional "buy-in" process of non PE groups.

It's certainly not for everyone, but not nearly what you describe.

 

[percyeye]

Negotiating your contract, employee or partnership, is something that we should all be well versed in regardless of practice set up (PE vs non PE). Ultimately, having a good contract attorney on your side is critical to help you navigate that piece.

I'm not sure where you are getting the impression that PE offers "scraps" or "pittance" salaries. They are quite competitive and often times significantly higher than a usual employed position. Most (if not all) have productivity built into the compensation structure to incentivize more work, production and ultimately more pay. Many still offer a partnership track which is much shorter and significantly less expensive than the traditional "buy-in" process of non PE groups.

It's certainly not for everyone, but not nearly what you describe.

I think they will use terms like "high compensation" and "productivity" to make it sound good and it might be a little better than an employed academic or even employed private practice but if they can afford to pay you $400K how much do you think they are making off of your back or how much could you make as owner/partner? The investment bankers are only in it for making money so if they can pay you well think about how much money you are leaving on the table for doing the exact same work. You are giving up half your money to pay the salary of the young investment banker who is probably making more more than you who only did an undergrad degree. There can be counter arguments made each way I just don't' see how selling out the profession and losing all control while making half as much money can be a good thing.

 

[TheLesPaul]

I think they will use terms like "high compensation" and "productivity" to make it sound good and it might be a little better than an employed academic or even employed private practice but if they can afford to pay you $400K how much do you think they are making off of your back or how much could you make as owner/partner? The investment bankers are only in it for making money so if they can pay you well think about how much money you are leaving on the table for doing the exact same work. You are giving up half your money to pay the salary of the young investment banker who is probably making more more than you who only did an undergrad degree. There can be counter arguments made each way I just don't' see how selling out the profession and losing all control while making half as much money can be a good thing.

Like academic institutions, PE will use complicated formulas and irrelevant titles to obfuscate the fact that they are taking a large chuck of your money. You don't need PE to get patients and you don't need PE to grow a practice. Imagine you collect $1M in a year and you keep $350K of that. If your overhead was 50%, then essentially you are paying Goldman Sachs $150K to hold your hand. I'm more than happy to spend a few mins on Indeed or order my own supplies for that $150K.

 

[MstaKing10]

Thats a solid point. Not everyone wants that job though. Its like paying a management company to manage investment real estate vs doing it yourself. Do you want to take the midnight phone call for plugged toilet or pay someone to do it?

 

[percyeye]

Thats a solid point. Not everyone wants that job though. Its like paying a management company to manage investment real estate vs doing it yourself. Do you want to take the midnight phone call for plugged toilet or pay someone to do it?

You can pay someone to unplug the toilet while at the same time not giving up half your salary. A lot of educators or non-owners make it sound like having to do work on your practice is the hardest and most inconvenient thing in the world. I think to intentionally scare people off. You can have office managers and other people do the non-clinic work for you. Having to do some business work imho is not worth selling off the practice to Goldman sachs.

 

[dantt]

I think they will use terms like "high compensation" and "productivity" to make it sound good and it might be a little better than an employed academic or even employed private practice but if they can afford to pay you $400K how much do you think they are making off of your back or how much could you make as owner/partner? The investment bankers are only in it for making money so if they can pay you well think about how much money you are leaving on the table for doing the exact same work. You are giving up half your money to pay the salary of the young investment banker who is probably making more more than you who only did an undergrad degree. There can be counter arguments made each way I just don't' see how selling out the profession and losing all control while making half as much money can be a good thing.

Once you choose to be an employee, best to worry about your own life and your own compensation. Most people would not consider the compensation at many PE firms "a pittance." You'll never be happy thinking about how much "they are making off your back."

 

[percyeye]

Once you choose to be an employee, best to worry about your own life and your own compensation. Most people would not consider the compensation at many PE firms "a pittance." You'll never be happy thinking about how much "they are making off your back."

Ignorance is bliss sometimes. How many times do you see owners/partners just up and quitting their $800K-$1 million dollar ownership practice (not talking about selling to PE) to just go work for PE or as any employee making $400K because now they don't have to deal with hiring a secretary? Or how often do you hear those owners saying man I wish I worked for an investment bank and made half my salary and not owned real estate/ASCs during my 30 year career?

Frankly it is disturbing to see any sort of defending these investment banks buying practices and ASCs. Don't fall into the trap of not owning your business is better.

 

[dantt]

Ignorance is bliss sometimes. How many times do you see owners/partners just up and quitting their $800K-$1 million dollar ownership practice (not talking about selling to PE) to just go work for PE or as any employee making $400K because now they don't have to deal with hiring a secretary? Or how often do you hear those owners saying man I wish I worked for an investment bank and made half my salary and not owned real estate/ASCs during my 30 year career?

Frankly it is disturbing to see any sort of defending these investment banks buying practices and ASCs. Don't fall into the trap of not owning your business is better.

No agenda here; just trying to offer some perspective. Employers don't make money off employees. Employers create jobs and hire and pay employees to perform job functions. This is true regardless of whether it's an academic job, a hospital job, a partner track with no off ramp, or a PE owned job.

Owners/partners sell their 7 figure compensation for a lot of money to PE all the time. Many were those large, dominant, highly profitable practices youve probably heard about that no longer have partner tracks. The larger the practice, the larger the gap between the employed and partner compensation, the more the practice is worth. Many employed positions allow one to invest in ASCs and ancillaries.

 

[percyeye]

No agenda here; just trying to offer some perspective. Employers don't make money off employees. Employers create jobs and hire and pay employees to perform job functions. This is true regardless of whether it's an academic job, a hospital job, a partner track with no off ramp, or a PE owned job.

Owners/partners sell their 7 figure compensation for a lot of money to PE all the time. Many were those large, dominant, highly profitable practices youve probably heard about that no longer have partner tracks. The larger the practice, the larger the gap between the employed and partner compensation, the more the practice is worth. Many employed positions allow one to invest in ASCs and ancillaries.

I'm sorry and not to sound petty but is this what they mean by they don't teach the business side of eye care in Residency. If you work for me or a PE firm and produce $1.2 million and net $650K. And then I pay you $450K and then I put that extra $200K into my own pocket what would that be classified as?

Apollo Capital, Goldman Sachs, Banks of America, Chuck E. Cheese or whatever corporation that happens to be investing into these funds buying practices only care about one thing. And that is you do enough surgeries and office procedures that will pay you just barely enough money to stay and work and so that they can get their 8-12% return back to their investors. I think instead of having the name of the old practice that sold to PE on the building they should be more transparent. So instead of North Carolina Retina Consultants, they now work for the New York Janitorial Pension Plan.

 

[solitude]

I'm sorry and not to sound petty but is this what they mean by they don't teach the business side of eye care in Residency. If you work for me or a PE firm and produce $1.2 million and net $650K. And then I pay you $450K and then I put that extra $200K into my own pocket what would that be classified as?

Apollo Capital, Goldman Sachs, Banks of America, Chuck E. Cheese or whatever corporation that happens to be investing into these funds buying practices only care about one thing. And that is you do enough surgeries and office procedures that will pay you just barely enough money to stay and work and so that they can get their 8-12% return back to their investors. I think instead of having the name of the old practice that sold to PE on the building they should be more transparent. So instead of North Carolina Retina Consultants, they now work for the New York Janitorial Pension Plan.

I agree with your animosity towards PE. Most grads do. Yet people do take the jobs. It's a free market. If the jobs stink enough, they will have trouble filling the spots. If the jobs pay enough and make practicing relatively painless, then people will keep filling the spots. Many people are already gravitating towards smaller practices or going solo. This will all sort itself out. Likely, it will end with the senior partners who sold out to PE retiring and not recouping as much as they predicted for their "equity". The practices will likely go under or being sold back to pennies on the dollar to young, hungry MDs. I don't see how the PE firms and their investors do well in this scenario honestly, unless they've skimmed enough off the top for the 5-10 years before the practice goes kaput to make up for the loss when they sell.

 

[mjohnsonets]

Negotiating your contract, employee or partnership, is something that we should all be well versed in regardless of practice set up (PE vs non PE). Ultimately, having a good contract attorney on your side is critical to help you navigate that piece.

Very important point - I recommend two law firms that are registered vendors on the AAO. These resources are available to anyone with access to the site. They can be helpful in negotiating your contract as well because they see so many ophthalmology contracts from around the US they have very up-to-date market info they can relay.

 

[percyeye]

I agree with your animosity towards PE. Most grads do. Yet people do take the jobs. It's a free market. If the jobs stink enough, they will have trouble filling the spots. If the jobs pay enough and make practicing relatively painless, then people will keep filling the spots. Many people are already gravitating towards smaller practices or going solo. This will all sort itself out. Likely, it will end with the senior partners who sold out to PE retiring and not recouping as much as they predicted for their "equity". The practices will likely go under or being sold back to pennies on the dollar to young, hungry MDs. I don't see how the PE firms and their investors do well in this scenario honestly, unless they've skimmed enough off the top for the 5-10 years before the practice goes kaput to make up for the loss when they sell.

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.

 

[MstaKing10]

I'm sorry and not to sound petty but is this what they mean by they don't teach the business side of eye care in Residency. If you work for me or a PE firm and produce $1.2 million and net $650K. And then I pay you $450K and then I put that extra $200K into my own pocket what would that be classified as?

Apollo Capital, Goldman Sachs, Banks of America, Chuck E. Cheese or whatever corporation that happens to be investing into these funds buying practices only care about one thing. And that is you do enough surgeries and office procedures that will pay you just barely enough money to stay and work and so that they can get their 8-12% return back to their investors. I think instead of having the name of the old practice that sold to PE on the building they should be more transparent. So instead of North Carolina Retina Consultants, they now work for the New York Janitorial Pension Plan.

Yes what is that qualified as? Non PE groups do this all the time during an associates “buy in” phase. The percentage they take and distribute amongst partners es even higher than your example. They dangle bonus above productivity as an incentive to produce more but make no mistake, they take more as well. Then at the end of the employee phase they ask for a large cash buy in to finish off the partnership track. Now you are finally partner but how much did that cost? And what of the practices that churn associates but never end up offering partnership because they never intended to? Or end up selling to PE anyways despite saying they never would?

I can agree that I hope we do see more solo or small group non PE practices emerge as a contrast to the huge PE conglomerates and also hope we see them succeed.

 

[TheLesPaul]

Non PE groups do this all the time during an associates “buy in” phase.

Yes, but they are supposed to offset that with a clear track to partnership where you can eat what you kill and the buy-in is less than the actual EBITDA * 3 (or whatever number is deemed to be fair).

I hope we do see more solo or small group non PE practices emerge

Absolutely!

 

[dantt]

Yes, but they are supposed to offset that with a clear track to partnership where you can eat what you kill and the buy-in is less than the actual EBITDA * 3 (or whatever number is deemed to be fair).


Absolutely!

Supposed to
Tons of deals out there that are otherwise. Beware!

 

[Openglobetrotters]

Most physicians are business savvy due to no training. If there was a physician company to help other physician build a multi physician practice then Can compete PE.

I know there are some practices that are physician owned where associates eat what they kill and the buy in is fair without a large goodwill.

If there were more practices like that, then PE wouldn’t be a big draw.

The reason why physician owned practices would want more physicians is that everyone does better financially when there’s more volume suegerixlal and clinically

 

[Etorphine]

Yes, but they are supposed to offset that with a clear track to partnership where you can eat what you kill and the buy-in is less than the actual EBITDA * 3 (or whatever number is deemed to be fair).


Absolutely!

What is the consensus on this page, for what is a fair buy-in? Obviously will depend on practice and tangible assets. But let’s start somewhere, for actual buy-ins you’ve heard of

 

[dantt]

What is the consensus on this page, for what is a fair buy-in? Obviously will depend on practice and tangible assets. But let’s start somewhere, for actual buy-ins you’ve heard of

LOL...

Practice can vary from an old person piddling along by themselves with a practice in a saturated market (hard assets only) to a dominant practice employing dozens of optometrists with optical, ASCs, real estate, etc where I used to work (big buy in but less than the $100,000,000 PE offered them)

 

[mjohnsonets]

What is the consensus on this page, for what is a fair buy-in? Obviously will depend on practice and tangible assets. But let’s start somewhere, for actual buy-ins you’ve heard of

I have heard them anywhere from $50K to 7 figures up to $2mil. The $50K is unique to large multi-spec practices that would be very expensive if you were buying true value. This is a way to make the buy-in cheap, the trade-off being when you retire or leave, it is only worth about $50K too. There are just so many ways to structure a buy-in and what you're buying changes with each practice so it's hard to say what's a fair buy-in. My advice for a buy-in has been to get a third-party valuation and go from there. I like to refer docs to my friends at BSM Consulting for any of these services or structuring a partnership agreement.

 

[Etorphine]

Well yea the sky is limit on mega groups with multiple offices, ASCs, etc

I suppose more specifically, let’s say a 1-3 partner group with no real estate and basic amenities (Oct machine and slit lamps, optical biometry). Your basic rinky dink private practice. are you paying goodwill?

 

[mjohnsonets]

Well yea the sky is limit on mega groups with multiple offices, ASCs, etc

I suppose more specifically, let’s say a 1-3 partner group with no real estate and basic amenities (Oct machine and slit lamps, optical biometry). Your basic rinky dink private practice. are you paying goodwill?

I would think it could be $100K to a couple hundred thousand. Really depends on the practice. I'm not trying to dodge the question, I just don't value practices so I don't want to step out of my lane. I feel I am a little with this post. There are factors like the debt of the practice that could change that. Some docs still expect some goodwill, some do not. If you're buying a practice where the previous owner is planning to exit immediately, the argument for goodwill is greatly diminished.

There are just so many variables that go into a practice sale/buy-in you really have to evaluate each specifically. As with all investments, you must consider your potential returns in other investments to evaluate if any one in particular is a "good" investment.

 

[RetinaDude]

Well yea the sky is limit on mega groups with multiple offices, ASCs, etc

I suppose more specifically, let’s say a 1-3 partner group with no real estate and basic amenities (Oct machine and slit lamps, optical biometry). Your basic rinky dink private practice. are you paying goodwill?

When we have new docs buying in, we always have an outside person come in and reassess the “equipment”, and that sets the sale price. Same thing is done for real estate. There’s no up charge for “goodwill” and this is all spelled out up front. We like to be very open, from the get go, because we want it to work

 

[Musty Goose]

When we have new docs buying in, we always have an outside person come in and reassess the “equipment”, and that sets the sale price. Same thing is done for real estate. There’s no up charge for “goodwill” and this is all spelled out up front. We like to be very open, from the get go, because we want it to work

Do you guys have an opening in 6 years?

 

[RetinaDude]

Do you guys have an opening in 6 years?

It’s very likely we will, as I’m sure many Retina practices will as well. I cannot see a time, in the near future, when retina is not going to be very busy.

 

[schistosomiasis]

Well yea the sky is limit on mega groups with multiple offices, ASCs, etc

I suppose more specifically, let’s say a 1-3 partner group with no real estate and basic amenities (Oct machine and slit lamps, optical biometry). Your basic rinky dink private practice. are you paying goodwill?

Practice valuations:

Practice valuations

By Howie Chen- How to calculate the value of an ophthalmology practice

solobuildingblogs.com

Yeah goodwill varies tremendously but for the “average” practice about 30-50% of a year’s collections. If you don’t wanna pay it then start your own practice from scratch!

 

[KHE]

Practice valuations:

Practice valuations

By Howie Chen- How to calculate the value of an ophthalmology practice

solobuildingblogs.com

Yeah goodwill varies tremendously but for the “average” practice about 30-50% of a year’s collections. If you don’t wanna pay it then start your own practice from scratch!

Good will seems to be, at least in my humble opinion a bit of a dying concept in medical practices given that it's almost exclusively 3rd party payors. It still exists for sure but your reputation will not matter all that much if the patients' insurance plan changes. We've all had that experience of patients disappearing for a while and then returning saying "oh....I couldn't see you because my insurance changed." Where's the good will in that? Patients care mostly about two things.......are you nice? Do you take my insurance? I'm not even sure they necessarily care about competency per se. I mean....they do, obviously, but I think for most docs, competency is presumed until proven otherwise.

I recall in 2007, medicare changed the reimbursement for fundus photography. It used to be a bilateral procedure so you would get paid approximately $43 per eye. They decided in 2007 that since you almost always do both eyes anyways, they were only going to pay once. And of course, it was $43. All of the other commercial carriers immediately followed suit so with the stroke of a pen, reimbursement for a common procedure was cut in half. What's the value of "good will" in that scenario?

 

[schistosomiasis]

Actually, when you purchase a practice you have the option of taking over the TIN, and then if the credentialing is delegated you might be able to keep higher negotiated rates or plans that are hard to get onto. That would actually increase goodwill. Of course, many folks start with their own TIN and recredential. Most ophthalmology patients are Medicare rather than some narrow network so insurance changing isn’t usually a big factor, unless it’s some narrow network Medicare advantage plan through an IPA (common in CA). Goodwill is very much well alive, the consultants who gave the talk even said it might be slightly higher than 10 years ago although trends are difficult to predict.

If you don’t want to pay goodwill, whether it be buying into an existing practice or taking one over, then start your own practice from scratch. Nothing wrong with that. The free market prevails. Any practice owner that is dumb enough to overcharge will have problems selling, and potentially get nothing. Any younger potential buyer who thinks they’re overpaying when they’re really getting a good deal will regret it when they have to take time and bandwidth to buy equipment, lease a space, credential, pick a EHR, and see only a few patients the first few months.

 

[schistosomiasis]

Here’s an article about buying a practice vs starting one from scratch (if you don’t wanna pay goodwill or don’t think it exists). One thing I forgot to mention, if you’re broke and in debt and can’t afford the $200K to start up, banks are more likely to give a loan to buy an existing practice with proven cash flow. That’s not to say that many of my friends have written business plans and gotten loans for a startup, especially if they are in the same city and already have some type of reputation or proof of W2 income:

Should I buy a practice or start my own from scratch?

By Howie Chen. The pros and cons of buying a practice versus starting your own, and the questions to ask before buying a practice.

solobuildingblogs.com

 

[RetinaDude]

It’s going to cost A LOT more than $200k to start an ophthalmology practice from scratch. Maybe if the new doc plans to lease all equipment, that’ll keep the costs lower, but a new OCT is $110k-$150k. And that’s just one piece of necessary equipment

 

[schistosomiasis]

Actually, a used cirrus 4000 can be had for $12,000 from multiple dealers, but the computer will be slow. (The used cirrus I bought when I opened still works and I’m still using it!) I would only go this route if you had very limited capital and wanted your practice to be in the black and pay for your food/ family before buying fancier toys. A new cirrus 5000 will run about $40-50K (topcon mastro slightly less), even a Heidelberg is under $100K. This post is from 2018 so obviously with competition and older models the numbers are less in 2022:

Do I need an OCT? If so which brand?

By Matt Swanic- which brand OCT should you purchase for your ophthalmology practice, and why?

solobuildingblogs.com

 

[dozitgetchahi]

Good will seems to be, at least in my humble opinion a bit of a dying concept in medical practices given that it's almost exclusively 3rd party payors. It still exists for sure but your reputation will not matter all that much if the patients' insurance plan changes. We've all had that experience of patients disappearing for a while and then returning saying "oh....I couldn't see you because my insurance changed." Where's the good will in that? Patients care mostly about two things.......are you nice? Do you take my insurance? I'm not even sure they necessarily care about competency per se. I mean....they do, obviously, but I think for most docs, competency is presumed until proven otherwise.

I recall in 2007, medicare changed the reimbursement for fundus photography. It used to be a bilateral procedure so you would get paid approximately $43 per eye. They decided in 2007 that since you almost always do both eyes anyways, they were only going to pay once. And of course, it was $43. All of the other commercial carriers immediately followed suit so with the stroke of a pen, reimbursement for a common procedure was cut in half. What's the value of "good will" in that scenario?

I completely agree that the value of “goodwill” basically amounts to nothing. The only times I’ve been able to overcome the “my insurance changed and I left to see someone else” issue is if the patients are affluent and can afford to pay cash for a specific doctor they like. In most situations, however, this is a very narrow niche of patients.

I also agree that “doctor quality” doesn’t count for much anymore, either. Certainly there are some patients who will seek out “the best doctor in town” and will care about how good you are at what you do, but there are also many who view doctors as a sort of interchangeable commodity - “just go to whichever warm body is able to see me first”, seems to be the attitude. You may have trouble keeping patients coming back if you are a total d-bag or a horrible clinician, but in some more rural parts of the country, that almost doesn’t matter either - even the borderline dangerous, nasty tempered doctors are super busy.

One of the biggest revelations of transitioning out of GME training in big academic centers to community PP was that “quality of care” counted for way less than everyone told me it would…

 

[RetinaDude]

Actually, a used cirrus 4000 can be had for $12,000 from multiple dealers, but the computer will be slow. (The used cirrus I bought when I opened still works and I’m still using it!) I would only go this route if you had very limited capital and wanted your practice to be in the black and pay for your food/ family before buying fancier toys. A new cirrus 5000 will run about $40-50K (topcon mastro slightly less), even a Heidelberg is under $100K. This post is from 2018 so obviously with competition and older models the numbers are less in 2022:

Do I need an OCT? If so which brand?

By Matt Swanic- which brand OCT should you purchase for your ophthalmology practice, and why?

solobuildingblogs.com

Good luck with all that. Ophthalmology is not immune to the problems the rest of the world is facing with manpower shortages. So, something we’ve dealt with lately is slow service with regards to getting instruments repaired, including slit lamps and OCTs. if you are gonna go with older used equipment, just be aware of this. I’m retina, so I’m biased, but a high quality OCT should be one of the most important pieces of equipment an ophthalmologist purchases, even if the plan is to do purely anterior segment. You gotta catch that preop DME, or ERM, or active AMD, before the cataract surgery or it can create unpleasant pt interactions.
it would definitely be nice if people can truly start an ophthalmology practice for $200k because it would continue our independence away from hospitals, insurance companies, and PE. I’m all for that

 

[TheLesPaul]

I started my practice for ~$75K but oculoplastics is relatively low-tech compared to the rest of ophthalmology FWIW.

Low overhead = low stress in the early days, and you can always upgrade your tech later and keep your old stuff as backups.

 

[RetinaDude]

I started my practice for ~$75K but oculoplastics is relatively low-tech compared to the rest of ophthalmology FWIW.

Low overhead = low stress in the early days, and you can always upgrade your tech later and keep your old stuff as backups.

Do you practice any general ophthalmology or are you purely oculoplastics? If purely oculoplastics, good for you. I strongly considered doing oculoplastics when I was was toward the end of residency. Really debated between it and retina for a while. Retina eventually won out because I thought, if I did oculoplastics, I’d still have to do some comprehensive ophthalmology……and I really don’t like any other part of the eye except retina

 

[TheLesPaul]

Do you practice any general ophthalmology or are you purely oculoplastics? If purely oculoplastics, good for you. I strongly considered doing oculoplastics when I was was toward the end of residency. Really debated between it and retina for a while. Retina eventually won out because I thought, if I did oculoplastics, I’d still have to do some comprehensive ophthalmology……and I really don’t like any other part of the eye except retina

Purely oculoplastics -- because I really don't like the eye at all

 

[MstaKing10]

I completely agree that the value of “goodwill” basically amounts to nothing. The only times I’ve been able to overcome the “my insurance changed and I left to see someone else” issue is if the patients are affluent and can afford to pay cash for a specific doctor they like. In most situations, however, this is a very narrow niche of patients.

I also agree that “doctor quality” doesn’t count for much anymore, either. Certainly there are some patients who will seek out “the best doctor in town” and will care about how good you are at what you do, but there are also many who view doctors as a sort of interchangeable commodity - “just go to whichever warm body is able to see me first”, seems to be the attitude. You may have trouble keeping patients coming back if you are a total d-bag or a horrible clinician, but in some more rural parts of the country, that almost doesn’t matter either - even the borderline dangerous, nasty tempered doctors are super busy.

One of the biggest revelations of transitioning out of GME training in big academic centers to community PP was that “quality of care” counted for way less than everyone told me it would…

In highly competitive, saturated markets your analysis does not hold. Costumer service, outcomes, quality of physician etc are paramount. Patients routinely doctor shop, even within our practice, until they find the one they like. Also, being a large practice, we do occasionally lose a few patients to insurance changes but for the most part we are contracted with just about every payer and they are in many ways forced to use us. One of the advantages (maybe few advantages) of being a large, single specialty practice. Not uncommonly, if we lose a patient to insurance issues one year, they tend to come back the next if their insurance changes. This type of loyalty is only developed if you provide excellent patient care and are set up to accommodate and serve patients better than your competitors.

 

[dozitgetchahi]

In highly competitive, saturated markets your analysis does not hold. Costumer service, outcomes, quality of physician etc are paramount. Patients routinely doctor shop, even within our practice, until they find the one they like. Also, being a large practice, we do occasionally lose a few patients to insurance changes but for the most part we are contracted with just about every payer and they are in many ways forced to use us. One of the advantages (maybe few advantages) of being a large, single specialty practice. Not uncommonly, if we lose a patient to insurance issues one year, they tend to come back the next if their insurance changes. This type of loyalty is only developed if you provide excellent patient care and are set up to accommodate and serve patients better than your competitors.

That’s fine. I have worked in several different types of markets in the US and have always delivered excellent care to everyone. I personally have no interest in working in oversaturated urban medical markets and thus I speak of the vibe I get in the rest (aka the other 75%) of America, where the pay and other aspects of medical practice are generally much better.