New practice opportunity - Need Advice

[bronchospasm]

I'm just finishing my fellowship. I was approached by a friend who is a fellowship trained and board certified pain physician who has his own practice and opened up a second location about 1 year ago. He is very busy at his primary location (started 5 years ago) and only goes to the new location 0.5 - 1 day a week. He is booked out about 2 months at the new office. He wants to bring in someone who will primarily work at the new location and develop that practice. Both Locations are about 20 miles apart from each other. The new location is in a suburb of a major city with a population of about 70,000 and a catchment area of about 100,000 with just one more part-time pain practice and another hospital based anesthesia group that does ESI's etc.
He already has 4 exam rooms and a Fluoro suite at the second location with a OEC 9900.
The location is great and meets almost all our needs in terms of weather, schools, airport, community etc.

He is offering 50% of collections the first year and then partnership. There is no income guarantee as yet. The details of the partnership is yet to be discussed. States that it is not his intent to make money off me but rather grow this location under a bigger umbrella and also have some cross coverage. He also wants me to buy into a medical office building that he has planned with other primary care physicians in the future. He says that it would be like developing your own practice from the ground up. Regarding practice volume and referrals, he states that right now he has more volume than he can handle and that too without any marketing at the second location. He states that within 1 year there should be enough volume to keep you very busy.

Here come the questions.

I practiced anesthesia for 5 years prior to joining my fellowship. Financially I can survive for about a year without any major problems. Based on the present information. With no income guarantee, basically no pay for 3-6 months. Does this sound like a risky proposition?

Keeping in mind the market forces, I think that my window to start my own practice is becoming smaller. In 2-3 years, it might become more difficult to start your own practice V/S being hospital employed. Is it worth trying it out for a year and then reevaluate. ????

I have the opportunity to stay on as faculty after finishing my fellowship. I can try and persuade the department to keep me on as part time and try the private practice part time for 6 months - 1 year . As I get busier in the private practice, I could transition over to full time. Any thoughts on that. ???

Any help and advice is greatly appreciated.

Thanks

---

Members don't see this ad.

 

[Ducttape]

as someone who decided to take the easy road and join a hospital practice....

i say that this deal sounds great and you should seriously think about taking the plunge.

do anesthesia per diem somewhere if you absolutely have to while building up your practice, but if you can get in and get partnership in a year, in a situation where there is already a market presence and the work is already out there...

you can always try to join a hospital based/academic based practice in the future - they will always be there.

 

[hyperalgesia]

If you can do gas 1-2 days/week and pursue this, it sounds like a great opportunity. Only in desperate times would I consider delving into my savings to survive. If that's the only way to make this work, I'd do it, but I would simultaneously try to hedge your bets with potential anesthesia jobs on the side.

 

[ampaphb]

Who owns the AR of the revenue you generate if you part ways after the first year? If you do, that's great, assuming his staff will still chase the money with the same effort they do for him.

If your employer owns the AR, then let him take out a business loan. Let's assume a salary of $300,000/yr, with an interest rate of 10%. Even with those ridiculously high numbers, it will cost your employer $15,000, assuming you don't generate any revenue for the 1st 6mo. $200,000 @ 5%? $5,000.

 

[bronchospasm]

You keep 50% of what you generate the first year. If you leave you keep the 50%. On further discussion, he says that he is reluctant to give an income guarantee because he wants someone to develop the practice, work hard and be aggressive. He feel that the income guarantee could make you complacent since you are getting the 300-350 K that is guaranteed. On the flip side he is willing to discuss terms of partnership right now year and willing to put in down on paper and promises 100 % transparency from day 1.

 

[powermd]

On the flip side he is willing to discuss terms of partnership right now year and willing to put in down on paper and promises 100 % transparency from day 1.

This is key. You would be hard pressed to find another opportunity that offers this kind of honesty up front.

Your buddy is taking a chance on you being right out of fellowship. There's an art to dealing with pain patients in a way that keeps them on your side that you may not have picked up as an anesthesiologist. It took me a while to learn this. I still struggle with the personality disorder people, especially If I don't recognize what I'm dealing with early in the conversation.

I found an opp where everything was inked out in contracts from day 1, I'm finally set to make partner next month! The experience with my partners reflected the transparency they showed me from the beginning.

 

[hyperalgesia]

You keep 50% of what you generate the first year. If you leave you keep the 50%. On further discussion, he says that he is reluctant to give an income guarantee because he wants someone to develop the practice, work hard and be aggressive. He feel that the income guarantee could make you complacent since you are getting the 300-350 K that is guaranteed. On the flip side he is willing to discuss terms of partnership right now year and willing to put in down on paper and promises 100 % transparency from day 1.

It sounds like the kind of opportunity I would jump on. He's making perfect sense and treating you like a partner already. I would not ask for any guarantees or anything else at this point. If he presents you with a 20 page contract with non-competes and penalties and all that, the picture changes entirely. But as it stands, I'm delighted by his proposal. Also, this is not a stranger to you and you seem comfortable with him personally. Go for it!

 

[Ducttape]

I found an opp where everything was inked out in contracts from day 1, I'm finally set to make partner next month! The experience with my partners reflected the transparency they showed me from the beginning.

congrats powermd on becoming a partner!

 

[ampaphb]

You keep 50% of what you generate the first year. If you leave you keep the 50%.

Lets assume you start work Jan 1. Do you keep 50% of money collected between Jan 1 and 12/31?. Or 50% of money generated during that time period, regardless of when it is collected?

 

[Disciple]

I think you'd be hard pressed to find someone who is willing to keep sending you checks indefinitely after you leave.

I'd say collections somewhere between 6 months- 1 year after you leave is reasonable, though I'd probably avoid doing any PI work (attorney referral) or worker's comp on a lien basis until you become a partner.

 

[Aether2000]

The devil is in the details. A large midwest neurosurgery group offered their two pain guys partnership after they had been there 5 years. The partnership came with a buy in of nearly a million each. Don't simply take a persons word on partnership...it is worth nothing. The details of what partnership entails, responsibilities, duties, will the partnership be equal or is this really corporate share ownership that may fluctuate? Will you have equal voting rights as a partner or is this simply a financial "partnership" arrangement? Many times surgeons have no idea what partnership really means with a pain doc, either financially or legally. So you need more details....

 

[hyperalgesia]

Good advice as usual. I would just make sure to approach this with good faith. I know someone who was offered a good deal and he immediately lawyered up and countered to try to get something better. The other guy was like, Jesus Cristo, nevermind.

But I agree, you want to be sure you're on the same page so you both know exactly what to expect.

 

[Ducttape]

The devil is in the details. A large midwest neurosurgery group offered their two pain guys partnership after they had been there 5 years. The partnership came with a buy in of nearly a million each. Don't simply take a persons word on partnership...it is worth nothing. The details of what partnership entails, responsibilities, duties, will the partnership be equal or is this really corporate share ownership that may fluctuate? Will you have equal voting rights as a partner or is this simply a financial "partnership" arrangement? Many times surgeons have no idea what partnership really means with a pain doc, either financially or legally. So you need more details....

in the opening post, there is mention that this is a pain physician who is offering the partnership, and details of the partnership are yet to be discussed.

dont scare him off - this situation has unique possibilities and deserves exploration.

 

[Aether2000]

My response was not to dissuade but to invoke gathering of more information. If a person takes an offer of partnership on faith without knowing any of the details of whether a partnership would even be affordable (buy-in cost, responsibilities of partnership), then so be it. However the experience of many pain physicians is that vague offers in the future may turn out to be indentured servitude or may not materialize at all. If the up front cost is minimal to the physician (no family to move, not uprooting lifestyle of others) then it is more palatable than if a physician incurs substantial cost to work at a new location. It is wise to consider the variables especially if one has not the experience with which to ask the correct questions without being demanding.

 

[bronchospasm]

Thank you for your responses. Regarding the collections, it is my understanding that I would keep 50% of what I generate regardless of when it is collected. So far it seems like a fair deal.

We had another talk and decided to meet in 3 weeks. I would visit the location and more concrete discussions are to follow. He did mention that he would like to come up with a number like 600 - 700K that I would have to reach for AR for the year prior to making partner. Till then I will get 50 percent of the collections and after that it would be collections minus actual expenses. HIs entire office overheads are at about 35-40 percent.

We did not have any discussions regarding buying into the practice as yet. As mentioned earlier, I would be working primarily at the new office. He goes to this second location 0.5-1 day a week. At the end of the year, about 80-90 percent of the income generated out of this location would be due to my efforts. I will spend the next year to develop, market and establish the practice while taking a moderate risk. If the practice does not work out then I will be out about 300K at least in terms of lost income, other expenses etc.
I'm still trying to decide on what an acceptable buy-in would be.

Any inputs ???

 

[pastafan]

Thank you for your responses. Regarding the collections, it is my understanding that I would keep 50% of what I generate regardless of when it is collected. So far it seems like a fair deal.

We had another talk and decided to meet in 3 weeks. I would visit the location and more concrete discussions are to follow. He did mention that he would like to come up with a number like 600 - 700K that I would have to reach for AR for the year prior to making partner. Till then I will get 50 percent of the collections and after that it would be collections minus actual expenses. HIs entire office overheads are at about 35-40 percent.

We did not have any discussions regarding buying into the practice as yet. As mentioned earlier, I would be working primarily at the new office. He goes to this second location 0.5-1 day a week. At the end of the year, about 80-90 percent of the income generated out of this location would be due to my efforts. I will spend the next year to develop, market and establish the practice while taking a moderate risk. If the practice does not work out then I will be out about 300K at least in terms of lost income, other expenses etc.
I'm still trying to decide on what an acceptable buy-in would be.

Any inputs ???

A fair buy-in should tie into a fair buy-out. This can be the amount that you will receive as a partner based on an aging formula for the accounts receivable generated when you were a non-partner with the same formula used to buy-out a partner. Added to this should be compensation to the partner(s) for capital equipment purchased for the practice.

 

[ampaphb]

If, in fact, you own your AR, you will be out nothing.Generally, if things don't work out, the practice owns the AR, which off-sets the initial salary.

 

[bronchospasm]

Update -

Visited the practice location and had detailed discussions last month. Received Contract today.

No mention of Income guarantee that was discussed during visit. I was clearly told that there would be an income guarantee of between 200K and 300K.
You keep 50% of collections.
Also there is a clause in the contract that there has to be an average monthly collections of about $65000 for 6 months before you become a (50%) partner in the practice.

My thoughts ?
No mention of an income guarantee in the contract is disappointing.
I think that an average of about 50K in collections over 12 months would be more realistic.

I wrote him an email highlighting the above 2 concerns.
Should I pursue or should I run ?

Thanks

 

[hyperalgesia]

I wouldn't run away yet.

These things you mentioned still seem defensive > offensive. It's a huge risk to take on a partner. Someone went out on a limb and set this thing up from scratch. It's only natural for him to be extremely careful.

Like you said, the barrier to partnership (65k/mo) is too high and needs to be adjusted.

I would like to know:
Is there a no-compete/separation clause (if, despite all efforts, things don't work out)?

I would not do anything rash. Take your time, get all the details you need, then make a counter offer that you are completely comfortable with. Just remember this must be profitable for both parties.

 

[Ducttape]

He definitely wants to see if you are going to be a good partner, a go-getter rather than someone who will clock in clock out.

Agree with above. If you know you are someone who is gonna work hard and will be willing to put in the hours to make it worth both your while, then make a reasonable counteroffer... Like a low income guarantee for 1 year and compromise with the partner track - maybe $55k over 9 months? (Tho I'm not a huge fan if basing things on collections, if who is doing the collections sucks...)

 

[bronchospasm]

Update:

I have not yet heard back from this guy after I emailed him about a week ago. Today, he calls a common friend to inform him that he can not give any income guarante. Also his non compete clause is for 8 surrounding counties and there is no separation clause if he does not make you partner.

So let me summarize the positives and negatives.

Positives :
You are walking into an established office that has 4 walls, office furniture etc.. Even if the present patient volume is limited to one day a week.
Do not have to deal with insurance contracts etc since they are already negotiated.
EMR and office workflow is set up.
Office staff and MA is trained.
Ther is some sort of referral network in place however minute it may be.
Vacation coverage is easier

Negatives.
No income guarantee but you get 50% percent collections.
The condition to become partner is average collections of 65k / month for 6 months this might take about 2 years.
There is no separation clause in the contract, so after a year if he does not make you partner the you have to leave town.
No compete is for a 8 county area - he has a presence in only one county.
I will be establishing this second office over the next year or more and if he does not decide to make you a partner then, I have taken a pay cut, helped establish his practice and have to leave town if things don't work out. And setting the stage for another fresh graduate to come in.

I think that it is a bad deal for me.
Am I thinking straight or am I overreacting and being too cautious.???

So here are my options,
Gamble with this guy and hope that he is fair. OR
Start my own practice. It may be tough for 6 months to a year, but eventually I hope things will work out. I can easily stay afloat for a year or more without a paycheck. Can pick up some anesthesia or pain locums while marketing or establishing the practise. It may be easier to start slow and be solo now than to separate after a year and restart somewhere else.

Any/ all advice is appreciated.

 

[hyperalgesia]

So here are my options,
Gamble with this guy and hope that he is fair. OR
Start my own practice. It may be tough for 6 months to a year, but eventually I hope things will work out. I can easily stay afloat for a year or more without a paycheck. Can pick up some anesthesia or pain locums while marketing or establishing the practise. It may be easier to start slow and be solo now than to separate after a year and restart somewhere else.

Any/ all advice is appreciated.

I would never gamble.

But don't take any of this personally. This guy is trying to make money so he can retire. That's all he cares about. So, even though his offer is a train wreck, it's just business. You should NOT be insulted or offended. You will hear worse!

If you threw out the non-compete clause, then you will always have equal or greater leverage than him. If he doesn't make you partner, you can always leave and take the pts with you. If you benefit mutually, why would you leave? Life is grand for all.

For me personally, and others will disagree with this, NOTHING makes me more uncomfortable than a non-compete. It's like building a house on someone else's land.

The rest of the terms are not great but I would be ok with them for a first gig. I would prefer not to have a salary guarantee because I don't like pressure.

My response to the offer would be that I'm ok with the terms but I am reluctant to sign a non-compete at this point. And I wouldn't add this but, by 'reluctant', I mean I would not do it under any circumstances short of immediate, legally-binding full partnership.

 

[emd123]

When in fellowship and looking for jobs I had a guy offer me a job, then after putting on an epic interview show, when it came time to put up a contract he said his practice wasn't busy enough to even offer me $1 per year in salary. Yeah, that's right not even one dollar.

The even more hilarious thing about that is that when I blew him off, he called back a few months later and wanted to discuss working together again. Needless to say, I didn't take the job and now a huge portion of my patients are former patients of his who got no relief from his injections. What a tool box.

It's amazing what BS you'll come across on the interview trail in Pain. Be careful out there.

 

[101N]

NOTHING makes me more uncomfortable than a non-compete

 

[PMR2008]

It's amazing what BS you'll come across on the interview trail in Pain. Be careful out there.

Well said. I feel bad for the poor souls who fall for these scams.

 

[bronchospasm]

Never received an edited contract from this person after he agreed, 4 weeks ago, to make all the changes as discussed.

I finally gave up and am looking to start my own practice in August.

Go live August 1st.

Found a 2 county area (population of 200K) with no board certified or fellowship trained pain physicians. There is one PMR physician who does ESI and TFESI and another anesthesiologist who does the same along with a couple of dedicated pill mills. Only neurosurgeon in the area has agreed to send me all his patients (4-6 patients / week.)

About an hour from my in-laws, good schools, reasonable drive to a big airport (60 miles), good weather.. etc

Going to start with an anesthesia group with part time (2 days a week and 1 weekend a month) work for a few months till volume picks up. Start with 2 MA's for 3 days. Hunting for office location now. Have option of starting in MOB building adjacent to the hospital since they rent it out based on Days per week ($750 /day/week). Will start with C arm and RF generator. USG machine and UDS lab to follow in 6 months.

Will sign up with Athena health for the EMR, billing, practice management, patient portal etc for a rate between 5.5 - 6.4% of total revenue collected.

A big THANK YOU to all who gave their opinion. Every bit of information has helped.

Will post more details as things fall in place. Maybe start a new thread detailing the journey.

Thanks

 

[hyperalgesia]

Love it