Partnership track and buy-in of $900K

[anes121508]

We bumped our (flat) starting salary up by 25% after having it set for ~15 years. We talked to friends at a few local groups and found out what they were offering. We're in the market ballpark for starting salaries now, but still the lowest starting in town. That said, we have the highest partner pay in the market by a fair bit. Market is mostly PP (~8 groups in the metro), one hospital covered by an AMC, and a few employed positions (University, VA, GI centers)

One question that should be asked is if the high partner pay is dependent on the buyin of associates or if it’s intrinsic to the practice based on high volume, efficiency, and unit value. Obviously it is often a combination of both. In a situation where there is low turnover, everyone could be a partner and no one is there pitch in the buyin. Or the partner income could fluctuate based on how many people are in the partner track.[/QUOTE]

That would depend on the buyin amount for the group relative to the earnings of partners and the earnings during years with a higher ratio of partners to non partners vs a lower ratio of partners to non partners right?

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[anes121508]

No offense, but try to be more humble. Most Private Practices are ninety days away from an AMC take over. And that AMC can get better commercial rates than you ever could after a decade of "negotiations." All it takes is a change in one or more Administrators...I have been there.

Also, the value of an Anesthesia group lies in it's ability to attract quality new recruits. Partner track candidates are better quality than CRNAs or Day Physicians. Administrators look at this stuff. We couldn't get anyone to come in my last gig (bad area, poor payor mix) and soon enough an AMC swooped up the contract with false promises. You need good Partner track people more than you lead on.

There's an age where it's worth taking the risk. Also, our Partner track guys get 150-200k more than the nearest AMC offer in their first year so it's a no brainer.

Agree with the no Brainer if your starting non partner pay is > amc pay. Curious as to why you wouldn’t lower it slightly since there is more of an upside than the amc. Just to guarantee that you are recruiting everyone you want vs the local AMC?

 

[anes121508]

I'm a partner in a PP group in the NE.

There are lots of different ways to define "buy in"

Is it sweat equity (on a partnership track at reduced income for x years) , is it actually money paid to the practice when becoming partner (very weird IMO)? is it both?

One thing I will comment on is the math above, its too simple..

You have to look at the "buy in" from a real world perspective.

Buy in does NOT = Partner income - Partner track income X years to partner. That type of thinking assumes that you would otherwise be making Partner income. Meaning that you actually had another offer for the same as partner level income but turned it down, which most likely the candidate did not have such an offer.

You have to consider Buy in = Partner income - Highest other job offer X years to partner.
For example, when I was on the partnership track, I earned 250k. But I had another job offer for 350k. No where did I have an offer for immediately making 500k.

So I lost (350-250) 100k x 3 years to partner = 300k buy in.

Its NOT 500k (partner income) - 250k = 250k x 3 years to partner = 750k. Because you never had the 500k income to "lose" in the first place..

Personally, I think paying your way (unlike working your way) into a practice is very strange. I'm not going to write a check, I'm going to take income reduction for x years. Especially if I have already had income reduction for x years.
)

Interesting. I guess I initially would view it as lost wages or sacrificed income. Certainly important. I think one part is missing though. Thats looking at that buyin amount or lost wages and figuring out two things:
1. How long till I make up the lost wages?
- depends on yearly difference between non partner pay and your current pay, duration of non partner pay, difference between yearly partner pay and current pay
2. How far ahead you get when it’s all said and done
- depends on years you got left after break even point and difference between current pay and partner pay


Looking at this correctly?

 

[anbuitachi]

25% bump is a lot. 15 years with no increase was a long time.

Did you have hiring issues before the bump and then ask your friends?

Sorry the phrase in question was actually Mman’s quote. Not sure why it came out that way.

Edit: the quote/replies seem messed up today[/QUOTE]

We bumped our (flat) starting salary up by 25% after having it set for ~15 years. We talked to friends at a few local groups and found out what they were offering. We're in the market ballpark for starting salaries now, but still the lowest starting in town. That said, we have the highest partner pay in the market by a fair bit. Market is mostly PP (~8 groups in the metro), one hospital covered by an AMC, and a few employed positions (University, VA, GI centers)

Makes sense and seems reasonable, appreciate the insight.[/QUOTE]

I mean 25% for 15 years is still way lower than inflation rates... but to keep salaries flat for 15 years is insane.

 

[anbuitachi]

I'm a partner in a PP group in the NE.

There are lots of different ways to define "buy in"

Is it sweat equity (on a partnership track at reduced income for x years) , is it actually money paid to the practice when becoming partner (very weird IMO)? is it both?

One thing I will comment on is the math above, its too simple..

You have to look at the "buy in" from a real world perspective.

Buy in does NOT = Partner income - Partner track income X years to partner. That type of thinking assumes that you would otherwise be making Partner income. Meaning that you actually had another offer for the same as partner level income but turned it down, which most likely the candidate did not have such an offer.

You have to consider Buy in = Partner income - Highest other job offer X years to partner.
For example, when I was on the partnership track, I earned 250k. But I had another job offer for 350k. No where did I have an offer for immediately making 500k.

So I lost (350-250) 100k x 3 years to partner = 300k buy in.

Its NOT 500k (partner income) - 250k = 250k x 3 years to partner = 750k. Because you never had the 500k income to "lose" in the first place..

Personally, I think paying your way (unlike working your way) into a practice is very strange. I'm not going to write a check, I'm going to take income reduction for x years. Especially if I have already had income reduction for x years.

And lastly, to the people who are saying "our guys start out at 150-200k more than AMCs on the partnership track" I'm wondering how is that possible. If the AMC is paying 400k, your starting them at 550?? Typically the decision is what I outlined above, a partnership track job at about 100k reduction from the other highest local alternative (which usually is an AMC paying 350-400k)

If im comparing to outside jobs, id rather look at # of years to break even, than the buyout money. the way i see buyout is how much less you are making compared to other people in the group while doing the same amount of work but i get what you mean.

if in PP i start at 300 for 4 years, then jump to 500 after partner.
Vs a non partner job paying 400k flat, yes difference is 400k over 4 years. but to keep math simple if i make partner id have to work for 8 years to just break even. if im unsure about even staying in the town for 8 years, then forget about it. id much rather get a high initial wage and PAY my way in (like write a check) if i know im going to stay.

 

[dhb]

id much rather get a high initial wage and PAY my way in (like write a check) if i know im going to stay.

Why is this not more prevalent? Take someone onboard for 2 years, if the practice is so great and the person wants to stay he writes a check to make partner.

 

[kmurp]

What our group does is start new docs out at a % of partner salary. This has varied over the years from 70-80%. One guy we really needed years ago to start our cardiac program came in at salary parity but waited a year or two for voting rights. Each year on the track, the physician moves up 10% in salary. Years to parity/voting has varied from 1-3 years depending on the job market. Salary floats as a % of partner income which varies with the year. Buyin when making partner is nominal ( like 20k) and can be in the form of a loan. Benefits are full from day one except pension contributions which doesn’t start for a year. Our salaries are low from what I see on here but the total cost to the group of benefits ( including things like group employer contribution to payroll taxes) is close to 100k. Accounts receivable rights vest over a longer period which is not a problem if you’re in for the long haul, which we want. Although the numbers have varied over the years, I don’t think currently that the AR payout makes up for the salary reduction but who knows what that will be in ten years?

 

[Hoya11]

Why is this not more prevalent? Take someone onboard for 2 years, if the practice is so great and the person wants to stay he writes a check to make partner.

Because this approach puts the ball in the court of the employee/partnership track doc, the other way, the ball is in the court of the group/partners. We are not going to give you the money up front and let you decide if you want to join or not, we are going to let you INVEST and work at a lower wage, committing yourself to the group and increasing the likelihood year after year that you will stay and make partner. After all, we don't really know you. You may have a great CV but do you wine to go home all the time? uncomfortable with certain cases? difficult personality? lets see how it goes before we show you the big money

Its the same old argument:

I'm a person who is going from Job to Job or looking for an immediate money grab and/or I'm OK traveling/moving every few years --> AMC job or sleazy PP group looking for someone short-term
I'm a person who is committed to an area, doesn't want to move, and will invest in a long career with a few years of mild underpayment --> partnership track to a PP group

 

[Hoya11]

If im comparing to outside jobs, id rather look at # of years to break even, than the buyout money. the way i see buyout is how much less you are making compared to other people in the group while doing the same amount of work but i get what you mean.

if in PP i start at 300 for 4 years, then jump to 500 after partner.
Vs a non partner job paying 400k flat, yes difference is 400k over 4 years. but to keep math simple if i make partner id have to work for 8 years to just break even. if im unsure about even staying in the town for 8 years, then forget about it. id much rather get a high initial wage and PAY my way in (like write a check) if i know im going to stay.

So your going to save year after year to be able to have the option to make that big 400k payment at the end of your track? When I have money coming in I want to spend it on my life expenses and not worry about writing a big check in the future. Also as I said in my other post you will not find this arrangement because it gives YOU the power vs the group and they know this.

 

[Mman]

Why is this not more prevalent? Take someone onboard for 2 years, if the practice is so great and the person wants to stay he writes a check to make partner.

because it isn't necessary. If great practices had trouble hiring great docs, they would pay them more initially. Nobody has trouble hiring. The prevalence of AMCs only makes it easier for the groups.

 

[anes121508]

If im comparing to outside jobs, id rather look at # of years to break even, than the buyout money. the way i see buyout is how much less you are making compared to other people in the group while doing the same amount of work but i get what you mean.

if in PP i start at 300 for 4 years, then jump to 500 after partner.
Vs a non partner job paying 400k flat, yes difference is 400k over 4 years. but to keep math simple if i make partner id have to work for 8 years to just break even. if im unsure about even staying in the town for 8 years, then forget about it. id much rather get a high initial wage and PAY my way in (like write a check) if i know im going to stay.

Yeah exactly how I initially looked at it when I was looking at jobs. Then decided if that duration of time made sense.

 

[Mman]

Yeah exactly how I initially looked at it when I was looking at jobs. Then decided if that duration of time made sense.

how I evaluated private job offers.

1) do I know and trust that they are not looking to screw me over? Are they honest about partnership track? Can they explain if or why anyone was ever not made a partner? (this is why it helps to have personal connections so you have a pre-existing relationship with people that do not wish to hurt you)
2) am I willing to work for whatever they are paying me initially. I mean not that salary forever, but for a few years would it be doable and how does it compare to other academic or AMC job offers I might have?
3) what is the likelihood of the group containing to remain private and how financially rewarding would that be to me long term? This is hardest to be able to guess at, although I personally think the days of AMC takeovers are nearly over. That model is failing and I know quite a few hospitals that are trying to get out of it. I suspect if anything the biggest risk to private groups that remain in the future is being bundled up into hospitals themselves, especially if single payer healthcare becomes a reality and our comp is based on medicare rates.

So if I trust them to not be trying to screw me over, the starting salary is reasonable, and I think a reasonable chance the group remains relatively profitable for the foreseeable future....then it is a strong consideration for a job I would want.