Partnerships

[newankle]

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I'd be interested to hear from those with experience regarding partnership offers and situations. Interested to hear how your arrangements are at the end of the fiscal year how you determine the disbursement/who gets what, your experiences with such and opinions on the subject, advantages/disadvantages of partnership.

 

[347932]

I'd be interested to hear from those with experience regarding partnership offers and situations. Interested to hear how your arrangements are at the end of the fiscal year how you determine the disbursement/who gets what, your experiences with such and opinions on the subject, advantages/disadvantages of partnership.

There are a few ways to do this, but it should be based on shares owned by each partner/shareholder ideally imho. Basically, every partner gets a set salary, and then at the end of the year, when there is "profit" to disperse, it is given out based on percentage share of the company. This should include all aspects of the business done in the office including the Diabetic Shoe program, in office dispensing of OTC products and even Rx dispensing (which can be done in office now), and should be CLEARLY outlined in the partnership agreement. Get a lawyer, too. Trust me, the money you spend on this will be invaluable if things go badly.

There are many ways that this can be abused, which is why some partnerships fall apart. If you work harder than your partner and both of you get the same set salary, this may unfairly skew earnings to your partner's side. Some who have had this issue work out a "point" system, where they get a certain amount of money per "point" based on patient volume and reimbursement for said patients. Again, assuming this is done fairly, it can work well.

A partnership is like a marriage. There are good times and bad times, and if both partners are equally committed to the cause, the good times are great and the bad times are worked through together. However, when/if things go bad, it can get as bad as those Hollywood divorces you hear about. I've seen it and been in the middle of it as well, and it's not fun AT ALL.

 

[Podfather]

I'd be interested to hear from those with experience regarding partnership offers and situations. Interested to hear how your arrangements are at the end of the fiscal year how you determine the disbursement/who gets what, your experiences with such and opinions on the subject, advantages/disadvantages of partnership.

We have an "eat what you kill" type of partnership. Although we both own 50% of the practice (assets, potential value when sold or another buys in) we disburse income based upon the percent generated by each doc. We take a historical average and then adjust quarterly. We keep it simple and only base it upon income generated. A fairer method also includes expenses. So that if you generate 70% of the income you would be charged 70% of the variable costs. Because of my involvement in many organizations(out of the office) and an emphasis on complex cases ,even though I am the more senior DPM, my partner makes more than I do because of the type of patients they see. Complex surgery makes a much lower profit margin than wound care, heel pain, ingrown nails etc.

 

[Feli]

We have an "eat what you kill" type of partnership. Although we both own 50% of the practice (assets, potential value when sold or another buys in) we disburse income based upon the percent generated by each doc. We take a historical average and then adjust quarterly. We keep it simple and only base it upon income generated. A fairer method also includes expenses. So that if you generate 70% of the income you would be charged 70% of the variable costs. Because of my involvement in many organizations(out of the office) and an emphasis on complex cases ,even though I am the more senior DPM, my partner makes more than I do because of the type of patients they see. Complex surgery makes a much lower profit margin than wound care, heel pain, ingrown nails etc.

I have nowhere near your experience, but based on just intuitive logic, this productivity split is probably "the way it should be" if a productive, long lasting partnership is the goal. 👍

That will take into account that the different partners see more/fewer patients and have a different payer mix based on their referral base. It lets each doc mold their practice model, individual reputation, and referral niches in the way they choose. It definitely works for the office patient care and outpatient surgery.

My only question would be this: is it ever considered that, in a productivity split partnership, the overhead adjustments need to be "tweaked" to consider that one partner may do significantly more hospital/OR/wound center based services away from the office? It seems to me that the overhead is low for those cares (minimal or no supplies since you're using the hospital/facility stuff, no med assts needed as you would in the office, etc for work done away from the office?).

For example:
Let's suppose that as the junior partner, my office volume is not very busy. So, I shake some hands with Family and Int Med docs in the lounge to get hospital visibility. That works out, and I take an inpatient DM consult that needs a initial eval consult, open TMA + VAC for forefoot osteo infection control, later delayed closure + TAL + total contact casting, subsequent hosptial based wound care f/u with more total contact casts, and eventually a CROW walker. I just spent a lot of my time and made the practice a significant amount of coin... but the supplies/staffing overhead was virtually nothing for the private office since I was using the facility resources.

Then again, the private office still has to bill my surgery/consults not done at the office, and they do have to schedule and manage the office follow-ups for the surgeries. On the other side of the coin, many inpatient and ER consults/surgeries never end up in the office (poverty or transportation issues, ECF residents, live far from the hospital/offices and follow up elsewhere closer to their home, etc). Also, I was increasing the community visibility of our practice, and those IM/Fam docs may send us some clinic referrals if I'm doing a good job on the inpatient/ER stuff.

 

[Podfather]

I have nowhere near your experience, but based on just intuitive logic, this productivity split is probably "the way it should be" if a productive, long lasting partnership is the goal. 👍

That will take into account that the different partners see more/fewer patients and have a different payer mix based on their referral base. It lets each doc mold their practice model, individual reputation, and referral niches in the way they choose. It definitely works for the office patient care and outpatient surgery.

My only question would be this: is it ever considered that, in a productivity split partnership, the overhead adjustments need to be "tweaked" to consider that one partner may do significantly more hospital/OR/wound center based services away from the office? It seems to me that the overhead is low for those cares (minimal or no supplies since you're using the hospital/facility stuff, no med assts needed as you would in the office, etc for work done away from the office?).

For example:
Let's suppose that as the junior partner, my office volume is not very busy. So, I shake some hands with Family and Int Med docs in the lounge to get hospital visibility. That works out, and I take an inpatient DM consult that needs a initial eval consult, open TMA + VAC for forefoot osteo infection control, later delayed closure + TAL + total contact casting, subsequent hosptial based wound care f/u with more total contact casts, and eventually a CROW walker. I just spent a lot of my time and made the practice a significant amount of coin... but the supplies/staffing overhead was virtually nothing for the private office since I was using the facility resources.

Then again, the private office still has to bill my surgery/consults not done at the office, and they do have to schedule and manage the office follow-ups for the surgeries. On the other side of the coin, many inpatient and ER consults/surgeries never end up in the office (poverty or transportation issues, ECF residents, live far from the hospital/offices and follow up elsewhere closer to their home, etc). Also, I was increasing the community visibility of our practice, and those IM/Fam docs may send us some clinic referrals if I'm doing a good job on the inpatient/ER stuff.

Like I mentioned, although we choose to base it only on collections the fairer way is to include some overhead. Fixed costs should be split but variable costs related to office overhead should be also allocated by percentage. How you determine that would be variable based upon the practice. If you have someone who is primarily hospital based then variable costs may be based upon time staff is used for billing, appointments, office care, PO in office care, etc.

My only advice (and why we have our system, even though I take a little hit), just like bonus structures, the easier you make it the better. If it becomes so complicated that each month or quarter you need an accountant to work it out then misconceptions and sometimes resentment sets in. Longevity and trust are the key for all sides (owner, associate, partner). The cost on both sides of either starting over or trying to find a new associate are high both in money and stress.

 

[PADPM]

Our practice is unique and does things a little differently than most partnerships. However, if really defined, our relationship is technically really a shareholder arrangement and not a partnership, but that's really a matter of semantics.

Although we have quite a few doctors, only 5 are actually partners/shareholders in the corporation at the present time. Three of the doctors have equal shares and the remaining two have the remaining shares (not equal to one another). The three that have equal shares make a particular salary and the other two make a little less. At the end of the fiscal year, if there is any money left over, it's divided according to percentage of shares that are held. Expenses are paid by the corporation as a whole and are not paid by percentage.

We do not pay by production or measure production, even with our associates. Naturally, we do LOOK at production each quarter including total patient visits, new patients, surgical procedures, orthoses, and break it down by doctor, but we don't really do anything but look at those numbers unless there is a serious trend down.

All the docs in our office work extremely hard and long hours, but there are too many variables to start paying by production. Although all our docs are ABPS certified, some have opted to no longer perform surgery due to the outrageous cost of surgical malpractice and the decreased reimbursements.

Therefore for example, one of our docs may see 60 patients in one day, and the majority may be palliative care or diabetic patients. He works hard, treats a lot of patients, but may not generate huge numbers. However, he will generate more diabetic shoes than I will, since I treat the least amount of routine palliative care patients in the practice.

Additionally, we treat a large number of capitated patients. What happens if I treat 20 capitated patients today and 30 private patients, and my partner treated 50 private patients?? Should he make more money than I do because he produced more, even though we both worked just as hard?

One of my partners runs a wound care center and there is a hyperbaric oxygen unit. He gets paid very well each time a patient has a "dive" in the unit, even though he is simply supervising. Therefore his production on those days is very high, while I may be in the O.R. for several hours performing very complicated surgery on patients with poor insurance. Should I be penalized???

Paying for production in my opinion is a great way to ruin a partnership and make partners constantly angry with one another. My partner does a surgery and gets the "credit" for the case, but he's out of town and I treat the patient post operatively for FREE. In this scenario, it creates a pissed off partner. In our scenario, it all goes into the pot and we all work together for a common goal.

We all cover for one another all the time and don't count beans. It's never you did this, and I did that, therefore we all get along and don't count each other's money.

Yes, we do argue over things, but not about helping one another and not about production. We each bring something unique to the table and understand that it simply would not be fair to start paying for production and would drive a wedge between the members of the practice and would create a cut-throat environment.

 

[Feli]

...We have an "eat what you kill" type of partnership. Although we both own 50% of the practice (assets, potential value when sold or another buys in) we disburse income based upon the percent generated by each doc...

... the easier you make it the better. If it becomes so complicated that each month or quarter you need an accountant to work it out then misconceptions and sometimes resentment sets in. Longevity and trust are the key for all sides (owner, associate, partner). The cost on both sides of either starting over or trying to find a new associate are high both in money and stress.

....Paying for production in my opinion is a great way to ruin a partnership and make partners constantly angry with one another...

...We all cover for one another all the time and don't count beans. It's never you did this, and I did that, therefore we all get along and don't count each other's money.

Yes, we do argue over things, but not about helping one another and not about production. We each bring something unique to the table and understand that it simply would not be fair to start paying for production and would drive a wedge between the members of the practice and would create a cut-throat environment.

This is all great advice and things I really need to think through when considering options coming out of residency (and for the rest of my practicing career). I'm sure you're both very successful, and the most important common denomintor here seems to be solid personal relationships and common goals between the partners. Thanks much.

 

[Podfather]

Our practice is unique and does things a little differently than most partnerships. However, if really defined, our relationship is technically really a shareholder arrangement and not a partnership, but that's really a matter of semantics.

Although we have quite a few doctors, only 5 are actually partners/shareholders in the corporation at the present time. Three of the doctors have equal shares and the remaining two have the remaining shares (not equal to one another). The three that have equal shares make a particular salary and the other two make a little less. At the end of the fiscal year, if there is any money left over, it's divided according to percentage of shares that are held. Expenses are paid by the corporation as a whole and are not paid by percentage.

We do not pay by production or measure production, even with our associates. Naturally, we do LOOK at production each quarter including total patient visits, new patients, surgical procedures, orthoses, and break it down by doctor, but we don't really do anything but look at those numbers unless there is a serious trend down.

All the docs in our office work extremely hard and long hours, but there are too many variables to start paying by production. Although all our docs are ABPS certified, some have opted to no longer perform surgery due to the outrageous cost of surgical malpractice and the decreased reimbursements.

Therefore for example, one of our docs may see 60 patients in one day, and the majority may be palliative care or diabetic patients. He works hard, treats a lot of patients, but may not generate huge numbers. However, he will generate more diabetic shoes than I will, since I treat the least amount of routine palliative care patients in the practice.

Additionally, we treat a large number of capitated patients. What happens if I treat 20 capitated patients today and 30 private patients, and my partner treated 50 private patients?? Should he make more money than I do because he produced more, even though we both worked just as hard?

One of my partners runs a wound care center and there is a hyperbaric oxygen unit. He gets paid very well each time a patient has a "dive" in the unit, even though he is simply supervising. Therefore his production on those days is very high, while I may be in the O.R. for several hours performing very complicated surgery on patients with poor insurance. Should I be penalized???

Paying for production in my opinion is a great way to ruin a partnership and make partners constantly angry with one another. My partner does a surgery and gets the "credit" for the case, but he's out of town and I treat the patient post operatively for FREE. In this scenario, it creates a pissed off partner. In our scenario, it all goes into the pot and we all work together for a common goal.

We all cover for one another all the time and don't count beans. It's never you did this, and I did that, therefore we all get along and don't count each other's money.

Yes, we do argue over things, but not about helping one another and not about production. We each bring something unique to the table and understand that it simply would not be fair to start paying for production and would drive a wedge between the members of the practice and would create a cut-throat environment.

More than one way to skin a cat. You have a large group that appears to have a great relationship and work ethic. I have seen the contrary where a larger group who splits income equally have some people on their way out who basically are coasting or a "new partner" who slows down because they split the pot regardless. Or you have a newbie who is not cost conscious who has an overhead higher than the average. Everyone has to do it their way. Eat what you kill is a common method and can be tweaked. It also provides an incentive for the new partner to step up and an older partner to slow down without the guilt. But your system can work with the right people.

I have been in your system before and one has to be sure that the income is looked at with considerable trending and periods of time. Quick quarterly snapshots can skew the data. But you have been together for quite a while?

 

[PADPM]

I understand and appreciate your remarks, and there certainly is no one size fits all answer. Once again, especially due to our payor mix and capitation, paying by eat what you kill would be almost impossible to truly figure out fairly.

The group has been together for quite a while and at the present time it works. There have been times when a senior member seems to be taking advantage of a younger partner or associate and the other partners will correct that immediately.

We do track trends short term and long term, and one of the reasons there are "only" 5 partners is because we all know that there are no slackers among those 5. We just hired another doc as an associate with the hope that he will become a shareholder/partner. Yes, we will watch his nuimbers but don't pay on production. We don't want anyone performing unnecessary procedures, orthoses, xrays, etc, just to increase his income.

 

[newankle]

All owners in our practice have equal partnership/shares and have an equal vote at the table. The price has been very near the same for all recent partners for buy-in. There is a certain amount you have to put down (with post-tax dollars) and the remainder has to be paid off within a certain amount of time and can be done so with pre-tax dollars. We determine practice overhead at the end of each fiscal year and also determine what our "draw" will be. For instance last year our "draw" was 43% so in this current year I am entitled to a guaranteed salary of 43% of last years collections (minus what we define as stark money). We actually take a little less during the year. So say last year I collected $700K after deducting stark money then this year I'm entitled to $301K but would take a draw of $245K throughout the year and get the remainder when we settle up at the end of the fiscal year. What we define as stark money is collections from PT, DME, and ASC fees for epidurals/blocks that all goes into one pile and gets divided equally. Last year each partner got approximately $60K from this. The remainder of the money left is divided among partners based on percentage of collections. Each new partner's stark money goes to the practice and towards their buy-in. They cannot take that yearly stark money until their buy-in is complete.

 

[347932]

Paying for production in my opinion is a great way to ruin a partnership and make partners constantly angry with one another.

I absolutely agree with this. There are just way too many ways for this to be manipulated imho. I've seen it fail MANY times. Podfather has a good thing going if within his practice he can make this work. It sounds like PADPM has his you know what together in this regard. Everyone works hard (which I can attest to in his situation btw), everyone shares the spoils. Fair and easy to manage.

By the time someone is offered partnership, the owner(s) should know what they're getting. Why would you offer someone a partnership if they don't have the work ethic required to achieve success within your practice? Yes I know the reasons why, but that doesn't mean they're right.

 

[Podfather]

I absolutely agree with this. There are just way too many ways for this to be manipulated imho. I've seen it fail MANY times. Podfather has a good thing going if within his practice he can make this work. It sounds like PADPM has his you know what together in this regard. Everyone works hard (which I can attest to in his situation btw), everyone shares the spoils. Fair and easy to manage.

By the time someone is offered partnership, the owner(s) should know what they're getting. Why would you offer someone a partnership if they don't have the work ethic required to achieve success within your practice? Yes I know the reasons why, but that doesn't mean they're right.

Well in our case, I do not think it's fair for my partner to choose a practice style that is more financially productive and share that with me. I choose the reconstructive stuff which pays less than if I stayed in the office more or performed wound care. Also I shouldn't have to feel guilty if my involvement in the profession has me out of the office more than them and they shouldn't have to subsidize it. We both work hard and cover for each other but my bottomline is less and my pay should show that. Eat what you kill allows flexibility in your practice and permits everyone to produce at whatever level they choose and encourages production in the new and longevity (even as part time) for the soon to be retiring. Associates get a salary and bonus so they do not have the options the partners have, own no assets, and can be let go. It works well for us and many other groups that I know.

 

[347932]

Well in our case, I do not think it's fair for my partner to choose a practice style that is more financially productive and share that with me. I choose the reconstructive stuff which pays less than if I stayed in the office more or performed wound care. Also I shouldn't have to feel guilty if my involvement in the profession has me out of the office more than them and they shouldn't have to subsidize it. We both work hard and cover for each other but my bottomline is less and my pay should show that. Eat what you kill allows flexibility in your practice and permits everyone to produce at whatever level they choose and encourages production in the new and longevity (even as part time) for the soon to be retiring. Associates get a salary and bonus so they do not have the options the partners have, own no assets, and can be let go. It works well for us and many other groups that I know.

As I said, if it ain't broke for you don't fix it. However, as I said as well, I liken a professional partnership to a marriage.

In my personal life my wife makes far less than I do, but I don't split earnings with her. We have a communal account where everything comes out of. We are both reasonable and with three kids there is very little ME money, but I don't even bother to look at that at all. As I said we spend what we spend. No counting pennies for me and pennies for you situation.

I like PADPMs model better than yours. That's all. That doesn't mean one is superior to the other (although I am not a fan of eat what you kill at all), I just like one better than the other. I've seen partnerships fail time and time again because of the dynamics that an "eat what you kill" philosophy fosters, so my experience with these things has been bad all the way around.

 

[Podfather]

As I said, if it ain't broke for you don't fix it. However, as I said as well, I liken a professional partnership to a marriage.

In my personal life my wife makes far less than I do, but I don't split earnings with her. We have a communal account where everything comes out of. We are both reasonable and with three kids there is very little ME money, but I don't even bother to look at that at all. As I said we spend what we spend. No counting pennies for me and pennies for you situation.

I like PADPMs model better than yours. That's all. That doesn't mean one is superior to the other (although I am not a fan of eat what you kill at all), I just like one better than the other. I've seen partnerships fail time and time again because of the dynamics that an "eat what you kill" philosophy fosters, so my experience with these things has been bad all the way around.

Agreed do what works for you. If we would go to a communal pot our partnership would split within a year. Although the marriage metaphor (and divorce metaphor when a group splits) works, it is not the same as a an actual marriage. My marriage has a communal pot since the marriage is more than a business but my practice is eat what you kill. To each his own.

 

[PADPM]

Agreed do what works for you. If we would go to a communal pot our partnership would split within a year. Although the marriage metaphor (and divorce metaphor when a group splits) works, it is not the same as a an actual marriage. My marriage has a communal pot since the marriage is more than a business but my practice is eat what you kill. To each his own.

Eat what you kill can work depending on the personality of the doctors involved, the demographics of the practice, the payor mix and a full realistic understanding of the potential pitfalls. Our system can also create problems if a doctor seems to be working harder, treating more patients, etc., and that's why it's imperative to have partner meetings, especially in a larger practice. There is nothing positive about members of a practice walking around pissed off all day mumbling under their breath. Regular partner meetings are mandatory to assure that everything gets aired out and all the problems are discussed to avoid disaster.

And I agree with Podfather, the analogy of a marriage being communal vs. a partnership is considerably different. They are two distinctly different situations. After all, I sleep with my wife and I don't sleep with my partners!

 

[NatCh]

I am in a group of three equal partners. We split expenses equally and divide up profits from patient care on an "eat what you kill" basis. Our usage is similar and our production is similar, so as long as nobody spends too much time counting pennies this arrangement works for all of us. If one of us were to become consistently much busier than the others, then we probably sit down and see if we needed to adjust our system.

We also have retail sales business in which we share expenses equally and divide profits equally.

 

[PADPM]

Once again in a very large, very busy practice this is almost impossible, especially with a significant population of capitated patients.

In a smaller practice in it often much more probable that patients won't "cross over" as often and will tend to see the same doctor on a regular basis.

With a very large and busy practice with multiple locations, it's not unusual for a patient to have to come in on an urgent/emergent basis and see one of the other doctors. This is often a no-pay follow up visit, which could create problems in an "eat what you kill" practice.

And as previously stated, we don't screen patients for insurance when booking patients. Therefore, it can simply work out that my partner may see X number of patients today that are all well paying private patients and I can see the exact number of patients that may be capitated or poorly paying insurance companies that don't allow me to take in-office x-rays, etc., whereas his patients all enabled him to provide ancillary services that were paid.

Should I be penalized and he be rewarded simply because he got "lucky" and saw the "well paying" patients? All patients are important to our practice, and as long as we are all working similar hours and contributing, the money will be distributed via a salary basis as pre-determined.

An eat what you kill practice can work in many cases, but there are some situations where it is simply not feasible.