Pathology Contract Questions??

[Pathguy11]

---

Members don't see this ad.

I have a few questions about Pathology Private Practice Contracts for anyone who is willing to share their experience.

1. If offered a Partnership tract is there a "traditional" percentage increase or dollar amount you should expect each year while on the partnership track prior to making partner. I have heard different things with regards to this subject. Some have told me that they received a set amount increase each year throughout the partnership tract. Others have mentioned a "formula" that some use. I assume this should all be spelled out in the contract???

2. If on a partnership track, should the final partnership salary or at least an estimated number be in your initial contract?

3. With regards to the "buy-in", should the exact number or at least the way they plan on calculating it be in the contract? I have heard that some groups will have a set buy-in that they will put in the contract. I have also heard of other groups that may say that it is hard for them to know how much the practice will be worth in 5 years or so in order to give you an exact buy-in value. In this latter case I suppose you should have them put in the way they will calculate the buy-in and perhaps the current value of the group?

Thank you in advance for your responses!

Pathguy11

 

[BrainPathology]

I have a few questions about Pathology Private Practice Contracts for anyone who is willing to share their experience.

1. If offered a Partnership tract is there a "traditional" percentage increase or dollar amount you should expect each year while on the partnership track prior to making partner. I have heard different things with regards to this subject. Some have told me that they received a set amount increase each year throughout the partnership tract. Others have mentioned a "formula" that some use which is: partner's salary - beginning salary = "x" difference . Let just say "x" is $100k for the purposes of calculating. And lets say that you are on a 5 year partnership track. So that would be $100k divided by 5 years which equals $20k increase to your beginning salary per year in a cumulative manner. for example, plus $20k after the first year, plus $40k after the second year, plus $60k after the third year, and so on... I assume this should all be spelled out in the contract???

2. If on a partnership track, should the final partnership salary or at least an estimated number be in your initial contract?

3. With regards to the "buy-in", should the exact number or at least the way they plan on calculating it be in the contract? I have heard that some groups will have a set buy-in that they will put in the contract. I have also heard of other groups that may say that it is hard for them to know how much the practice will be worth in 5 years or so in order to give you an exact buy-in value. In this latter case I suppose you should have them put in the way they will calculate the buy-in and perhaps the current value of the group?

Thank you in advance for your responses!

Pathguy11

My contract has a set salary for the years up to partner. It goes up by approximately 10% per year. I'm not sure if this is an industry standard. There is no mention of what I will be paid as a partner except that it will be 1 equal share to all the other partners. However, they did show me the figures a partner's share for the last few years- at least get some idea of what it will be even if it's not defined in the contract. If they do have some sort of formula for your employee phase it must be spelled out in the contract or they could basically decide to pay you whatever they feel like paying.

If I had a salary based on the formula you gave (1 year partner draw - 100k to start which then graduated up to the average partner's draw) I'd snap that up in a hot second and save what I needed to to buy into the practice when the time came. There is an important number here that I'm not aware of which would be an average difference between partnership salaries and employee-phase salaries which would drastically effect the decisionmaking if you had a formula vrs set salary contract. Also the number they are subtracting and graduating the salary from would make a huge difference. If it's a large number could you just budget what your first year salary is and save the increase year over year to make the buy in relatively painless.. etc.

In mine, there is a specific buy-in amount to buy 1 "share" of the practice spelled out in my contract. It's a pittance and reflects the reality that the difference in salary I'll be earning and a partner's share is really the "buy-in" to being a partner (and is significantly larger than the arbitrary 100k you chose as an example).

Incidentally, I would try to get a clause that specifies a point in time that they notify you whether you'll be retained as a partner. It's fairly quick in mine, I get a 6 month evaluation (basically to give me a chance to fix any problems with my work) and at a year notification that they will or will not keep me. (I'm sure there are ways for them to get out of this but at least it gives you something). Basically, this gives me 3 years to find another position if they decide not to keep me (which they have done once in 25 years btw - another thing you should ask).

All this is an n of 1. I had one interview, one offer, and one contract to look over, I showed it to several people I trusted including an attorney who all agreed it seemed fair. Hopefully more people will chime in so you have more to compare.

 

[Pathguy11]

In mine, there is a specific buy-in amount to buy 1 "share" of the practice spelled out in my contract. It's a pittance and reflects the reality that the difference in salary I'll be earning and a partner's share is really the "buy-in" to being a partner (and is significantly larger than the arbitrary 100k you chose as an example).
QUOTE]

So let me make sure I understood this part and I know the $100k is not realistic difference (just used to make math easier). Anyway, are you saying that you will or will not actually have to come up with the money to cover that "1 share" once you are a partner? I am confused if you meant that while on the partnership tract the difference in your salary along the way and the full partnership salary counted as your buy-in OR if you were saying that it was somehow related to the eventual "1 share" amount that you will have to pay? Sorry but thios part is unclear to me. And is your "1 share" somehow related to the value of the practice? any more details you can share on this would be helpful. Thanks again!!

Pathguy11

 

[BrainPathology]

In mine, there is a specific buy-in amount to buy 1 "share" of the practice spelled out in my contract. It's a pittance and reflects the reality that the difference in salary I'll be earning and a partner's share is really the "buy-in" to being a partner (and is significantly larger than the arbitrary 100k you chose as an example).
QUOTE]

So let me make sure I understood this part and I know the $100k is not realistic difference (just used to make math easier). Anyway, are you saying that you will or will not actually have to come up with the money to cover that "1 share" once you are a partner? I am confused if you meant that while on the partnership tract the difference in your salary along the way and the full partnership salary counted as your buy-in OR if you were saying that it was somehow related to the eventual "1 share" amount that you will have to pay? Sorry but thios part is unclear to me. And is your "1 share" somehow related to the value of the practice? any more details you can share on this would be helpful. Thanks again!!

Pathguy11

The "share" that I will buy, as its defined in the contract, isn't reflective of the value of the practice. For the purpose of the partner's shares the practice is divided up into x number of 'shares' where x = the number of partners. The available compensation for the partners is then divided by x and 1x is given to each partner every year. To buy my 'share' I have to pay $100.00 (one hundred) at the end of my employee-phase. The difference in my salary and the partner's shares isn't officially counted as my 'buy-in" in a contractual sense. However, when I asked why the buy-in was so low the explanation was basically 'all the money we keep from your work in the first few years really makes a true buy-in based on the value of the practice unfair.'

Also, as someone they are hiring to be a partner your presence there is part of the practice's "value." You've partially bought in to the practice just by virtue of your skills and work. I know this realization is so rare in pathology practices these days as to sound like fantasy. But the fact that it isn't honored doesn't mean it's untrue.

 

[Pathguy11]

...

 

[Pathguy11]

The "share" that I will buy, as its defined in the contract, isn't reflective of the value of the practice. For the purpose of the partner's shares the practice is divided up into x number of 'shares' where x = the number of partners. The available compensation for the partners is then divided by x and 1x is given to each partner every year. To buy my 'share' I have to pay $100.00 (one hundred) at the end of my employee-phase. The difference in my salary and the partner's shares isn't officially counted as my 'buy-in" in a contractual sense. However, when I asked why the buy-in was so low the explanation was basically 'all the money we keep from your work in the first few years really makes a true buy-in based on the value of the practice unfair.'

Also, as someone they are hiring to be a partner your presence there is part of the practice's "value." You've partially bought in to the practice just by virtue of your skills and work. I know this realization is so rare in pathology practices these days as to sound like fantasy. But the fact that it isn't honored doesn't mean it's untrue.

Thanks for this..it cleared things up

Pathguy11

 

[BrainPathology]

I am not sure if my example was meant in the way I am reading it above. I didn't mean Partnership salary - $100k and then dividing this number by the years in the partnership track. Here is a more clear example of what I was trying to propose. I am INTENTIONALLY using smaller unrealistic numbers in the example below for various reasons:

Partnership salary $200k
Starting salary: $100k
Difference: $200k - $100k = $100k
Partnership track length: 5 years

$100k / 5 years = $20k per year increase

Example increasing gradient salaries:
Start 1st year = $100k
Start 2nd year = $120k
Start 3rd year = $140k
Start 4th year = $160k
Start 5th year = $180k
Start 6th year = Partnership of $200k

By the way this is JUST AN EXAMPLE and has not real reflection on anything.

Pathguy11

I know what you were saying. I was just responding that the arbitrary number, when it changes to an actual number, is important to what I would say regarding what I'd want in the contract vs. the buy-in. So if that number is very large and the raises are correspondingly large letting you save a lot for a buy in, then a value based buy in would seem reasonable to me. On the other hand if the number is really small, or your salary is low compared to the partners and stays low, a value based buy in at partnership would seem more onerous. That's all I meant.

 

[LADoc00]

There is no industry standard in relation to partnership paths.

Im going to be honest as I think the entire concept of partnership path as it was known doesnt make a whole lot of sense to me considering you dont honestly need it to retain good employees anymore due to lousy job market. Even academics have done away with 'tenure for everyone' mentality and instituted what is essentially a perma-employee "clincal track" system.

You seem to have lucked out in my opinion, hope it works out.

My own feeling is that most group practice owners/founders should stay in control of the group and pass the reigns completely to their junior members upon their exit and not before. I think its insane to have someone with no business experience suddenly have equal share voting rights in a real company. I would guess 90% of pathologists are competely unprepared for such responsibilities (in addition to getting settled signing out cases).

I had it thrust upon me by situation and although it worked out very well, the stress endured I wouldnt wish on anyone.

Regardless, junior staff should take personal charge of their own business education from day 1 if they are planning on being a voting partner in only 4-5 years.

 

[BrainPathology]

I would guess 90% of pathologists are competely unprepared for such responsibilities (in addition to getting settled signing out cases).

I had it thrust upon me by situation and although it worked out very well, the stress endured I wouldnt wish on anyone.

Regardless, junior staff should take personal charge of their own business education from day 1 if they are planning on being a voting partner in only 4-5 years.

I've actually thought about this... I have a couple years experience managing a practice before going into medical school but I harbor no illusions about that translating into feeling like I have "depth of experience" when it comes time to make practice changing decisions.

I do have those 4 years though.. any ideas about how to spend them fruitfully? I do anticipate with the caseload everyone is responsible that I'll be getting my feet under me for the first 6 months to a year.

 

[Pathguy11]

I know what you were saying. I was just responding that the arbitrary number, when it changes to an actual number, is important to what I would say regarding what I'd want in the contract vs. the buy-in. So if that number is very large and the raises are correspondingly large letting you save a lot for a buy in, then a value based buy in would seem reasonable to me. On the other hand if the number is really small, or your salary is low compared to the partners and stays low, a value based buy in at partnership would seem more onerous. That's all I meant.

Thanks for the feedback. I see what you were saying now.

Pathguy11

 

[LADoc00]

I've actually thought about this... I have a couple years experience managing a practice before going into medical school but I harbor no illusions about that translating into feeling like I have "depth of experience" when it comes time to make practice changing decisions.

I do have those 4 years though.. any ideas about how to spend them fruitfully? I do anticipate with the caseload everyone is responsible that I'll be getting my feet under me for the first 6 months to a year.

depending on your location, I found a nice selection of introductory business and regulatory as well as healthcare law courses within driving distance. I spent about 2 years slogging through insurance regs., contract law and intro to biz finance (combination of community college and university extension) before I got a good handle on churning a practice. I didnt bother with any sort of degree program (eMBA, M.Fin. etc)

If you are super rural, you might have to rely on books from Amazon.com. I tried that at first, but was too lazy to read all of it without a course to encourage my competitive spirit.

 

[BrainPathology]

depending on your location, I found a nice selection of introductory business and regulatory as well as healthcare law courses within driving distance. I spent about 2 years slogging through insurance regs., contract law and intro to biz finance (combination of community college and university extension) before I got a good handle on churning a practice. I didnt bother with any sort of degree program (eMBA, M.Fin. etc)

If you are super rural, you might have to rely on books from Amazon.com. I tried that at first, but was too lazy to read all of it without a course to encourage my competitive spirit.

Thanks.. .it won't be rural and I believe there are 2 or 3 business schools within driving distance and possibly with online extensions. So I can almost certainly use that advice as a starting point.