Private practice and partnership track... help...

[cmz]

I have this dilemma right now... I am about to start negotiations toward the buy-in of the existing path practice where I currently work and I am trying to wrap my head around what seems like a fair buy-in price or if this whole process is even worth it.

We have a small four person group (2 employee pathologists and 2 co-partner pathologists). The two co-partners are looking to scale back significantly over the next two-three years and be totally retired by that time. What has been stated to me thus far is that I would in essence be paying for their buy-out with time/increased RVUs. Why am I hesitant? I feel that there will be a bit of risk buying-in, right now, in the current climate. Anyone have any advice on how to approach this?

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[yaah]

If you're not actually paying any cash that is a different story though. 2-3 years of working longer hours may be worth it depending on your situation.

 

[Thrombus]

You are probably getting a great deal. I would research what companies are bought for as far as revenue and earnings, and do the arithmetic.

 

[pathstudent]

You got to do what you got to do, but I think they are trying to milk you. They have already profited off you by paying you a salary that is less than what you generated in revenue. That was in essence your "buy-in". Now it sounds like they want to go part-time without paying a part-timer. You could ask to see their books to see how worth it it is.

I am in a similarly sized group and when people retire here, they just get their Accounts Receivable. There is no "buy-out"

 

[schrute]

If you've been an employee for several years, an additional 2-3 yrs of employee non-partner status is bogus, but if you are now technically a partner (albeit one with a greater share of the work), you're in--I think it depends on what your status is the next 2-3 yrs.

Working for a period as an "employee" is generally equivalent to a "buy in", depending on how long you've been doing that. Also sort of depends on if you will be "buying into" a revenue stream that is generated through ownership of a lab or not--I presume your "buy in" entails a private lab in which you own the equipment?

 

[Sulfinator]

So your total time to partnership from employee status is 2-3 years plus however long you've been in the group up to this point? And then you will be a full partner with no other form of buy in (i.e., no cash payment to the group)? Depending on how long you've been with them already, I would think this could be really good. The group I am joining has a 3-5 year partnership track that you also buy into with cash once you become eligible (after your 3-5 years as an employee).

 

[coroner]

I assume you are one of the two employees and you’re ready to move upwards. When you were hired, were the future prospects with the group discussed (which should have been done during the interview process, though not necessarily put in writing) congruent with what you are being told now? i.e. If you stay here for X number of years you will qualify for partnership/buy-in which will cost Y and you can expect to earn Z, etc. Or are they trying to pull a fast one on you and change the verbally proposed expectations? How does the other employee fit in? Are they going to be offered the same track as you and if so how would that affect your RVU’s and income in the short and long run?

We had a former partner who kept wanting to milk the cow after he fully retired; but, since he was the sole proprietor of the practice there wasn’t much we could do. It was either buy him out upfront or continue paying him for the next 10 years even though he wasn't going to do even one day of work from that point on. When one of our contracts went bust, we didn’t have to pay him anything… Although we lost a big chunk of revenue…

You mentioned you’re hesitant in the current climate and I don’t blame you. Without knowing the specifics of the environment you’re in, there’s too many variables for me to evaluate the risk/reward opportunity e.g. financial status of the hospital, consolidation/buy-outs going on in your geographic area, etc. but most importantly, present status of the group with your hospital(s) i.e. how “safe” do you feel the group’s contract will be renewed during your tenure? And I stress present because legacy contracts are one the biggest straw-man beliefs a group can have. Just because you’ve been entrenched at the same place for the last 30+ years while living high off the hog doesn’t mean administration can’t window shop for the younger, hotter girlfriend. Old-timers are particularly guilty of this mentality

 

[schrute]

So you're total time to partnership from employee status is 2-3 years plus however long you've been in the group up to this point? And then you will be a full partner with no other form of buy in (i.e., no cash payment to the group)? Depending on how long you've been with them already, I would think this could be really good. The group I am joining has a 3-5 year partnership track that you also buy into with cash once you become eligible (after your 3-5 years as an employee).

3-5 yrs PLUS a cash buy in? I wouldn't consider that the norm or typical, much less a target to shoot for. Yes, getting into a private group while you still can is good, but if you're spending 5 yrs plus paying cash to do so, I'd look elsewhere unless the group is just outstanding and worth the wait.

 

[cmz]

No cash will exchange hands. The buy-in should be pretty straight forward as the only tangible things on the table is the goodwill that the current partners are providing. We don't own any equipment, there is no office, etc. I could wait until when the contract renewal is up and "snipe" it for myself, but I don't think I have it in me to take this kind of action.

The current set-up that I would be getting is a 20% -> 25% -> 33.3% share of the pie in a stepwise fashion over a three-year period where I would finally become an equal partner (this goes for the other associate, too). Overall, this is basically a 5 year partnership track in a less than desirable area. I'm not greedy, but I want to be compensated fairly. If I were in a bigger metro area in a sizable group, etc... I can see maybe a 5 yr track being the norm so to speak. It seems like I have more than "paid in" for the amount of work I've done to date (being employed for 2 yrs) -- on top of my general caseload, I've generated more revenue for the group by at least capturing other revenue sources (e.g. flow, FISH, etc). All in all, the "20%" share that I will immediately receive in a couple of months is maybe a 4% raise based on my own calculations. In the long run (if we maintain our current contracts), the partnership deal obviously makes more sense...

A few things come to mind as I haven't seen the "books" yet, so I don't know what sort of revenue we historically generate on a month to month basis. The transition to partnership would take place in the next couple of months, which historically occurs when we have a slight dip in our volume. Conceivably, I could see a scenario in which the current partners would benefit from this as they have already received a good portion of the expected yearly revenue.

 

[cmz]

I assume you are one of the two employees and you’re ready to move upwards. When you were hired, were the future prospects with the group discussed (which should have been done during the interview process, though not necessarily put in writing) congruent with what you are being told now? i.e. If you stay here for X number of years you will qualify for partnership/buy-in which will cost Y and you can expect to earn Z, etc. Or are they trying to pull a fast one on you and change the verbally proposed expectations? How does the other employee fit in? Are they going to be offered the same track as you and if so how would that affect your RVU’s and income in the short and long run?

Yes, I am one of the two employees moving upwards -- same compensation/same partnership agreement. When I was hired, I tried to negotiate a term for partnership and there is some vague terminology in the contract regarding that but obviously nothing binding. I basically had to move to the area for personal reasons; however, the job seemed good at the time and I wasn't going to let this one item deter me. So far, things have more than worked out in my favor. Regarding the compensation aspect, I would love to 'eat what I kill' (full allocation model of earning) in the current system, but we would probably continue with having a 'team-oriented system.'

We had a former partner who kept wanting to milk the cow after he fully retired; but, since he was the sole proprietor of the practice there wasn’t much we could do. It was either buy him out upfront or continue paying him for the next 10 years even though he wasn't going to do even one day of work from that point on. When one of our contracts went bust, we didn’t have to pay him anything… Although we lost a big chunk of revenue…

The transition time to step-down for one of the current partners is basically 2 years then they are PRN/locums at that point.

You mentioned you’re hesitant in the current climate and I don’t blame you. Without knowing the specifics of the environment you’re in, there’s too many variables for me to evaluate the risk/reward opportunity e.g. financial status of the hospital, consolidation/buy-outs going on in your geographic area, etc. but most importantly, present status of the group with your hospital(s) i.e. how “safe” do you feel the group’s contract will be renewed during your tenure? And I stress present because legacy contracts are one the biggest straw-man beliefs a group can have. Just because you’ve been entrenched at the same place for the last 30+ years while living high off the hog doesn’t mean administration can’t window shop for the younger, hotter girlfriend. Old-timers are particularly guilty of this mentality

I will say that I am not 100% confident in the financial status of the hospital in the coming years. I can easily see a decline in volume, and that is something that doesn't sit well with me at the moment. We sort of have what you described above as a "legacy" contract, but we also have new leaders at the helm. Do I feel 100% safe? Of course not.

 

[Tissue issue]

I guess I'm not sure what you are asking for help with. Do you have any other job options? Obviously I don't know your exact situation but I can comfortably tell you that there aren't many four person groups left. Which means chances are good things are going to change.

 

[cmz]

I was mostly looking for anyone's thoughts on how to approach this subject. Every group has a different way of handling partnership negotiations. I guess I will have to do what makes the most sense professionally and financially in the end.

Thanks for all the responses so far And yes, I do have a couple of other potential job options available to me... this sort of makes the decision that much more difficult. :\

 

[deleted314957]

Everything is different. I had to" buy in" for $230k in 1992 after 4 years as an associate with top salary with bonus at $160k +20K.
BUT, that year I made $7ooK, then $500k, then $600k, then $500k. Then we sold the business. The remainder of my career (17 years) I made about $400 with bonus and benefits.
This generally does not happen today. I hit the sweet spot. I've been retired for two years and do not keep up with what is going on.

 

[pathstudent]

What happens if you do nothing? Will they can you if you don't buy them out?

 

[cmz]

I don't think they will can me if I don't buy-in, but it would perhaps look extremely odd. I guess before I completely reject anything, we would attempt some sort of re-negotiations...

 

[Torsed]

Concerning the "eat what I kill mentality" I see Quest and LabCorp eating more of my meals. No way to stop them.

I don't know if small groups, etc. are going to survive I doubt it. The VA is looking more and more promising.

 

[Autopsy101]

How is the other employee? If this person is also in the partnership track in the near future, I would consider your working relationship with this person seriously in the equation. When the older members are out of the picture, can you see yourself working together with similar goals? Are they the type of person who pulls their weight in the group, goes the extra mile, or just does the bare minimum to get by? Together you will be making the rules for new employee members if you stay a small group of 4 people and negotiating with the hospital for your contract. Getting into a bad partnership where you don't have similar goals and expectations with other members is a bit like a bad marriage - you'll be looking for a divorce/other opportunities sooner or later.

 

[img4path]

Here is what I would recommend: Recommend a third party value the group and your buy-in. There are several lawyers, finance people well versed in buy-ins that will provide an objective assessment and several options for you and the group based on tax advantages. This will cost about 5K plus any travel expenses, but well worth it.

 

[univlad]

I have this dilemma right now... I am about to start negotiations toward the buy-in of the existing path practice where I currently work and I am trying to wrap my head around what seems like a fair buy-in price or if this whole process is even worth it.

We have a small four person group (2 employee pathologists and 2 co-partner pathologists). The two co-partners are looking to scale back significantly over the next two-three years and be totally retired by that time. What has been stated to me thus far is that I would in essence be paying for their buy-out with time/increased RVUs. Why am I hesitant? I feel that there will be a bit of risk buying-in, right now, in the current climate. Anyone have any advice on how to approach this?

How has this ended up working out in the end?

 

[cmz]

How has this ended up working out in the end?

I quit. Best decision of my life even though I generally liked who I worked with. The short story is that the practice that I left has become a shell of its former self. I ended up forming a partnership with another local pathologist -- we now have four hospital contracts and own an outpatient anatomic lab (GI, breast, cytology, flow cytometry, IHC etc). My gut instinct to leave was correct. Yes, I would have been a "partner" of a group but my ambition to venture out and grow the practice would have been stymied by the other partners. I would have been miserable. My inspiration to take this move came partly from my current partner but also from another local pathologist (young gun) who has made his name well-known in the area where I work. When you're in the right place at the right time, you have to act quickly before someone else does.

 

[LADoc00]

I quit. Best decision of my life even though I generally liked who I worked with. The short story is that the practice that I left has become a shell of its former self. I ended up forming a partnership with another local pathologist -- we now have four hospital contracts and own an outpatient anatomic lab (GI, breast, cytology, flow cytometry, IHC etc). My gut instinct to leave was correct. Yes, I would have been a "partner" of a group but my ambition to venture out and grow the practice would have been stymied by the other partners. I would have been miserable. My inspiration to take this move came partly from my current partner but also from another local pathologist (young gun) who has made his name well-known in the area where I work. When you're in the right place at the right time, you have to act quickly before someone else does.

Damn. Nice work. These are the stories that need more headline status for people coming up through the ranks.

 

[Zarniwoop]

Damn. Nice work. These are the stories that need more headline status for people coming up through the ranks.

Agreed. Very impressive, but a bit like sharing stories in the prison yard about the 1 guy who escaped through the laundry shoot, learned piano, and now tours with the NY philharmonic.

 

[stickyshift]

Agreed. Very impressive, but a bit like sharing stories in the prison yard about the 1 guy who escaped through the laundry shoot, learned piano, and now tours with the NY philharmonic.

There really was a guy who did that?

 

[coroner]

Agreed. Very impressive, but a bit like sharing stories in the prison yard about the 1 guy who escaped through the laundry shoot, learned piano, and now tours with the NY philharmonic.

…Replace the laundry chute with a sewer and NY philharmonic with a picturesque beach in Mexico and Shawshank Redemption comes to mind. Either way, well done CMZ!