Partnering with a practice is not right for everyone. While some physicians may benefit from partnering, others may be better off passing on the opportunity. The decision to partner warrants considering both the current financial health of a practice, as well as what the practice’s financial trajectory. Employment lawyer Kate Dewberry and business transactional lawyer Dave Krosner, both of North Carolina-based law firm Poyner Spruill, LLP’s Healthcare division, have some suggestions for physicians considering partnership.
Ultimately, the decision to enter a partnership comes down to each specific physician’s personal preferences. According to Krosner, physicians should note that growing regulatory burdens tied to practicing medicine make it increasingly difficult to efficiently and profitably work in a small medical practice.
Compensation Elevated May Lead for Increased Financial Risk
Dewberry offers a positive element to partnering—the potential for increased compensation, as owners usually earn more than non-owners. However, compensation elevation may lead to an increased possibility for financial risk. For example, decreased financial predictability that accompanies partnership often leads to income that varies according to the practice’s performance. Dewberry also stresses that physicians in a partnership may see their income distributed at a less frequent rate when compared to non-partner distribution.
Partnering physicians must also be willing to accept the management responsibilities that come along with ownership. Dewberry notes that managing a practice, on top of caring for patients, may not be the best fit for certain doctors. Given that partnership is not a short-term option, physicians must familiarize themselves with all aspects of a practice, from partners to financial health, before committing to partnership. Dewberry stresses that physicians can face financial strain due to any noncompliant actions of a practice, and exiting a partnership is quite a difficult endeavor. As such, physicians should only consider a partnership that significantly invests in compliance and liability protections.
There are certain key red flags to bear in mind when deciding to join a partnership. For example, Dewberry notes that practices with a history of frequent partner turnover warrant significant investigation before a physicians opt for partnership there. Before entering a partnership, Dewberry suggests that physicians learn about any ownership interests held by the practice. If, for example, a practice owns their building location, physicians joining the practice should make sure to become owners of the real property entity. Potential partners should also obtain any historical data on the economics of ownership. This may include anything from previous buy-ins and distributions to any prior malpractice claims.