The Partnership Track

"When you buy into a partnership," says Carolyn Josey, "it's kind of like getting married. People have differences of opinion, from how patients are handled, to where the practice is located, to the color of paint on the wall."

Just as when choosing a life partner, it is important to carefully assess your options, making sure you know what you're getting into on the practice partnership track.

Potential physician partners "need to spend some time with each physician in the practice," says Josey, director of operations for Tidewater Multispecialty Group, a 40-physician practice in Newport News, Va. "The reality is there are personalities that they have to buy into."

"If things go OK," Josey adds, "[new hires] are going to be offered a partnership as they move through a given time frame. That should be outlined in their contracts. They should never go into a contract with [the time frame] left open."

Mike Fleischman, a principal and vice president of Atlanta-based practice management firm Gates, Moore & Co., concurs. "You can't do anything on a handshake anymore," he says.

The experts agree that partnership in a medical practice generally takes about two years for general practitioners, and about five years for specialists. Productivity is a standard measure for progress in all practice areas.

But don't simply assume that, after putting in your time, the role of partner is yours for the asking. "Partnership is not a given," says Brian McCartie, regional vice president of business development for physician recruitment firm Cejka & Co., in St. Louis. Find out what criteria each practice uses to determine who is eligible.

Mark Bair, MD, advises that, "If you are interviewing with a group that has not developed specific requirements for advancement, you should determine why. If that group is not willing to disclose, or simply does not want to make any promises, you should carefully reconsider," says Bair, an emergency physician at Timpanogos Regional Hospital and Mountainview Hospital in Utah, and immediate past president of the AMA Young Physicians Section.

So, what do these experts recommend for physicians who want to follow the partnership track? A combination of hard work and homework.

Active participation

"When physicians are looking at a partnership opportunity they need to do their homework," says McCartie. "They need to think about what [the package] looks like: the location, the practice style, and the compensation. They need to understand the overhead and how the physicians are compensated once they are partners."

Josey adds that physicians in search of potential new partners are "looking for good workers -- people who can hit the ground and move fairly quickly, and who are able to produce volume." She emphasizes that physicians who wish to be considered "partner material" need to be available for the long haul and work toward building the practice, typically with a goal of seeing 25 to 40 patients per day within their first couple of years.

"One thing I've noticed among recruits," Josey says, "is the attitude that 'I'm here, but I'm only available for a year,' or, 'I only want to work part-time.' You can't build a business that way. It takes a couple of years for young doctors to become very cost-effective. That's why there is that period of time before they become a partner. They can't generate enough money in the first year to pay their salary."

While productivity is a key indicator of likely future success, it's not the only one. "It's also about citizenship in the group," says McCartie. "By that I mean covering equal call, leading in initiatives, and building rapport in the community." In addition to ability, he adds, practices look for "availability, accessibility, and affability."

Start building the right connection with possible future partners at the first job interview. Because the pressure is high during the interview process, it's important to be sure the fit between the practice and potential partner is mutually beneficial. "New physicians will find that, as they interview with people, the group will be looking for specific qualities," says Bair. "My advice is not to be who they want you to be, but be who you want to be. Be yourself and you will find the best place for you."

Dig for details

What are some specific areas to explore up-front before deciding to sign on as a future partner?

Fleischman recommends that, before accepting a partnership-track position, physicians should "make several trips to the practice before they make a final decision, and certainly never look at just one opportunity. Look at a couple, just to have a point of reference.

"One huge consideration is whether your spouse is going to be happy," Fleischman adds. He also suggests looking into the relationships between the existing physicians. "There has to be a high level of respect for their clinical ability -- and how well they get along. Are they always fighting about money or how the practice is run? Have they recruited other partners who have left the practice after a year or two?"

Both Fleischman and Bair agree that, whenever possible, it helps to talk to hospital administration, physicians who refer to the practice, and nursing and support staff, to assess their impressions of how well the group works together. Sometimes, the perspective of outsiders is the clearest.

Since partnership in a medical practice brings financial benefits (and responsibilities), would-be partners do well to show that they are business-savvy. After all, the opportunity comes at a cost, namely buy-in to the practice.

Josey says future partners "need to understand the finances and ask questions like: how does your billing work, what is the number of days in accounts receivable, how often will I have call? They need to ask some very specific questions about what's going on in the business end of the operation."

Fleischman urges potential partners to "become familiar with terms like overhead percentages and gross collection rates and adjusted collection rates; be able to look at those numbers to see if [the practice is] well-run financially."

Finding value in buy-in

Once you've done your due diligence and met your productivity goals -- and have been offered a partnership -- then comes the big step: buying in. But how can that happen when your medical school loans are still looming large?

"Everybody is acutely aware of young physicians' budget constraints," says Josey. "In this practice, new physicians have the opportunity to earn some money that goes toward their buy-in, if their productivity is high. They might get to their three-year mark and owe nothing, so it's not so terribly painful." Similarly, McCartie says larger groups may offer a longer-than-usual partnership track so, in effect, future partners "work down" their buy-in.

Again, asking questions and setting expectations is crucial at this point in the process. "Certainly younger physicians need to ask questions about this so they're not surprised in a couple of years when it comes time for the buy-in," Fleischman says. "Typically, the value [of a practice] is attached to fixed assets, furniture, fixtures, and equipment; it may be attached minimally to supplies, and also possibly to accounts receivable. So the question is, how are these valued? If I'm looking at joining a group today, I know that in two years I'll be buying in, the value won't be the same. There needs to be a general understanding of determining the value of the practice," he says.

The actual cash outlay for new physician partners can range from zero (as in the arrangements Josey and McCartie describe) to several hundred thousand dollars. And, says McCartie, if a practice has additional revenue streams, such as labs, or "if there is real estate associated with the practice, then there is a fixed, tangible asset. So the physician is investing in a piece of real estate that will provide returns, and the buy-in becomes a kind of opportunity."

He adds that "the buy-in of six or seven years ago differs significantly from the buy-in of today. Back then, hospitals and medical centers were in a frenzy of buying practices; it was significant due to the 'goodwill' aspect [valuing a practice based on its reputation or strength in the community]. These days, goodwill has disappeared because it is not based on fixed assets or accounts receivable."

The real picture

Goodwill aside, some aspects of making partner still carry over from days past. For one, Josey says, "When young people come to interview, they need to look like professionals. Some of them seem to have missed that memo entirely. But the 'dress for success' concept is still pretty strong in this arena. You have to look like you're ready to go out into the real world."

Balancing the demands of patient care and the practice's business needs is also more important than ever. Josey suggests that new physicians focus on two areas that will help: first, find a mentor to emulate in building patient relationships; and second, know how to code. Both will increase productivity and job satisfaction.

"Coding is one of the huge gaps I see in the young people coming out of school," Josey says. "Medical schools say they don't have time to teach it. But if physicians can't make money, they can't survive and pay their loans back. If they are very good at coding, they can have higher productivity and not work any harder. It might mean that they want to see one or two more patients a day, so they can get that reward and not have to [pay at buy-in]."

Partnership has its benefits, according to Bair. "First is economic parity with other partners," he says. "All physicians have the same income-producing potential, whether we are two years or 20 years out of residency. In addition, partnership usually provides voting parity, to shape the policy and future of your group. Lastly, partnership can provide for various benefits that only partners can enjoy by law, like tax advantages, investment opportunities, or shared perks.

"Partnership can also have its drawbacks," Bair continues. "There are physicians who prefer not to be involved at the partner level and are just as content as employees of the group. There is nothing wrong with either choice. In fact, we are seeing a high percentage of our new physicians entering into employed positions.

"Personally," says Bair, "I think partnership is a good goal to try to achieve. It provides some security and control over your own destiny and future."

Joanne Tetrault, director of editorial services for Physicians Practice, can be reached at jtetrault@physicianspractice.com.

This article originally appeared in the July/August 2002 issue of Physicians Practice.