Should you expand your practice by hiring an associate? To answer that question, you must carefully consider a number of factors. Here, I'll describe the measures you need to take of your practice and your market. I'll also offer some advice on identifying the best candidates for a new associate, as well as how to structure the agreements that will document your working relationship.

Whether to bring in an associate is a very different question for a physician in solo practice and a practice of two or more physicians. In some respects, for the solo ophthalmologist, it's similar to the internal conversation of a confirmed bachelor contemplating marriage. Having the autonomy of "running the show" without having to accommodate a partner's preferences is comfortable.

On the other hand, a practice of two or more physicians has its own advantages. First, the overhead costs of a solo practice are disproportionately high when expressed as a percentage of income. The average overhead of ophthalmology practices is 50% to 55% of income. However, many well-run solo ophthalmology practices have overhead costs of 60% to 75%, simply because office space and personnel costs, the largest components of practice overhead, can't be efficiently used by one physician. Adding one or two physicians to a solo practice can reduce the overhead by 10% to 25% of income.

Next, "partnership" allows for more effective and efficient coverage of evening and weekend call and vacations. Finally, and perhaps most importantly, a group practice is in a position to build a business, sharing management, the creativity and work required for new business development (optical dispensing, refractive surgery, etc.), and generally fulfilling the adage that "the whole is more than the sum of its parts."

As you consider whether adding an ophthalmologist to your practice will help or hinder you, evaluate the factors listed below. (These factors are valid for practices of any size.)

• Patient capacity.
Is your schedule full? Can you accommodate more patient visits and surgeries in your current practice configuration? If a patient calling today for a new patient evaluation has to wait longer than 2 to 4 weeks for an appointment, you need more capacity.
• Patient pool.
Is there a source of additional patients to provide a full practice for an additional physician?
• Physician succession.
Are one or more of the current physicians looking to exit the practice? Planning that exit should begin several years prior to the projected exit date in order to have an orderly succession and to obtain the maximum sale price for the practice.
• Ophthalmology and medical market.
Do too many ophthalmologists already practice in your area? A good ratio is one ophthalmologist per population of 30,000 to 40,000.
• Contracts.
Could a new associate gain membership on the managed care panels that are key to your practice? Are you able to serve all of the patients your present managed care contracts bring to the practice? Would patients from future contracts exceed your practice's capacity?
• Growth opportunities.
Are you considering adding a new location? There may be a growing community in your area that presents an opportunity that would require bringing in additional physicians.
• Ability to expand services.
You may be able to offer a set of subspecialty services with the addition of a physician who has training in that subspecialty.
• Practice facilities.
Do you have space for an added ophthalmologist in the current office? While I have clients who see 25 patients in a 3-hour clinic session in two lanes, three lanes per physician is more comfortable. Can your current space be expanded (lanes added)? This is generally a bigger issue for a solo ophthalmologist because a practice that already has two or more ophthalmologists can stagger office hours and use other tactics to accommodate added physicians.
• Staff considerations.
Will you have to add staff to accommodate an additional physician? This is generally a minor problem compared to space considerations.
• Management systems.
Are the practice's management systems expandable? If functions such as billing, appointment scheduling and patient recall are already stretched to capacity, they may not be able to accommodate another physician. The business office processes, as well as the computer system, may need to be upgraded.
On the other hand, if the new physician has an interest or experience in these management systems, that may be another incentive for expanding the practice.
• Financial performance.
If your practice's collection performance hasn't been optimal, bringing in an associate may cause difficulties. While a solo physician may have been satisfied with "just enough" income, the new associate may expect a higher level of collections.
• Capital requirements.
Adding a physician will cost money in the short-term. In the first several months of the new physician's employment, the practice will have a net loss because added income will not be in excess of increased costs.

Of course, there is no "perfect associate," any more than there is a perfect spouse. But you can increase your chances for a successful association by keeping these points in mind.

• Start your search early.
The best time to begin searching for a new associate is in the early fall of the year prior to the associate's anticipated start date. This will allow you to advertise and send letters to training programs and to set up meetings at the annual American Academy of Ophthalmology (AAO) conference in late October or early November. New graduates of ophthalmology training programs usually complete their training by June 30, so allowing 4 months for advertising, initial interviews, visits to the practice and selection will give you 2 to 3 months to negotiate an employment agreement and 3 months to get final signatures before the new associate comes on board.
• Consider hiring a seasoned ophthalmologist.
If you pursue a relocating physician, look carefully at his or her history since training, and examine the reason for the relocation. It may be as simple as a spouse's relocation for work or something as problematic as a form of misconduct. Due diligence will pay.

Choose your new associate carefully because just like a marriage, joining a practice is a lot easier to do than undo.

Here, again, are some points to consider:

• Practice style.
Does the potential associate like to spend time with patients or is he more interested in high volume? Does he have the same philosophy as you regarding surgery? Ask about his criteria for recommending cataract surgery to a patient and consider whether those criteria are similar to yours.
• Range of services.
If you're trying to expand your general ophthalmology practice, don't hire someone who only wants to do medical retina or refractive surgery.
• Work ethic.
Ask the candidate to define his or her commitment to the practice vs. outside interests, such as family.
• Management.
If you want someone who will share the management of the practice with you, make sure you bring in someone with those interests.
• Gender.
If all of the current physicians are male, a female associate will enhance the practice.
• Language.
In areas with heavy ethnic populations, a new associate of similar ethnicity, or at least someone who can speak the predominant language, will be a strong asset.

Once you've chosen your associate, you'll need to set up an agreement. This is an area where expert assistance is a necessity. Consult with an attorney who has lengthy experience in drafting physician employment agreements (including experience in untangling the results of an inadequate agreement when the partners attempt to dissolve their relationship). I won't provide the outline of an agreement, but I'll note some points the agreement should cover. (Also see "Preparing for an Exit" above.)

Make sure your agreement includes:

• base salary and threshold for bonus
• hours of service
• term of agreement (defines the length of employment before eligibility for change in status occurs)
• conditions for termination (As the practice owner, the termination clause should be under your control, and should, as much as possible, be "without cause." This is an area where expert legal advice more than pays for itself.)
• the conditions under which the employed physician can become an equity owner of the practice (The terms should include, "by mutual agreement," so there is no promise of the opportunity to buy a portion of the practice. The decision must remain yours, as the seller.)
• the formula for setting the price for "buying-in" to the practice
• the formula for distributing practice income among the equity owners
• The "buy-out" or "exit formula" for compensating a departing physician.

Hopefully, now that you're aware of the factors to consider before adding an associate, you can successfully navigate the path to practice expansion -- or choose to avoid the path and remain at your current size and configuration. Most practices do very well with new associates. It's the proper preparation and technique that produce the satisfactory outcome. OM

Asking yourself these five questions can help you determine whether adding an associate is right for your practice:

• Do I want to put up with the lifestyle change bringing on another physician would bring?
• Does the practice have sufficient additional patients to keep the new physician occupied and the practice profitable?
• Can the practice handle an additional physician (physical space, staff, management systems)?
• Can I afford to bring in another physician?
• Can I afford not to (lost opportunity)?

A structure for the exit of one of the ophthalmologists is perhaps the most important part of an employment agreement, and the one most sorely missed when there is an exit and the terms governing the exit are absent from the agreement. Addressing these points in the employment agreement can save you time, money and aggravation if a partnership doesn't work out. These terms must be ironed out:

• Patient charts
. Define who owns the charts and how they're to be delineated. An associated issue is who will have access to the patient database for mailings, etc.
• Non-compete area.
Indicate the area of geographic non-compete to prevent the departing associate from opening a new practice in close proximity to your office.
• The office
. Define who has the right to keep the primary office location when the dissolution is not for retirement.
• Staff.
Indicate whether the partner who is leaving has the right to solicit or hire existing staff.
• Patient notification.
Define the form and format of the notification of patients regarding the departing physician.

Ron Rosenberg, PA-C, MPH, is president of the Practice Management Resource Group, a full-service practice management consulting and outsourced billing and receivables management firm with offices in the San Francisco, Chicago and Philadelphia areas. He has led programs on practice financial performance for many medical professional organizations, and has written books on financial performance and capitation contracting. You can visit the PMRG Web site at www.medicalpmrg.com.