In most cases, expanding the number of physician-owners of a group practice represents positive growth to the company. As a practice grows in size, it typically experiences an increase in market share, clinical income, surgical income, collective bargaining power and research opportunities. While these prospects may be exciting, growing a practice is a delicate business and it is paramount that both the associate provider and the existing ownership have prepared for this significant transition. Here are a few factors to consider in this process.

The “courtship” period

Most partnership tracks for eye surgeons range from 1.5 to 2.5 years. This important courtship period allows both parties to determine if there is adequate alignment of business and personal core values.

The evaluation process for partnership potential begins on day one for an employed surgeon. Early on, positive attitude and flexibility are key as an associate assimilates him- or herself into a new practice. The day-to-day patient and ancillary staff interactions are vital in determining fit for a new surgeon in the first few months.

As experience is gained, an associate with partnership potential should exemplify creative problem solving to staffing/management issues. It goes without saying that surgical outcomes and patient care quality are also paramount considerations for the physician owners as they consider adding a new partner.

If the above components are favorable during the employment period, the next step in preparing for a partnership transition is to begin including the employed physician in the decision-making process of the practice. It is important the potential owner understands “what’s under the hood” prior to making a long-term commitment to partnership.

There are some practical ways to make this possible. Associates should be invited to selected board meetings and included on board emails prior to becoming a voting member. These experiences allow the associate to observe how decisions are made within the organization and how the existing owners interact with each other. Inclusion in the business side of the practice is critical in establishing transparency, which builds trust and feeds the respect needed to create a solid long-term partnership. Finally, early inclusion in board meetings allows the associate to start thinking like an owner as it pertains to cost/benefit, overhead and staff satisfaction.

The buy-in

Assuming that both the existing owners and the associate are excited about the opportunity to formalize a partnership, several steps must take place to ensure success. First, there must be transparency in the valuation process of the practice — in other words, both parties should perceive fairness in the transaction.

In order to achieve this, the ownership must ensure uniformity/predictability whenever possible, and ideally there should be reference to practice valuation protocols within the contract negotiated at the time of hire. The most common example of this is using an agreed-upon multiple of the earnings before interest, taxes, depreciation and amortization (EBITDA) as the metric for practice valuation. Depending on the practice structure, a lot of value can be tied into assets and property. If so, it is essential that the employed physician is a part of the appraisal process and that standardized formulas are utilized.

If the ownership wants to make extensive changes to the process when the transaction is drawing near, that should be considered a red flag. That said, an associate must understand that, in any business, timing matters. Not every owner will have the same buy-in experience or buy-in costs. If differences exist among owners, there must be transparency as to why that is the case and how each transaction was handled. In my experience, the strongest practices are those in which buy-in contracts are structured in such a way that each owner ultimately has an equal share in the company.

Conclusion

Partnership is likely the most important relationship outside of family that a physician will encounter. Like any marriage, it will not always be perfect and there is not a recipe book that outlines each step.

Most recently, COVID taught us that we need to be prepared for difficult times. Earlier this year, many physician-owners were forced to go without pay to maintain income for their employees. Associates must realize that such sacrifices may come with the territory – making the idea of partnership and larger personal investments more intimidating in times of recession. On the other hand, practices should also highlight the profound benefits that come with ownership, including access to capital, opportunity for decreased tax burden and long-term diffusion of personal risk.

An associate’s successful transition to partnership within a group requires an alignment of personalities and values. When accompanied by a sound and equitable financial foundation, physician partners tend to have both very high job satisfaction and financially successful careers. OM

ABOUT THE AUTHOR

Zachary Zavodni, MD, is a cornea, cataract and refractive surgeon. He is the medical director of The Eye Institute of Utah in Salt Lake City. Dr. Zavodni holds clinical leadership roles in ASCRS and AAO. He routinely lectures on advanced surgical skills and practice administration topics. Email him at zzavodni@theeyeinstitute.com.