Paying for your partner's mistakes
Q: I'm thinking about buying into a small family practice partnership. Would I be on the hook for any mistakes made by my partners before I joined the group?
A: No. That doesn't mean you won't get sued, but you'd most likely be quickly dismissed from the case.
Once you join the practice, however, it's a different story. Each physician is liable for the acts of his partners under general principles of partnership law. In a regular partnership, you may have to assume certain liabilities stemming from your colleagues' medical decisions and treatment, as well as office- and employment-related incidents, such as allegations of employee discrimination or sexual harassment.
Also, you could have liability if there are inadequate safety policies or incompetent doctors in the practice. The allegation against you might be that you were aware of serious problems but took no action to correct them.
Make sure you and your partners all have the same amount of malpractice insurance so you don't end up as the deepest pocket in any potential lawsuit. It's a good idea for all partners to be insured by the same company so that you can avail yourselves of a joint defense. Higher limits of liability may be available for the partnership as a whole. Ask your insurer about this coverage.
Because of this liability threat, many practices are set up as professional corporations. Under this arrangement, it's the corporation, and not the individual stockholder/physician, that can be held liable for a partner's actions. So medical negligence committed exclusively by one of the doctors in a professional corporation isn't a basis for liability against the other physicians.
Another option is to create a limited liability partnership, which is permitted in many states. With this form of ownership, you maintain the familiar structure of a partnership, but each doctor-partner is personally liable only for those acts of omission or commission performed by him or under his direct control or responsibility. If the practice you're joining isn't organized as a limited liability partnership, check to see whether your state permits this setup.
Liability issues are less clear when there's an informal co-venture, such as when doctors maintain independent practices but agree to share expenses and coverage. Courts have held that if patients are led to believe that the arrangement is a partnership, each doctor could be held liable for the actions of others in the expense-sharing group.
Although liability is an important element to consider when choosing the business structure you'll operate under, it's not the only one. Taxes, internal governance, and the culture of the group are equally important considerations.
No matter which corporate structure you choose, have an experienced attorney draw up a written agreement, clearly spelling out each physician's responsibilities and risk.
Lee Johnson. Malpractice Consult. Medical Economics 2001;18:98.