Partner or employee: How to decide

November 2, 2007

In today's shifting marketplace, becoming a practice partner may no longer be a matter of when, but if.

Key Points

For a doctor weighing the opportunity to become a practice partner, it's a buyer's market. Physicians are now scarce in most specialties, and hospitals and large multispecialty groups have stepped up their hiring. To remain competitive, small and medium-sized practices are offering better terms to job candidates, including higher starting salaries, reduced buy-in prices, and a shorter path to partnership.

The typical length of time that an associate has to wait before being offered a partnership has dropped from five years to two-or in some cases, to no time at all. Owners who delay too long or profit too much from the work of associates are likely to lose potential partners, who have no dearth of employment opportunities to choose from.

Before you conclude that this is the perfect time to buy into a practice, however, consider the other side of the equation: With income expectations down, a lot of physicians are anxiously looking for hospitals or large groups to buy their practices and employ them, notes Robert C. Bohlmann, an MGMA consultant in Arlington, TX. Because these "fire sales" usually involve the value of hard assets alone, they're dragging down the worth of other practices.

Find out what to expect

"It's in the interest of a doctor to get partnership terms specified up front, so that he has an idea of what he's getting into and can compare offers from different practices," says Daniel Bernick, vice president of The Health Care Group in Plymouth Meeting, PA. If an interviewer doesn't broach the subject, he adds, you should.

At a minimum, an employment agreement should specify the length of time the doctor must be employed before the owners will consider offering him a partnership and the criteria on which that decision will be based, says Bernick. In many groups, the criteria include not only productivity and clinical skills, but also an entrepreneurial bent and "good citizenship." That can mean anything from taking the initiative for developing referral sources to serving on committees, volunteering for managerial tasks, or covering for an ill colleague, says Gray Tuttle Jr., a consultant in Lansing, MI.

It's unlikely that a practice will tell an applicant or new hire how much a partnership will cost. But Gary Matthews, an Atlanta-based consultant, states that the methodology for calculating the cost should be included in the employment contract, and the candidate can use that to get a rough idea of the price.

Doctors who don't discuss this up front can be in for an unpleasant surprise. For example, a young physician in the Midwest was in his third year with an internal medicine group when he discovered that he'd have to pay $200,000 to buy in. He did a double take. The owners had said little about the partnership opportunity when he joined the practice, and he had neglected to ask. All he really knew-and it wasn't even in writing-was that he'd be considered for a partnership after five years with the group.

The internist was aware that the owners were making more than average for general internists, partly because of income from ancillaries that were part of what he'd be buying into. But with third-party reimbursement falling and malpractice premiums rising, he wasn't sure he'd ever see a return on what he suspected was an inflated investment.