No announcement yet.

Buy-in question

First Prev Next Last
  • Filter
  • Time
  • Show
Clear All
new posts

  • Buy-in question

    My husband is starting with a radiology group in July (as of now--at least he is on the schedule!)

    His contract is such that he is an employee for 2 years with potential partnership (must be voted in) at the end of the 2 year period. He has a productivity provision that allows for an increase in salary if he consistently meets a certain RVU amount at 6 months. The first year equals the buy-in amount and we planned to just save that lump sum for the buy in should he make partner in 2 years. (He has been reading for them remotely on a locums basis already and it is very clear to him and the group that he will not have any issue meeting the RVU threshold).

    We know they are in a cash crunch like everyone else--volumes are down, etc but it appears they are doing okay enough for now based on what he has been told and what the list looks like. At any rate, we were mulling offering that the bonus could be held for 6 months to a year as a "credit" towards future partnership buy-in, with the (written) caveat that it would just be paid out at a later date if he was not voted in or chose not to buy in. Sort of a goodwill "trying to help out" as a new associate. We realize the biggest risk to this is that the group goes under, so it isn't something he would offer until he was on site and able to assess the situation in person a bit.

    1. The benefit to us would be that if it was held as a credit, we wouldn't be paying taxes on it as income. However, I'm not sure this is "kosher." Can anyone provide any insight on whether that is something that can be legally done?

    2. Anything else we are not considering that would make this a horrible idea?

  • #2
    I wouldn't bother. The group shouldn't be that strapped for cash. If they are, that's a bad sign.

    The owners should have plenty of room to reduce their own take home before they need to worry about essentially taking a loan from a future partner.


    • #3
      If you could have (legally) deferred bonus to use for buy-in, this would have been preferable whether or not COVID-19 pandemic was happening. Perhaps a CPA can comment, but I don't believe that is legal because you need to use after-tax dollars to buy shares of the partnership, and when a future partner buys from you, you only pay taxes on the difference (ie, capital gains). Would love to hear more on this specific situation, as it would apply to my future partnership.


      • #4
        Agreeing with the prior 2 posters ^^^. And wanted to add, if I were the owner/partner, I maybe possibly perhaps potentially see this as brown nosing. Especially from a fresh hire. I understand your spouse is wanting to help, but so early on I wouldn't recommend "rocking the boat". Just my opinion.
        "Oh look another bajillion point declin-Ooooh!!! A coupon for pizza!!!!" <--- This is what everyone's IPS should be. ✓✓✓


        • #5
          Run the discounted PV if those RVU raises compared to the buy-in in 2 years. Not much of an offer to the group.
          “My husband is starting with a radiology group in July (as of now--at least he is on the schedule!)”

          The volumes are the business concern in July and in 2 years. I think the pre-tax thought is clouding your calculations. Nice idea, can it.


          • #6
            Bonus wouldn't be due til December, so it wouldn't be coming up right away. I sure hope things are better by December, but with collection cycles it's possible they still will be hurting. Sounds like it cant happen for tax purposes anyway. Never considered the brown nosing aspect, just figured it is going to feel pretty horrible for him to potentially have to bring up, "Hey where's my bonus" when everyone else took a paycut. He isn't the only non-partner, just the newest.


            • #7
              •After pay-cut, the partners probably took home more in absolute terms.
              •Based in production, part of his volumes were likely contributed towards overhead and partners take home.

              Nothing wrong with asking when “incentive bonuses “ are scheduled to be paid. If nothing else, you might need to figure out FIT withholding. That can be presented as taking care of business. The thing to avoid is either enthusiast/critical reactions. Some may have an opposite situation. Good luck.


              • #8
                I have seen physicians buy-in using salary deferral. Deferring bonuses to buy-in is similar. As you pointed out there is a risk of losing the money if the group goes under. Other risk is the money not being properly accounted for when it comes time for the buy-in or you want the bonus later. My group tried salary deferral for one associate's buy-in and it was such an accounting headache we dropped it for future associates.

                Many radiology groups are seeing a sharp drop in volume. Screening mammography has been suspended in my area and outpatient imaging has significantly decreased. How quickly volume picks up after the pandemic passes is a big unknown.


                • #9
                  The bonus is based on his RVU production, and not some other arbitrary measure? Under the assumption he hits his thresholds under ordinary measures (i.e. not cherry picking a list), then he should just take the money. If volumes are down across the board, he might not be able to hit his productivity, so it doesn't matter. If he is cherry picking a list, then he may not get partner (it would be a red flag to me... ).


                  • #10
                    I would let things ride. We are in a period of significant upheaval, and the last thing the rad group wants to do right now is renegotiate the partnership buy-in for someone who has not even started yet.

                    As others have stated before, volumes have dropped substantially, on average between 50 and 75%. If they have not dropped by that much yet, they will soon. Each locality is suffering the same fate but on a different schedule depending on how much Covid is in their region and how proactive government officials and medical leaders have been to reduce elective services (which are about 70% radiology volume).

                    The rad partners are currently cutting their own salaries, and if volumes remain low for a while longer, there is a pretty good chance that they will approach you to renegotiate the deal. And it might be a downward revision of previous terms.