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Group sold to private equity before becoming partner—am I stupid to stay?

Home General/Welcome Group sold to private equity before becoming partner—am I stupid to stay?

  • q-school q-school 
    Participant
    Status: Physician
    Posts: 2640
    Joined: 05/07/2017

    In this case, 100k was offered?   I’m curious what the forum thinks is reasonable.  100k is a lot of money for someone who frankly isn’t a partner to be offered and the frustration seems misdirected at the partners.  When people talk about reasonable cut, what would be reasonable?

    Click to expand…

    $100k is chump change, almost an insult, to stay in a practice that might be struggling to survive in a few years, especially when the partners received 10x or more of that, and many partners will be disengaged and counting the days until they can retire. And good luck hiring some new rads to replace those that are leaving. I would recommend taking a job with another local group, if possible. I do not like the teleradiology option so much, but a lot of younger rads certainly do.

    I would have a tough time looking an associate in the eye if I sold them out like this. When we were going through the process to be bought out (ultimately dropped the deal), we were looking at making our valued late first year associate and expected future partner an immediate partner and including him the buy-in at 50% the partner cut. You are getting paid for the past AND the future.

    Click to expand…

    as you know these things are very complicated.  i agree that personally it is hard to look someone in the face after something like this.  however, having been in the partner situation during some of these discussions, the first thing that typically happens is a serious nondisclosure is signed.  now some may decide personally that they are going to ignore it and share with their associates, but i feel that if i sign a nondisclosure for any non partner, i have to honor it.   next the accountants move in and make valuations and blah blah blah.  negotiations are held.  this is happening over the course of months.    the fact of the practice sale is not an indictment of the partners.

    i have posted this before.  the legal advisors during the sale provided a professional opinion that 1) we could not tier the partnerships after starting the negotiations to reflect longevity.  1 share was 1 share, whether founding partner or partner of 1 mo duration.  2) we could not accelerate partnership for the associates after starting negotiations.  this was a national legal firm with expertise in these acquisitions.   it may not have been the only opinion, and it may not be universally correct, but after paying a ton of money for it and researching them prior to hiring them, we stuck with it.  the best we could do was negotiate something for the associates, recognizing that it would be a fraction of what the partnership (which they are not a member of yet) was sold for.  The valuation changes once it is known that the hospital or PE firm is interested in acquiring.  what was once a 500k buy would be a 1MM buy in.   nothing accomplished.

    having been in those negotiations, trying to squeeze an extra 100k per associate out is not easy.  and in the end, it is not guaranteed that the work environment would be worse.  and if it is, the associate would not want to be partner there anyway.   the timing is unfortunate.  however, there are no guarantees of partnership when joining a group.  they have no guarantee you are staying after the trial period either.  it is of course extremely disappointing to be so close, but once the sale reaches the tipping point, it is even harder to dissuade senior partners of the value of the sale to them personally.  some of them may have been waiting a few years for fear or missing out the sale.  for many many years, being hired for the first two years was not a guarantee of partnership.  in that in recent times it has become more of a sellers market than a buyers market.  but remember practices have good years and bad years.  there is a SORR to practice health as well.  maybe the partners know the practice won’t be as good.  maybe they read the tea leaves on insurance contracts or medicare reimbursements.  maybe they know the machines are about to break down, or partners are leaving.  maybe new groups are springing up.

    this is why physicians lose in the end.

    whoever controls the money, has the power.  if you don’t trust that physicians are acting ethically, and expect PE or hospital admin to act ‘more’ ethically, or at least trust that their rules are better than physician rules than we will continue to lose.  i’m not saying the situation worked out well for this young person.  i’m wondering how many of you will look your senior partner of a decade in the face and say i don’t want to be part of your retirement, which by the way will also guarantee your own FI, because our legal team tells us we can’t make associate A a partner.  meanwhile the senior guy says, nothing stopping you from gifting them the money from your share.  especially if you are going to get outvoted anyways.  do you quit?  do you make a stink?  i think it is very possible you wind up negotiating as hard as you can for them.  100k i’m telling you is a good negotiation in these settings.

    by the way, in the two buyouts i have been involved with, both groups did well after the buyout.  the practices didn’t disintegrate.  they continued to be successful at hiring and running a practice.  after a few years, people don’t remember all this stuff, they are more concerned with day to day running of the practice.  depends on how hands off the new owners are.  i’ve been on both sides.  missed by two months once.  was on partner side once by one year.  was a partner for many years in group that explored sale numerous times and never did.

    jmo.

    ymmv

    you may be better negotiators than us.

     

    Click to expand…

    The NDA thing makes me view this as even shadier.

    NDAs are basically always used by powerful people and entities to control weaker ones. They only ever go in one direction.

    What if you were facing a quality review for a bad case and you demanded that the members of the QI committee and the CMO of your hospital sign NDAs? They’d laugh in your face.

    This is another massive failure of the free market as the panacea for all that plagues healthcare. The free market dictates that partners in established groups sell out to PE firms at the highest possible dollar amount and that the least possible info be given to the grunts who then work at the minimum they can be paid while not actively looking to bail. Nothing about the free market conveys any rights or protection to the younger docs.

    Click to expand…

    are the quality discussions subject to protections from outside queries?   i believe they are in many states.

    in any case, NDA is an accepted part of the legal/business world.  whether we like it or not does not affect the accepted utility of the NDA.   i don’t have the expertise to debate your claim that NDAs are basically always used by powerful people and entities to control weaker ones.  i don’t believe that is their only purpose, but like i said it doesn’t matter what i think.

    i’m confused about the free market part.

    hope you are having a good day.

     

    Click to expand…

    Quality discussion might have been a bad example, my point is that junior docs/associates are not able to invoke NDAs against employers or partners seeking to keep stuff from them. NDAs are ridiculous.

    Of course they are an accepted part of the legal and business world. That’s the world we’re always lamenting has so much control over doctors and medicine. We are supposed to have professional ethics that are superior to the world of business.

    Click to expand…

    they are the employers.  employers always keep stuff from employees.   ultimately, an NDA is, a confidentiality agreement?  i read the article you link, and i don’t see that the author is proposing that this would be an in appropriate use of NDA.  but if you read that article and see otherwise, please educate me.  maybe it’s a generational thing-i don’t understand why someone who is not a partner would be expected to have 100% access to specific business management information.  yes, on many levels, new physicians are welcomed as partners to be, but this is not one of those areas.   i get that you are struggling with this concept in terms of fairness.  i hope that you can balance your beliefs with the fact that other reasonable people take the other side with equal certainty that it is at least not inherently unfair.  unequal certainly, but that is the nature of a privately owned entity.  i do think we as a profession have superior professional ethics to the business world.  i think marrying to the business side is where we can run into questions of ethics.   i don’t see this particular issue as clearly yes ethical/no ethical as i perceive many on this thread as being.

    more like social security.  i hear lots of people say they don’t trust social security and plan for it not being there.  i see it more like partnership not there until it’s there.  when i was in private practice, i never included partnership valuation in my net worth.  too far away, too many things could change.  i was never in a partnership with less than 25 physicians, so it was very obvious that you could be outvoted on any issue, including sale, assumption of debt, repricing of stock.

    regardless, without question, the risk should be considered when contemplating joining a practice.  any truthful answer to practice sale involves some form of–if the price is right.  i think the questions revolve around-what can be done for associates if that occurs.  what do they deserve?  what were legal obligations and what were expectations/hopes?  there are lawyers and experienced business people and accountants.  perhaps they could provide some comments.

    as always

    jmo

    ymmv

     

    Click to expand…

    I do see all sides of this. Frankly it sounds like you’ve been on the winning team but not the losing one (I’m reading into your posts) which would certainly color your impression of things. Sorry if I’m reading that wrong.

    This isn’t my world and realistically never will be. I’m just telling you how this has influenced my advising of residents as they look for jobs and I hope lurkers are taking note. I have a hard time telling them to go for these long buy-ins. I had a close friend do one and one provision of partnership was to live in a specific area. For family reasons she ended up not being able to live in this small suburb but had to stay in the metro <50 miles away to help care for ailing family members. She was #2 in productivity and had never missed a shift or been late. After her 3 year buy-in she asked for an exception to be made in the geographical provision. She was told no. Every partner in the group was willing to divvy up and pocket 10% of her comp each year as a penalty but then were shocked and hurt when she left.

    I wouldn’t be able to look myself in the mirror and hire an associate on a 3 year partnership track if I knew that my group was planning to seek out or discuss buy out within that time period. I think it’s grossly unethical to do so. Look, this doesn’t take much, you have to be honest with people and not act in your unilateral self-interest, or you can apply the Golden Rule. It’s kind of a minimal ethical standard.

    I am not saying that partners in a practice can never sell out or that every doc should get an equal share, we’re talking about a pretty narrow issue here raised by the OP — the selling of a group without any meaningful disclosure to associates and with apparently minimal care for said associates after the sale. I can also guarantee you that the partners most eagerly signing these NDAs and rubbing shoulders with private equity would be the most offended and butt-hurt if they were on the other side of the equation, left holding the bag as the associate given $100k after a multi-million dollar deal and now wondering about the future. Again, it comes down to ethical behavior and the golden rule.

    Click to expand…

    i know i typed a lot of information, but to repost-i missed a multimillion dollar buyout by not starting at the practice two months earlier.

    wasn’t butt hurt about it.  i hadn’t done anything to substantially build the practice so i really did feel that the people who had been partners for 2 mo only really got lucky–and i didn’t.

    in the end it changed nothing for me.  i reach fi a little slower.   it might have even been a blessing-if you think there is such a thing as too much too soon.  who can know?

    i guess i don’t know how to respond to your statement of seeing all sides and then alleging minimal ethical standard and unilateral self interest.  for me, it really doesn’t sound like you are actually seeing both sides.  but to each their own.

    i do appreciate the honest conversation.

     

     

     

    #227157 Reply
    Avatar dayman 
    Participant
    Status: Physician
    Posts: 77
    Joined: 12/09/2017

    Here is the flip side.

     

    Over the last several years I have had several people interview for associate positions in my practice, many of whom stated they would not pay any goodwill or that my practice wasn’t worth much if anything.  Along comes private equity and I have been offered seven figures…. I am sorry what happened to op and his situation is complicated  but when I think about market forces, who is being greedy the old timers or the spring chickens?  Your more than welcome to build your own, and I am more than welcome to sell mine to someone willing to write a check.

    Stay if it’s a good deal, leave if it’s not.

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    Sell if you want to sell. Just don’t convince a young doc to take a less desirable job by offering a partnership track that doesn’t exist. That’s the greedy part. They signed him for below market value pay, less vacation, less desirable hours etc by dangling a false carrot.

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    Perhaps groups should get reimbursed when new employee docs fail drug tests and go to rehab as well? Have malpractice claims? Just don’t fit in?   There lots of reasons why partnerships in life do not work out.   The reality is op is better off not being partnered with this group because of the way this was handled… it is either an expensive or cheap lesson depending on how you choose to look at it.

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    Yes, I would consider it unethical if associate doc has a drug problem affecting job performance and hid it from the group.

    Just don’t fit in? That’s pretty subjective, but could be a decent reason to not make someone partner. Ethical behavior would be answering honestly when an applicant asks how often that happens. If 6 of the last 7 associates “didn’t fit in”, good luck with hiring.

    “There are lots of reasons why partnerships in life do not work out.” True. The reason in this particular case is because the group hired him under false pretenses to increase the group’s value, hid negotiations from him while they were ongoing, and then sold out and gave him a pittance. You are right, he should learn from the experience and move on, that doesn’t change the fact that his colleagues are tools.

    #227170 Reply
    Avatar Bartl007 
    Participant
    Status: Physician
    Posts: 74
    Joined: 01/30/2016

    A few points from someone who went through this 1 yr ago and ended up staying (for now).

    1. Have an attorney familiar with radiology contracts review your old existing contract and new proposed contact.

    2. Tell them you won’t sign your new contract and see what they say (mostly as a negotiating strategy). Your current contract probably has an assignment clause that gives the employer responsibilities to the purchasing entity (PE group) after the sale is complete. It is possible to work for the PE group under the terms of your old contract and I did this for ~4 months until they agreed to the terms I wanted in the new contract.
    3. Know what your next best offer is and publicly put out feelers through drug and device reps in your metro area. In other words, have the reps put your name out there to hopefully get the news out in the community that you’re not happy and are looking around for better opportunities. Hopefully word will get back to your original practice owners and to the PE group so they know you’re serious about leaving.
    4. Be aware that anywhere you are considering going to (academia excluded) has likely received multiple offers to sell from PE groups and very well could be in talks to sell out right now…even the small one and two doctor groups. In my field (ophthalmology), I don’t know a single group (large or small) in our medium sized metro area that hasn’t had multiple offers and talks with PE and I’ve talked with almost all of them. Even small single doctor practices in rural areas are being offered, so don’t think that there is comfort if you find another private group that promises not to sell (everyone has a price).

    Know that you will continue to despise the owners who sold your portion of the practice to a third party without your consent or knowledge. The violation of trust is not something that goes away and it really depends on how often you have to interact with the original owners with respect to your ability to stay and put on a happy face.

    The good news is that you don’t have to be a partner in a group full of people that you can’t trust!

    Hope that helps. You’re not crazy for staying if that’s what you end up doing. It very well may be the best play at this point with all the buying and selling that’s going on.

    Sometimes the devil you know is better than the devil that you don’t know.

    #227200 Reply
    MPMD MPMD 
    Participant
    Status: Physician
    Posts: 2606
    Joined: 05/01/2017

    In this case, 100k was offered?   I’m curious what the forum thinks is reasonable.  100k is a lot of money for someone who frankly isn’t a partner to be offered and the frustration seems misdirected at the partners.  When people talk about reasonable cut, what would be reasonable?

    Click to expand…

    $100k is chump change, almost an insult, to stay in a practice that might be struggling to survive in a few years, especially when the partners received 10x or more of that, and many partners will be disengaged and counting the days until they can retire. And good luck hiring some new rads to replace those that are leaving. I would recommend taking a job with another local group, if possible. I do not like the teleradiology option so much, but a lot of younger rads certainly do.

    I would have a tough time looking an associate in the eye if I sold them out like this. When we were going through the process to be bought out (ultimately dropped the deal), we were looking at making our valued late first year associate and expected future partner an immediate partner and including him the buy-in at 50% the partner cut. You are getting paid for the past AND the future.

    Click to expand…

    as you know these things are very complicated.  i agree that personally it is hard to look someone in the face after something like this.  however, having been in the partner situation during some of these discussions, the first thing that typically happens is a serious nondisclosure is signed.  now some may decide personally that they are going to ignore it and share with their associates, but i feel that if i sign a nondisclosure for any non partner, i have to honor it.   next the accountants move in and make valuations and blah blah blah.  negotiations are held.  this is happening over the course of months.    the fact of the practice sale is not an indictment of the partners.

    i have posted this before.  the legal advisors during the sale provided a professional opinion that 1) we could not tier the partnerships after starting the negotiations to reflect longevity.  1 share was 1 share, whether founding partner or partner of 1 mo duration.  2) we could not accelerate partnership for the associates after starting negotiations.  this was a national legal firm with expertise in these acquisitions.   it may not have been the only opinion, and it may not be universally correct, but after paying a ton of money for it and researching them prior to hiring them, we stuck with it.  the best we could do was negotiate something for the associates, recognizing that it would be a fraction of what the partnership (which they are not a member of yet) was sold for.  The valuation changes once it is known that the hospital or PE firm is interested in acquiring.  what was once a 500k buy would be a 1MM buy in.   nothing accomplished.

    having been in those negotiations, trying to squeeze an extra 100k per associate out is not easy.  and in the end, it is not guaranteed that the work environment would be worse.  and if it is, the associate would not want to be partner there anyway.   the timing is unfortunate.  however, there are no guarantees of partnership when joining a group.  they have no guarantee you are staying after the trial period either.  it is of course extremely disappointing to be so close, but once the sale reaches the tipping point, it is even harder to dissuade senior partners of the value of the sale to them personally.  some of them may have been waiting a few years for fear or missing out the sale.  for many many years, being hired for the first two years was not a guarantee of partnership.  in that in recent times it has become more of a sellers market than a buyers market.  but remember practices have good years and bad years.  there is a SORR to practice health as well.  maybe the partners know the practice won’t be as good.  maybe they read the tea leaves on insurance contracts or medicare reimbursements.  maybe they know the machines are about to break down, or partners are leaving.  maybe new groups are springing up.

    this is why physicians lose in the end.

    whoever controls the money, has the power.  if you don’t trust that physicians are acting ethically, and expect PE or hospital admin to act ‘more’ ethically, or at least trust that their rules are better than physician rules than we will continue to lose.  i’m not saying the situation worked out well for this young person.  i’m wondering how many of you will look your senior partner of a decade in the face and say i don’t want to be part of your retirement, which by the way will also guarantee your own FI, because our legal team tells us we can’t make associate A a partner.  meanwhile the senior guy says, nothing stopping you from gifting them the money from your share.  especially if you are going to get outvoted anyways.  do you quit?  do you make a stink?  i think it is very possible you wind up negotiating as hard as you can for them.  100k i’m telling you is a good negotiation in these settings.

    by the way, in the two buyouts i have been involved with, both groups did well after the buyout.  the practices didn’t disintegrate.  they continued to be successful at hiring and running a practice.  after a few years, people don’t remember all this stuff, they are more concerned with day to day running of the practice.  depends on how hands off the new owners are.  i’ve been on both sides.  missed by two months once.  was on partner side once by one year.  was a partner for many years in group that explored sale numerous times and never did.

    jmo.

    ymmv

    you may be better negotiators than us.

     

    Click to expand…

    The NDA thing makes me view this as even shadier.

    NDAs are basically always used by powerful people and entities to control weaker ones. They only ever go in one direction.

    What if you were facing a quality review for a bad case and you demanded that the members of the QI committee and the CMO of your hospital sign NDAs? They’d laugh in your face.

    This is another massive failure of the free market as the panacea for all that plagues healthcare. The free market dictates that partners in established groups sell out to PE firms at the highest possible dollar amount and that the least possible info be given to the grunts who then work at the minimum they can be paid while not actively looking to bail. Nothing about the free market conveys any rights or protection to the younger docs.

    Click to expand…

    are the quality discussions subject to protections from outside queries?   i believe they are in many states.

    in any case, NDA is an accepted part of the legal/business world.  whether we like it or not does not affect the accepted utility of the NDA.   i don’t have the expertise to debate your claim that NDAs are basically always used by powerful people and entities to control weaker ones.  i don’t believe that is their only purpose, but like i said it doesn’t matter what i think.

    i’m confused about the free market part.

    hope you are having a good day.

     

    Click to expand…

    Quality discussion might have been a bad example, my point is that junior docs/associates are not able to invoke NDAs against employers or partners seeking to keep stuff from them. NDAs are ridiculous.

    Of course they are an accepted part of the legal and business world. That’s the world we’re always lamenting has so much control over doctors and medicine. We are supposed to have professional ethics that are superior to the world of business.

    Click to expand…

    they are the employers.  employers always keep stuff from employees.   ultimately, an NDA is, a confidentiality agreement?  i read the article you link, and i don’t see that the author is proposing that this would be an in appropriate use of NDA.  but if you read that article and see otherwise, please educate me.  maybe it’s a generational thing-i don’t understand why someone who is not a partner would be expected to have 100% access to specific business management information.  yes, on many levels, new physicians are welcomed as partners to be, but this is not one of those areas.   i get that you are struggling with this concept in terms of fairness.  i hope that you can balance your beliefs with the fact that other reasonable people take the other side with equal certainty that it is at least not inherently unfair.  unequal certainly, but that is the nature of a privately owned entity.  i do think we as a profession have superior professional ethics to the business world.  i think marrying to the business side is where we can run into questions of ethics.   i don’t see this particular issue as clearly yes ethical/no ethical as i perceive many on this thread as being.

    more like social security.  i hear lots of people say they don’t trust social security and plan for it not being there.  i see it more like partnership not there until it’s there.  when i was in private practice, i never included partnership valuation in my net worth.  too far away, too many things could change.  i was never in a partnership with less than 25 physicians, so it was very obvious that you could be outvoted on any issue, including sale, assumption of debt, repricing of stock.

    regardless, without question, the risk should be considered when contemplating joining a practice.  any truthful answer to practice sale involves some form of–if the price is right.  i think the questions revolve around-what can be done for associates if that occurs.  what do they deserve?  what were legal obligations and what were expectations/hopes?  there are lawyers and experienced business people and accountants.  perhaps they could provide some comments.

    as always

    jmo

    ymmv

     

    Click to expand…

    I do see all sides of this. Frankly it sounds like you’ve been on the winning team but not the losing one (I’m reading into your posts) which would certainly color your impression of things. Sorry if I’m reading that wrong.

    This isn’t my world and realistically never will be. I’m just telling you how this has influenced my advising of residents as they look for jobs and I hope lurkers are taking note. I have a hard time telling them to go for these long buy-ins. I had a close friend do one and one provision of partnership was to live in a specific area. For family reasons she ended up not being able to live in this small suburb but had to stay in the metro <50 miles away to help care for ailing family members. She was #2 in productivity and had never missed a shift or been late. After her 3 year buy-in she asked for an exception to be made in the geographical provision. She was told no. Every partner in the group was willing to divvy up and pocket 10% of her comp each year as a penalty but then were shocked and hurt when she left.

    I wouldn’t be able to look myself in the mirror and hire an associate on a 3 year partnership track if I knew that my group was planning to seek out or discuss buy out within that time period. I think it’s grossly unethical to do so. Look, this doesn’t take much, you have to be honest with people and not act in your unilateral self-interest, or you can apply the Golden Rule. It’s kind of a minimal ethical standard.

    I am not saying that partners in a practice can never sell out or that every doc should get an equal share, we’re talking about a pretty narrow issue here raised by the OP — the selling of a group without any meaningful disclosure to associates and with apparently minimal care for said associates after the sale. I can also guarantee you that the partners most eagerly signing these NDAs and rubbing shoulders with private equity would be the most offended and butt-hurt if they were on the other side of the equation, left holding the bag as the associate given $100k after a multi-million dollar deal and now wondering about the future. Again, it comes down to ethical behavior and the golden rule.

    Click to expand…

    i know i typed a lot of information, but to repost-i missed a multimillion dollar buyout by not starting at the practice two months earlier.

    wasn’t butt hurt about it.  i hadn’t done anything to substantially build the practice so i really did feel that the people who had been partners for 2 mo only really got lucky–and i didn’t.

    in the end it changed nothing for me.  i reach fi a little slower.   it might have even been a blessing-if you think there is such a thing as too much too soon.  who can know?

    i guess i don’t know how to respond to your statement of seeing all sides and then alleging minimal ethical standard and unilateral self interest.  for me, it really doesn’t sound like you are actually seeing both sides.  but to each their own.

    i do appreciate the honest conversation.

     

     

     

    Click to expand…

    Ah sorry something you had posted made it sound like you had been the recipient of a buy-out.

    On the point of seeing all sides/ethical standard: I can understand how a partner feels they have built something and doesn’t owe an associate anything. I’m not saying that ethical standards dictate a massive payout to a brand-new, untested associate. I’m saying that ethical standards (if not the law, an NDA, or the policy of PE firms) dictate disclosure to prospective associates that you are in this process. It’s very simple, if a group is in negotiations with a PE firm or casting about for offers I don’t think they should place an associate on a typical buy-in period. The point of the buy-in is the EXPLICIT (not to mention implicit) idea that the associate will do some kind of supplication in exchange for full partnership/money/influence. If you are never planning to let them get there then those dollars taken out of their pocket are essentially stolen.

    I can speak from years of experience on this, young docs looking for their first or maybe second job really don’t understand that they are a commodity. They are still in the med school/Match mindset of “please take me oh great Avatar of Training (or Money).” I spend hours each year trying to coach them to advocate for themselves and ask the right questions, they are all worried that they are going to piss off a medical director and have a job prospect pulled.

    We need to protect these young docs, that’s what WCI mission is all about right? Fight burnout through wise decisions and guidance. I wish I could tell my grads to ask these SDGs if they are going to bought out or if they are looking to sell but I known damned well the question wouldn’t be appreciated and I sadly wouldn’t even expect it to be answered honestly. Kind of sad when you consider how much the associate is investing.

    #227204 Reply
    MPMD MPMD 
    Participant
    Status: Physician
    Posts: 2606
    Joined: 05/01/2017

    who is being greedy the old timers or the spring chickens?

    Click to expand…

    Both.

     

    Yeah I am not in favor of those and we don’t have them, but if you sign the contract whose fault is that?

    Click to expand…

    It’s both the fault of the person signing it and the people writing them.

     

     

    Click to expand…

    Perhaps groups should get reimbursed when new employee docs fail drug tests and go to rehab as well? Have malpractice claims? Just don’t fit in?   There lots of reasons why partnerships in life do not work out.   The reality is op is better off not being partnered with this group because of the way this was handled… it is either an expensive or cheap lesson depending on how you choose to look at it.

    Click to expand…

    Groups with partnership buy-ins ARE being compensated when stuff like this happens, that’s the point.

    Click to expand…

    I agree with your first two points completely, never heard of a group coming after an associate for damages not listed in a contract.  Can you help me understand this third point?

    Click to expand…

    I’m just talking about the money being held back from the associate during the buy in, assuming there is any.

    #227206 Reply
    q-school q-school 
    Participant
    Status: Physician
    Posts: 2640
    Joined: 05/07/2017

    In this case, 100k was offered?   I’m curious what the forum thinks is reasonable.  100k is a lot of money for someone who frankly isn’t a partner to be offered and the frustration seems misdirected at the partners.  When people talk about reasonable cut, what would be reasonable?

    Click to expand…

    $100k is chump change, almost an insult, to stay in a practice that might be struggling to survive in a few years, especially when the partners received 10x or more of that, and many partners will be disengaged and counting the days until they can retire. And good luck hiring some new rads to replace those that are leaving. I would recommend taking a job with another local group, if possible. I do not like the teleradiology option so much, but a lot of younger rads certainly do.

    I would have a tough time looking an associate in the eye if I sold them out like this. When we were going through the process to be bought out (ultimately dropped the deal), we were looking at making our valued late first year associate and expected future partner an immediate partner and including him the buy-in at 50% the partner cut. You are getting paid for the past AND the future.

    Click to expand…

    as you know these things are very complicated.  i agree that personally it is hard to look someone in the face after something like this.  however, having been in the partner situation during some of these discussions, the first thing that typically happens is a serious nondisclosure is signed.  now some may decide personally that they are going to ignore it and share with their associates, but i feel that if i sign a nondisclosure for any non partner, i have to honor it.   next the accountants move in and make valuations and blah blah blah.  negotiations are held.  this is happening over the course of months.    the fact of the practice sale is not an indictment of the partners.

    i have posted this before.  the legal advisors during the sale provided a professional opinion that 1) we could not tier the partnerships after starting the negotiations to reflect longevity.  1 share was 1 share, whether founding partner or partner of 1 mo duration.  2) we could not accelerate partnership for the associates after starting negotiations.  this was a national legal firm with expertise in these acquisitions.   it may not have been the only opinion, and it may not be universally correct, but after paying a ton of money for it and researching them prior to hiring them, we stuck with it.  the best we could do was negotiate something for the associates, recognizing that it would be a fraction of what the partnership (which they are not a member of yet) was sold for.  The valuation changes once it is known that the hospital or PE firm is interested in acquiring.  what was once a 500k buy would be a 1MM buy in.   nothing accomplished.

    having been in those negotiations, trying to squeeze an extra 100k per associate out is not easy.  and in the end, it is not guaranteed that the work environment would be worse.  and if it is, the associate would not want to be partner there anyway.   the timing is unfortunate.  however, there are no guarantees of partnership when joining a group.  they have no guarantee you are staying after the trial period either.  it is of course extremely disappointing to be so close, but once the sale reaches the tipping point, it is even harder to dissuade senior partners of the value of the sale to them personally.  some of them may have been waiting a few years for fear or missing out the sale.  for many many years, being hired for the first two years was not a guarantee of partnership.  in that in recent times it has become more of a sellers market than a buyers market.  but remember practices have good years and bad years.  there is a SORR to practice health as well.  maybe the partners know the practice won’t be as good.  maybe they read the tea leaves on insurance contracts or medicare reimbursements.  maybe they know the machines are about to break down, or partners are leaving.  maybe new groups are springing up.

    this is why physicians lose in the end.

    whoever controls the money, has the power.  if you don’t trust that physicians are acting ethically, and expect PE or hospital admin to act ‘more’ ethically, or at least trust that their rules are better than physician rules than we will continue to lose.  i’m not saying the situation worked out well for this young person.  i’m wondering how many of you will look your senior partner of a decade in the face and say i don’t want to be part of your retirement, which by the way will also guarantee your own FI, because our legal team tells us we can’t make associate A a partner.  meanwhile the senior guy says, nothing stopping you from gifting them the money from your share.  especially if you are going to get outvoted anyways.  do you quit?  do you make a stink?  i think it is very possible you wind up negotiating as hard as you can for them.  100k i’m telling you is a good negotiation in these settings.

    by the way, in the two buyouts i have been involved with, both groups did well after the buyout.  the practices didn’t disintegrate.  they continued to be successful at hiring and running a practice.  after a few years, people don’t remember all this stuff, they are more concerned with day to day running of the practice.  depends on how hands off the new owners are.  i’ve been on both sides.  missed by two months once.  was on partner side once by one year.  was a partner for many years in group that explored sale numerous times and never did.

    jmo.

    ymmv

    you may be better negotiators than us.

     

    Click to expand…

    The NDA thing makes me view this as even shadier.

    NDAs are basically always used by powerful people and entities to control weaker ones. They only ever go in one direction.

    What if you were facing a quality review for a bad case and you demanded that the members of the QI committee and the CMO of your hospital sign NDAs? They’d laugh in your face.

    This is another massive failure of the free market as the panacea for all that plagues healthcare. The free market dictates that partners in established groups sell out to PE firms at the highest possible dollar amount and that the least possible info be given to the grunts who then work at the minimum they can be paid while not actively looking to bail. Nothing about the free market conveys any rights or protection to the younger docs.

    Click to expand…

    are the quality discussions subject to protections from outside queries?   i believe they are in many states.

    in any case, NDA is an accepted part of the legal/business world.  whether we like it or not does not affect the accepted utility of the NDA.   i don’t have the expertise to debate your claim that NDAs are basically always used by powerful people and entities to control weaker ones.  i don’t believe that is their only purpose, but like i said it doesn’t matter what i think.

    i’m confused about the free market part.

    hope you are having a good day.

     

    Click to expand…

    Quality discussion might have been a bad example, my point is that junior docs/associates are not able to invoke NDAs against employers or partners seeking to keep stuff from them. NDAs are ridiculous.

    Of course they are an accepted part of the legal and business world. That’s the world we’re always lamenting has so much control over doctors and medicine. We are supposed to have professional ethics that are superior to the world of business.

    Click to expand…

    they are the employers.  employers always keep stuff from employees.   ultimately, an NDA is, a confidentiality agreement?  i read the article you link, and i don’t see that the author is proposing that this would be an in appropriate use of NDA.  but if you read that article and see otherwise, please educate me.  maybe it’s a generational thing-i don’t understand why someone who is not a partner would be expected to have 100% access to specific business management information.  yes, on many levels, new physicians are welcomed as partners to be, but this is not one of those areas.   i get that you are struggling with this concept in terms of fairness.  i hope that you can balance your beliefs with the fact that other reasonable people take the other side with equal certainty that it is at least not inherently unfair.  unequal certainly, but that is the nature of a privately owned entity.  i do think we as a profession have superior professional ethics to the business world.  i think marrying to the business side is where we can run into questions of ethics.   i don’t see this particular issue as clearly yes ethical/no ethical as i perceive many on this thread as being.

    more like social security.  i hear lots of people say they don’t trust social security and plan for it not being there.  i see it more like partnership not there until it’s there.  when i was in private practice, i never included partnership valuation in my net worth.  too far away, too many things could change.  i was never in a partnership with less than 25 physicians, so it was very obvious that you could be outvoted on any issue, including sale, assumption of debt, repricing of stock.

    regardless, without question, the risk should be considered when contemplating joining a practice.  any truthful answer to practice sale involves some form of–if the price is right.  i think the questions revolve around-what can be done for associates if that occurs.  what do they deserve?  what were legal obligations and what were expectations/hopes?  there are lawyers and experienced business people and accountants.  perhaps they could provide some comments.

    as always

    jmo

    ymmv

     

    Click to expand…

    I do see all sides of this. Frankly it sounds like you’ve been on the winning team but not the losing one (I’m reading into your posts) which would certainly color your impression of things. Sorry if I’m reading that wrong.

    This isn’t my world and realistically never will be. I’m just telling you how this has influenced my advising of residents as they look for jobs and I hope lurkers are taking note. I have a hard time telling them to go for these long buy-ins. I had a close friend do one and one provision of partnership was to live in a specific area. For family reasons she ended up not being able to live in this small suburb but had to stay in the metro <50 miles away to help care for ailing family members. She was #2 in productivity and had never missed a shift or been late. After her 3 year buy-in she asked for an exception to be made in the geographical provision. She was told no. Every partner in the group was willing to divvy up and pocket 10% of her comp each year as a penalty but then were shocked and hurt when she left.

    I wouldn’t be able to look myself in the mirror and hire an associate on a 3 year partnership track if I knew that my group was planning to seek out or discuss buy out within that time period. I think it’s grossly unethical to do so. Look, this doesn’t take much, you have to be honest with people and not act in your unilateral self-interest, or you can apply the Golden Rule. It’s kind of a minimal ethical standard.

    I am not saying that partners in a practice can never sell out or that every doc should get an equal share, we’re talking about a pretty narrow issue here raised by the OP — the selling of a group without any meaningful disclosure to associates and with apparently minimal care for said associates after the sale. I can also guarantee you that the partners most eagerly signing these NDAs and rubbing shoulders with private equity would be the most offended and butt-hurt if they were on the other side of the equation, left holding the bag as the associate given $100k after a multi-million dollar deal and now wondering about the future. Again, it comes down to ethical behavior and the golden rule.

    Click to expand…

    i know i typed a lot of information, but to repost-i missed a multimillion dollar buyout by not starting at the practice two months earlier.

    wasn’t butt hurt about it.  i hadn’t done anything to substantially build the practice so i really did feel that the people who had been partners for 2 mo only really got lucky–and i didn’t.

    in the end it changed nothing for me.  i reach fi a little slower.   it might have even been a blessing-if you think there is such a thing as too much too soon.  who can know?

    i guess i don’t know how to respond to your statement of seeing all sides and then alleging minimal ethical standard and unilateral self interest.  for me, it really doesn’t sound like you are actually seeing both sides.  but to each their own.

    i do appreciate the honest conversation.

     

     

     

    Click to expand…

    Ah sorry something you had posted made it sound like you had been the recipient of a buy-out.

    On the point of seeing all sides/ethical standard: I can understand how a partner feels they have built something and doesn’t owe an associate anything. I’m not saying that ethical standards dictate a massive payout to a brand-new, untested associate. I’m saying that ethical standards (if not the law, an NDA, or the policy of PE firms) dictate disclosure to prospective associates that you are in this process. It’s very simple, if a group is in negotiations with a PE firm or casting about for offers I don’t think they should place an associate on a typical buy-in period. The point of the buy-in is the EXPLICIT (not to mention implicit) idea that the associate will do some kind of supplication in exchange for full partnership/money/influence. If you are never planning to let them get there then those dollars taken out of their pocket are essentially stolen.

    I can speak from years of experience on this, young docs looking for their first or maybe second job really don’t understand that they are a commodity. They are still in the med school/Match mindset of “please take me oh great Avatar of Training (of money).” I spend hours each year trying to coach them to advocate for themselves and ask the right questions, they are all worried that they are going to piss off a medical director and have a job prospect pulled.

    We need to protect these young docs, that’s what WCI mission is all about right? Fight burnout through wise decisions and guidance. I wish I could tell my grads to ask these SDGs if they are going to bought out or if they are looking to sell but I known damned well the question wouldn’t be appreciated and I sadly wouldn’t even expect it to be answered honestly. Kind of sad when you consider how much the associate is investing.

    Click to expand…

    is the associate investing more or the practice investing more?  i think you have a very one sided view of the relationship is all i’m saying.  if the associates are commodities, everyone is a commodity.  i think you view the buyout as more of a given than my experiences have been.  many times they break down before being completed.  sometimes there are no plans to sell but laws change (stark 4).  i think you are right to caution them of the possibility of a buyout, but what can be done about it is unclear (to me).   but lets agree that all practices are potentially for sale if the price is right.  people should consider that possibility when considering a private practice group.

    i’m not sure that protecting young physicians is the mission.  i think education is the mission.  everyone still has to find their own path.  may be different than the one i would choose but still right for them.  sometimes young adults do whatever they think is right anyways.  sometimes it works out even though statistically unlikely.

    🙂

    #227242 Reply
    CordMcNally CordMcNally 
    Participant
    Status: Physician
    Posts: 3052
    Joined: 01/03/2017

    The reason in this particular case is because the group hired him under false pretenses to increase the group’s value, hid negotiations from him while they were ongoing, and then sold out and gave him a pittance. You are right, he should learn from the experience and move on, that doesn’t change the fact that his colleagues are tools.

    Click to expand…

    Now you’re just making comments under assumptions that may very well be false. I’ll assume his partnership track was at least 2 years and he said he had under a year to go. I doubt they hired him and had him start on the same day. I’ll also assume that they hired him months before his official start date. I would doubt that negotiations had been going on that long and that they didn’t hire him under false pretenses as you state. True, they did give him a pittance but that was also more than he was owed. This situation doesn’t mean his colleagues are tools. It’s a difficult situation, sure, but difficult situations and decisions don’t automatically make someone a tool.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #227245 Reply
    Liked by q-school
    Avatar Kamban 
    Participant
    Status: Physician
    Posts: 2577
    Joined: 08/01/2016

    What is boils down to is that a pre-partner should not be taken advantage of. But at the same time there is no obligation to pay him anything close to a equal percentage in the buyout compared to one who has been there for 20+ years.

    If I were starting out now with a PP group I would ask for a salary similar to an employee in a hospital – no expectation of ownership and no getting less money in return. So if the sale goes through, you have really not lost any income. And if you have been offered partnership and start a buy out of your stake of ownership, then you should get the equal shared percentage minus the remaining buyout money.

    But if you choose to accept less pay for the years you work before you become a partner on the understanding that this is sweat equity, I would try and include the wording that should the sale occur before you become a partner, the money held back as sweat equity will be paid to you as a condition for staying there with the group.

    #227247 Reply
    MPMD MPMD 
    Participant
    Status: Physician
    Posts: 2606
    Joined: 05/01/2017

    In this case, 100k was offered?   I’m curious what the forum thinks is reasonable.  100k is a lot of money for someone who frankly isn’t a partner to be offered and the frustration seems misdirected at the partners.  When people talk about reasonable cut, what would be reasonable?

    Click to expand…

    $100k is chump change, almost an insult, to stay in a practice that might be struggling to survive in a few years, especially when the partners received 10x or more of that, and many partners will be disengaged and counting the days until they can retire. And good luck hiring some new rads to replace those that are leaving. I would recommend taking a job with another local group, if possible. I do not like the teleradiology option so much, but a lot of younger rads certainly do.

    I would have a tough time looking an associate in the eye if I sold them out like this. When we were going through the process to be bought out (ultimately dropped the deal), we were looking at making our valued late first year associate and expected future partner an immediate partner and including him the buy-in at 50% the partner cut. You are getting paid for the past AND the future.

    Click to expand…

    as you know these things are very complicated.  i agree that personally it is hard to look someone in the face after something like this.  however, having been in the partner situation during some of these discussions, the first thing that typically happens is a serious nondisclosure is signed.  now some may decide personally that they are going to ignore it and share with their associates, but i feel that if i sign a nondisclosure for any non partner, i have to honor it.   next the accountants move in and make valuations and blah blah blah.  negotiations are held.  this is happening over the course of months.    the fact of the practice sale is not an indictment of the partners.

    i have posted this before.  the legal advisors during the sale provided a professional opinion that 1) we could not tier the partnerships after starting the negotiations to reflect longevity.  1 share was 1 share, whether founding partner or partner of 1 mo duration.  2) we could not accelerate partnership for the associates after starting negotiations.  this was a national legal firm with expertise in these acquisitions.   it may not have been the only opinion, and it may not be universally correct, but after paying a ton of money for it and researching them prior to hiring them, we stuck with it.  the best we could do was negotiate something for the associates, recognizing that it would be a fraction of what the partnership (which they are not a member of yet) was sold for.  The valuation changes once it is known that the hospital or PE firm is interested in acquiring.  what was once a 500k buy would be a 1MM buy in.   nothing accomplished.

    having been in those negotiations, trying to squeeze an extra 100k per associate out is not easy.  and in the end, it is not guaranteed that the work environment would be worse.  and if it is, the associate would not want to be partner there anyway.   the timing is unfortunate.  however, there are no guarantees of partnership when joining a group.  they have no guarantee you are staying after the trial period either.  it is of course extremely disappointing to be so close, but once the sale reaches the tipping point, it is even harder to dissuade senior partners of the value of the sale to them personally.  some of them may have been waiting a few years for fear or missing out the sale.  for many many years, being hired for the first two years was not a guarantee of partnership.  in that in recent times it has become more of a sellers market than a buyers market.  but remember practices have good years and bad years.  there is a SORR to practice health as well.  maybe the partners know the practice won’t be as good.  maybe they read the tea leaves on insurance contracts or medicare reimbursements.  maybe they know the machines are about to break down, or partners are leaving.  maybe new groups are springing up.

    this is why physicians lose in the end.

    whoever controls the money, has the power.  if you don’t trust that physicians are acting ethically, and expect PE or hospital admin to act ‘more’ ethically, or at least trust that their rules are better than physician rules than we will continue to lose.  i’m not saying the situation worked out well for this young person.  i’m wondering how many of you will look your senior partner of a decade in the face and say i don’t want to be part of your retirement, which by the way will also guarantee your own FI, because our legal team tells us we can’t make associate A a partner.  meanwhile the senior guy says, nothing stopping you from gifting them the money from your share.  especially if you are going to get outvoted anyways.  do you quit?  do you make a stink?  i think it is very possible you wind up negotiating as hard as you can for them.  100k i’m telling you is a good negotiation in these settings.

    by the way, in the two buyouts i have been involved with, both groups did well after the buyout.  the practices didn’t disintegrate.  they continued to be successful at hiring and running a practice.  after a few years, people don’t remember all this stuff, they are more concerned with day to day running of the practice.  depends on how hands off the new owners are.  i’ve been on both sides.  missed by two months once.  was on partner side once by one year.  was a partner for many years in group that explored sale numerous times and never did.

    jmo.

    ymmv

    you may be better negotiators than us.

     

    Click to expand…

    The NDA thing makes me view this as even shadier.

    NDAs are basically always used by powerful people and entities to control weaker ones. They only ever go in one direction.

    What if you were facing a quality review for a bad case and you demanded that the members of the QI committee and the CMO of your hospital sign NDAs? They’d laugh in your face.

    This is another massive failure of the free market as the panacea for all that plagues healthcare. The free market dictates that partners in established groups sell out to PE firms at the highest possible dollar amount and that the least possible info be given to the grunts who then work at the minimum they can be paid while not actively looking to bail. Nothing about the free market conveys any rights or protection to the younger docs.

    Click to expand…

    are the quality discussions subject to protections from outside queries?   i believe they are in many states.

    in any case, NDA is an accepted part of the legal/business world.  whether we like it or not does not affect the accepted utility of the NDA.   i don’t have the expertise to debate your claim that NDAs are basically always used by powerful people and entities to control weaker ones.  i don’t believe that is their only purpose, but like i said it doesn’t matter what i think.

    i’m confused about the free market part.

    hope you are having a good day.

     

    Click to expand…

    Quality discussion might have been a bad example, my point is that junior docs/associates are not able to invoke NDAs against employers or partners seeking to keep stuff from them. NDAs are ridiculous.

    Of course they are an accepted part of the legal and business world. That’s the world we’re always lamenting has so much control over doctors and medicine. We are supposed to have professional ethics that are superior to the world of business.

    Click to expand…

    they are the employers.  employers always keep stuff from employees.   ultimately, an NDA is, a confidentiality agreement?  i read the article you link, and i don’t see that the author is proposing that this would be an in appropriate use of NDA.  but if you read that article and see otherwise, please educate me.  maybe it’s a generational thing-i don’t understand why someone who is not a partner would be expected to have 100% access to specific business management information.  yes, on many levels, new physicians are welcomed as partners to be, but this is not one of those areas.   i get that you are struggling with this concept in terms of fairness.  i hope that you can balance your beliefs with the fact that other reasonable people take the other side with equal certainty that it is at least not inherently unfair.  unequal certainly, but that is the nature of a privately owned entity.  i do think we as a profession have superior professional ethics to the business world.  i think marrying to the business side is where we can run into questions of ethics.   i don’t see this particular issue as clearly yes ethical/no ethical as i perceive many on this thread as being.

    more like social security.  i hear lots of people say they don’t trust social security and plan for it not being there.  i see it more like partnership not there until it’s there.  when i was in private practice, i never included partnership valuation in my net worth.  too far away, too many things could change.  i was never in a partnership with less than 25 physicians, so it was very obvious that you could be outvoted on any issue, including sale, assumption of debt, repricing of stock.

    regardless, without question, the risk should be considered when contemplating joining a practice.  any truthful answer to practice sale involves some form of–if the price is right.  i think the questions revolve around-what can be done for associates if that occurs.  what do they deserve?  what were legal obligations and what were expectations/hopes?  there are lawyers and experienced business people and accountants.  perhaps they could provide some comments.

    as always

    jmo

    ymmv

     

    Click to expand…

    I do see all sides of this. Frankly it sounds like you’ve been on the winning team but not the losing one (I’m reading into your posts) which would certainly color your impression of things. Sorry if I’m reading that wrong.

    This isn’t my world and realistically never will be. I’m just telling you how this has influenced my advising of residents as they look for jobs and I hope lurkers are taking note. I have a hard time telling them to go for these long buy-ins. I had a close friend do one and one provision of partnership was to live in a specific area. For family reasons she ended up not being able to live in this small suburb but had to stay in the metro <50 miles away to help care for ailing family members. She was #2 in productivity and had never missed a shift or been late. After her 3 year buy-in she asked for an exception to be made in the geographical provision. She was told no. Every partner in the group was willing to divvy up and pocket 10% of her comp each year as a penalty but then were shocked and hurt when she left.

    I wouldn’t be able to look myself in the mirror and hire an associate on a 3 year partnership track if I knew that my group was planning to seek out or discuss buy out within that time period. I think it’s grossly unethical to do so. Look, this doesn’t take much, you have to be honest with people and not act in your unilateral self-interest, or you can apply the Golden Rule. It’s kind of a minimal ethical standard.

    I am not saying that partners in a practice can never sell out or that every doc should get an equal share, we’re talking about a pretty narrow issue here raised by the OP — the selling of a group without any meaningful disclosure to associates and with apparently minimal care for said associates after the sale. I can also guarantee you that the partners most eagerly signing these NDAs and rubbing shoulders with private equity would be the most offended and butt-hurt if they were on the other side of the equation, left holding the bag as the associate given $100k after a multi-million dollar deal and now wondering about the future. Again, it comes down to ethical behavior and the golden rule.

    Click to expand…

    i know i typed a lot of information, but to repost-i missed a multimillion dollar buyout by not starting at the practice two months earlier.

    wasn’t butt hurt about it.  i hadn’t done anything to substantially build the practice so i really did feel that the people who had been partners for 2 mo only really got lucky–and i didn’t.

    in the end it changed nothing for me.  i reach fi a little slower.   it might have even been a blessing-if you think there is such a thing as too much too soon.  who can know?

    i guess i don’t know how to respond to your statement of seeing all sides and then alleging minimal ethical standard and unilateral self interest.  for me, it really doesn’t sound like you are actually seeing both sides.  but to each their own.

    i do appreciate the honest conversation.

     

     

     

    Click to expand…

    Ah sorry something you had posted made it sound like you had been the recipient of a buy-out.

    On the point of seeing all sides/ethical standard: I can understand how a partner feels they have built something and doesn’t owe an associate anything. I’m not saying that ethical standards dictate a massive payout to a brand-new, untested associate. I’m saying that ethical standards (if not the law, an NDA, or the policy of PE firms) dictate disclosure to prospective associates that you are in this process. It’s very simple, if a group is in negotiations with a PE firm or casting about for offers I don’t think they should place an associate on a typical buy-in period. The point of the buy-in is the EXPLICIT (not to mention implicit) idea that the associate will do some kind of supplication in exchange for full partnership/money/influence. If you are never planning to let them get there then those dollars taken out of their pocket are essentially stolen.

    I can speak from years of experience on this, young docs looking for their first or maybe second job really don’t understand that they are a commodity. They are still in the med school/Match mindset of “please take me oh great Avatar of Training (of money).” I spend hours each year trying to coach them to advocate for themselves and ask the right questions, they are all worried that they are going to piss off a medical director and have a job prospect pulled.

    We need to protect these young docs, that’s what WCI mission is all about right? Fight burnout through wise decisions and guidance. I wish I could tell my grads to ask these SDGs if they are going to bought out or if they are looking to sell but I known damned well the question wouldn’t be appreciated and I sadly wouldn’t even expect it to be answered honestly. Kind of sad when you consider how much the associate is investing.

    Click to expand…

    is the associate investing more or the practice investing more?  i think you have a very one sided view of the relationship is all i’m saying.  if the associates are commodities, everyone is a commodity.  i think you view the buyout as more of a given than my experiences have been.  many times they break down before being completed.  sometimes there are no plans to sell but laws change (stark 4).  i think you are right to caution them of the possibility of a buyout, but what can be done about it is unclear (to me).   but lets agree that all practices are potentially for sale if the price is right.  people should consider that possibility when considering a private practice group.

    i’m not sure that protecting young physicians is the mission.  i think education is the mission.  everyone still has to find their own path.  may be different than the one i would choose but still right for them.  sometimes young adults do whatever they think is right anyways.  sometimes it works out even though statistically unlikely.

    🙂

    Click to expand…

    Well, I’m under 40, so I really haven’t known any docs well who have benefited from a buy out of a group. As noted above we seem to hear stories of docs getting screwed on the regular. Selection bias obviously, people are going to be less likely to take to the internet and talk about how they sold to a PE group.

    I will leave it there.

    #227250 Reply
    Liked by Zaphod, q-school
    Avatar wcinewbie 
    Participant
    Status: Physician
    Posts: 92
    Joined: 09/30/2017

    Totally appropriate for us to discuss and educate.  At the end of the day, each person has to make their own decision.  Years ago there was not much discussion about this.  If I had seen this thread, I would definitely not have agreed to the contract that I did.

    We talk about potential mistakes young physicians often make such as buying a house/expensive car before they’re sure about their practice.  A key bit of knowledge should be to understand how a non compete works and what’s reasonable and acceptable.

    #227261 Reply
    Liked by artemis
    Avatar dayman 
    Participant
    Status: Physician
    Posts: 77
    Joined: 12/09/2017

    The reason in this particular case is because the group hired him under false pretenses to increase the group’s value, hid negotiations from him while they were ongoing, and then sold out and gave him a pittance. You are right, he should learn from the experience and move on, that doesn’t change the fact that his colleagues are tools.

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    Now you’re just making comments under assumptions that may very well be false. I’ll assume his partnership track was at least 2 years and he said he had under a year to go. I doubt they hired him and had him start on the same day. I’ll also assume that they hired him months before his official start date. I would doubt that negotiations had been going on that long and that they didn’t hire him under false pretenses as you state. True, they did give him a pittance but that was also more than he was owed. This situation doesn’t mean his colleagues are tools. It’s a difficult situation, sure, but difficult situations and decisions don’t automatically make someone a tool.

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    Maybe I worded it too strongly – I don’t know the degree of deception. The most benign scenario is there were only informal PE discussions within the group before they hired him, they were open to the idea of selling but had no concrete plans, then a great offer came along. The most malignant is either they were already in talks or had been had been unofficially planning on selling for years. At the very least, they deceived him during the time he was employed there and negotiations with PE were ongoing, letting him continue to work extra hours for less pay on his “partnership track”.

    Also I didn’t think the 100k was some type of goodwill, more than he was owed gesture. It’s an enticement to try and get him to commit to X number of years of below market value pay going forward. If I misunderstood that please correct me.

    If I were the partner considering selling, I don’t think it’d be a difficult decision to do right by my younger colleague. Obviously other people disagree. Maybe one day I’ll be in that situation and get to find out.

    #227291 Reply
    CordMcNally CordMcNally 
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    Status: Physician
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    Joined: 01/03/2017
    Also I didn’t think the 100k was some type of goodwill, more than he was owed gesture. It’s an enticement to try and get him to commit to X number of years of below market value pay going forward. If I misunderstood that please correct me.

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    Usually whoever is doing the buying will give the group X amount of dollars to buy the group. It’s then up to the group ownership to decide how to disburse that (split evenly among the partners is most common assuming there are no tiers of partners). I think it’d be highly unusual for the corporation to pay each member of the group individually. I suspect the “under $100k” came from the partners and not the corporation.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #227294 Reply
    Avatar MSooner 
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    Earnest refinancing bonus
    I can speak from years of experience on this, young docs looking for their first or maybe second job really don’t understand that they are a commodity. They are still in the med school/Match mindset of “please take me oh great Avatar of Training (or Money).” I spend hours each year trying to coach them to advocate for themselves and ask the right questions, they are all worried that they are going to piss off a medical director and have a job prospect pulled.

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    Amen to above. We just did the whole “find your first job thing” and yeah, it’s real. I love my husband, but he was so scared of offending them/losing an offer. We weren’t even asking for anything–just asking questions! I had to do a lot of behind the scenes pushing to get him to clarify some important stuff. He eventually came around, but boy the fear was there.

    OP–sorry to hear. That really sucks. On the bright side, the job market really is that good. Most of his (just graduated) residency class has jobs locked down or multiple offers already. It’s true that a lot of the listings are corporate/PE, but few of them wanted to go that route and most found true PP jobs unless they were looking for academics. So there are definitely options where there weren’t before–it’s nice after 5 years of hearing how much the job market sucked during training.

    On the downside, we know of more than one person in your situation and one that walked from contract talks when they found out the practice was already in talks with PE. The places my husband looked were willing to talk about it–one offered outright that they had heard the pitch and weren’t interested so that wasn’t something he should worry about if he signed with them (I mean, they could be lying but the average age of the group would make a PE buyout less attractive to the partners). The other question I’d ask (based on our experience and something we just heard about) is “what is the status of your contract with the hospital?” Hoping that one doesn’t come back to haunt us, but at least we know there have been issues. In the end, every job had a potential downside lurking somewhere.

    #227304 Reply
    Liked by MPMD
    Vagabond MD Vagabond MD 
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    In this case, 100k was offered?   I’m curious what the forum thinks is reasonable.  100k is a lot of money for someone who frankly isn’t a partner to be offered and the frustration seems misdirected at the partners.  When people talk about reasonable cut, what would be reasonable?

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    $100k is chump change, almost an insult, to stay in a practice that might be struggling to survive in a few years, especially when the partners received 10x or more of that, and many partners will be disengaged and counting the days until they can retire. And good luck hiring some new rads to replace those that are leaving. I would recommend taking a job with another local group, if possible. I do not like the teleradiology option so much, but a lot of younger rads certainly do.

    I would have a tough time looking an associate in the eye if I sold them out like this. When we were going through the process to be bought out (ultimately dropped the deal), we were looking at making our valued late first year associate and expected future partner an immediate partner and including him the buy-in at 50% the partner cut. You are getting paid for the past AND the future.

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    as you know these things are very complicated.  i agree that personally it is hard to look someone in the face after something like this.  however, having been in the partner situation during some of these discussions, the first thing that typically happens is a serious nondisclosure is signed.  now some may decide personally that they are going to ignore it and share with their associates, but i feel that if i sign a nondisclosure for any non partner, i have to honor it.   next the accountants move in and make valuations and blah blah blah.  negotiations are held.  this is happening over the course of months.    the fact of the practice sale is not an indictment of the partners.

    i have posted this before.  the legal advisors during the sale provided a professional opinion that 1) we could not tier the partnerships after starting the negotiations to reflect longevity.  1 share was 1 share, whether founding partner or partner of 1 mo duration.  2) we could not accelerate partnership for the associates after starting negotiations.  this was a national legal firm with expertise in these acquisitions.   it may not have been the only opinion, and it may not be universally correct, but after paying a ton of money for it and researching them prior to hiring them, we stuck with it.  the best we could do was negotiate something for the associates, recognizing that it would be a fraction of what the partnership (which they are not a member of yet) was sold for.  The valuation changes once it is known that the hospital or PE firm is interested in acquiring.  what was once a 500k buy would be a 1MM buy in.   nothing accomplished.

    having been in those negotiations, trying to squeeze an extra 100k per associate out is not easy.  and in the end, it is not guaranteed that the work environment would be worse.  and if it is, the associate would not want to be partner there anyway.   the timing is unfortunate.  however, there are no guarantees of partnership when joining a group.  they have no guarantee you are staying after the trial period either.  it is of course extremely disappointing to be so close, but once the sale reaches the tipping point, it is even harder to dissuade senior partners of the value of the sale to them personally.  some of them may have been waiting a few years for fear or missing out the sale.  for many many years, being hired for the first two years was not a guarantee of partnership.  in that in recent times it has become more of a sellers market than a buyers market.  but remember practices have good years and bad years.  there is a SORR to practice health as well.  maybe the partners know the practice won’t be as good.  maybe they read the tea leaves on insurance contracts or medicare reimbursements.  maybe they know the machines are about to break down, or partners are leaving.  maybe new groups are springing up.

    this is why physicians lose in the end.

    whoever controls the money, has the power.  if you don’t trust that physicians are acting ethically, and expect PE or hospital admin to act ‘more’ ethically, or at least trust that their rules are better than physician rules than we will continue to lose.  i’m not saying the situation worked out well for this young person.  i’m wondering how many of you will look your senior partner of a decade in the face and say i don’t want to be part of your retirement, which by the way will also guarantee your own FI, because our legal team tells us we can’t make associate A a partner.  meanwhile the senior guy says, nothing stopping you from gifting them the money from your share.  especially if you are going to get outvoted anyways.  do you quit?  do you make a stink?  i think it is very possible you wind up negotiating as hard as you can for them.  100k i’m telling you is a good negotiation in these settings.

    by the way, in the two buyouts i have been involved with, both groups did well after the buyout.  the practices didn’t disintegrate.  they continued to be successful at hiring and running a practice.  after a few years, people don’t remember all this stuff, they are more concerned with day to day running of the practice.  depends on how hands off the new owners are.  i’ve been on both sides.  missed by two months once.  was on partner side once by one year.  was a partner for many years in group that explored sale numerous times and never did.

    jmo.

    ymmv

    you may be better negotiators than us.

     

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    The NDA thing makes me view this as even shadier.

    NDAs are basically always used by powerful people and entities to control weaker ones. They only ever go in one direction.

    What if you were facing a quality review for a bad case and you demanded that the members of the QI committee and the CMO of your hospital sign NDAs? They’d laugh in your face.

    This is another massive failure of the free market as the panacea for all that plagues healthcare. The free market dictates that partners in established groups sell out to PE firms at the highest possible dollar amount and that the least possible info be given to the grunts who then work at the minimum they can be paid while not actively looking to bail. Nothing about the free market conveys any rights or protection to the younger docs.

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    are the quality discussions subject to protections from outside queries?   i believe they are in many states.

    in any case, NDA is an accepted part of the legal/business world.  whether we like it or not does not affect the accepted utility of the NDA.   i don’t have the expertise to debate your claim that NDAs are basically always used by powerful people and entities to control weaker ones.  i don’t believe that is their only purpose, but like i said it doesn’t matter what i think.

    i’m confused about the free market part.

    hope you are having a good day.

     

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    Quality discussion might have been a bad example, my point is that junior docs/associates are not able to invoke NDAs against employers or partners seeking to keep stuff from them. NDAs are ridiculous.

    Of course they are an accepted part of the legal and business world. That’s the world we’re always lamenting has so much control over doctors and medicine. We are supposed to have professional ethics that are superior to the world of business.

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    they are the employers.  employers always keep stuff from employees.   ultimately, an NDA is, a confidentiality agreement?  i read the article you link, and i don’t see that the author is proposing that this would be an in appropriate use of NDA.  but if you read that article and see otherwise, please educate me.  maybe it’s a generational thing-i don’t understand why someone who is not a partner would be expected to have 100% access to specific business management information.  yes, on many levels, new physicians are welcomed as partners to be, but this is not one of those areas.   i get that you are struggling with this concept in terms of fairness.  i hope that you can balance your beliefs with the fact that other reasonable people take the other side with equal certainty that it is at least not inherently unfair.  unequal certainly, but that is the nature of a privately owned entity.  i do think we as a profession have superior professional ethics to the business world.  i think marrying to the business side is where we can run into questions of ethics.   i don’t see this particular issue as clearly yes ethical/no ethical as i perceive many on this thread as being.

    more like social security.  i hear lots of people say they don’t trust social security and plan for it not being there.  i see it more like partnership not there until it’s there.  when i was in private practice, i never included partnership valuation in my net worth.  too far away, too many things could change.  i was never in a partnership with less than 25 physicians, so it was very obvious that you could be outvoted on any issue, including sale, assumption of debt, repricing of stock.

    regardless, without question, the risk should be considered when contemplating joining a practice.  any truthful answer to practice sale involves some form of–if the price is right.  i think the questions revolve around-what can be done for associates if that occurs.  what do they deserve?  what were legal obligations and what were expectations/hopes?  there are lawyers and experienced business people and accountants.  perhaps they could provide some comments.

    as always

    jmo

    ymmv

     

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    I do see all sides of this. Frankly it sounds like you’ve been on the winning team but not the losing one (I’m reading into your posts) which would certainly color your impression of things. Sorry if I’m reading that wrong.

    This isn’t my world and realistically never will be. I’m just telling you how this has influenced my advising of residents as they look for jobs and I hope lurkers are taking note. I have a hard time telling them to go for these long buy-ins. I had a close friend do one and one provision of partnership was to live in a specific area. For family reasons she ended up not being able to live in this small suburb but had to stay in the metro <50 miles away to help care for ailing family members. She was #2 in productivity and had never missed a shift or been late. After her 3 year buy-in she asked for an exception to be made in the geographical provision. She was told no. Every partner in the group was willing to divvy up and pocket 10% of her comp each year as a penalty but then were shocked and hurt when she left.

    I wouldn’t be able to look myself in the mirror and hire an associate on a 3 year partnership track if I knew that my group was planning to seek out or discuss buy out within that time period. I think it’s grossly unethical to do so. Look, this doesn’t take much, you have to be honest with people and not act in your unilateral self-interest, or you can apply the Golden Rule. It’s kind of a minimal ethical standard.

    I am not saying that partners in a practice can never sell out or that every doc should get an equal share, we’re talking about a pretty narrow issue here raised by the OP — the selling of a group without any meaningful disclosure to associates and with apparently minimal care for said associates after the sale. I can also guarantee you that the partners most eagerly signing these NDAs and rubbing shoulders with private equity would be the most offended and butt-hurt if they were on the other side of the equation, left holding the bag as the associate given $100k after a multi-million dollar deal and now wondering about the future. Again, it comes down to ethical behavior and the golden rule.

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    i know i typed a lot of information, but to repost-i missed a multimillion dollar buyout by not starting at the practice two months earlier.

    wasn’t butt hurt about it.  i hadn’t done anything to substantially build the practice so i really did feel that the people who had been partners for 2 mo only really got lucky–and i didn’t.

    in the end it changed nothing for me.  i reach fi a little slower.   it might have even been a blessing-if you think there is such a thing as too much too soon.  who can know?

    i guess i don’t know how to respond to your statement of seeing all sides and then alleging minimal ethical standard and unilateral self interest.  for me, it really doesn’t sound like you are actually seeing both sides.  but to each their own.

    i do appreciate the honest conversation.

     

     

     

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    Ah sorry something you had posted made it sound like you had been the recipient of a buy-out.

    On the point of seeing all sides/ethical standard: I can understand how a partner feels they have built something and doesn’t owe an associate anything. I’m not saying that ethical standards dictate a massive payout to a brand-new, untested associate. I’m saying that ethical standards (if not the law, an NDA, or the policy of PE firms) dictate disclosure to prospective associates that you are in this process. It’s very simple, if a group is in negotiations with a PE firm or casting about for offers I don’t think they should place an associate on a typical buy-in period. The point of the buy-in is the EXPLICIT (not to mention implicit) idea that the associate will do some kind of supplication in exchange for full partnership/money/influence. If you are never planning to let them get there then those dollars taken out of their pocket are essentially stolen.

    I can speak from years of experience on this, young docs looking for their first or maybe second job really don’t understand that they are a commodity. They are still in the med school/Match mindset of “please take me oh great Avatar of Training (of money).” I spend hours each year trying to coach them to advocate for themselves and ask the right questions, they are all worried that they are going to piss off a medical director and have a job prospect pulled.

    We need to protect these young docs, that’s what WCI mission is all about right? Fight burnout through wise decisions and guidance. I wish I could tell my grads to ask these SDGs if they are going to bought out or if they are looking to sell but I known damned well the question wouldn’t be appreciated and I sadly wouldn’t even expect it to be answered honestly. Kind of sad when you consider how much the associate is investing.

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    is the associate investing more or the practice investing more?  i think you have a very one sided view of the relationship is all i’m saying.  if the associates are commodities, everyone is a commodity.  i think you view the buyout as more of a given than my experiences have been.  many times they break down before being completed.  sometimes there are no plans to sell but laws change (stark 4).  i think you are right to caution them of the possibility of a buyout, but what can be done about it is unclear (to me).   but lets agree that all practices are potentially for sale if the price is right.  people should consider that possibility when considering a private practice group.

    i’m not sure that protecting young physicians is the mission.  i think education is the mission.  everyone still has to find their own path.  may be different than the one i would choose but still right for them.  sometimes young adults do whatever they think is right anyways.  sometimes it works out even though statistically unlikely.

    🙂

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    Well, I’m under 40, so I really haven’t known any docs well who have benefited from a buy out of a group. As noted above we seem to hear stories of docs getting screwed on the regular. Selection bias obviously, people are going to be less likely to take to the internet and talk about how they sold to a PE group.

    I will leave it there.

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    Well, I am over 50 and do not know anyone who was screwed by a group who got bought by a PE-backed firm, but I know plenty of people who have benefited. 😉

    #227338 Reply
    Liked by q-school, G
    Vagabond MD Vagabond MD 
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    Joined: 01/21/2016
    Also I didn’t think the 100k was some type of goodwill, more than he was owed gesture. It’s an enticement to try and get him to commit to X number of years of below market value pay going forward. If I misunderstood that please correct me. 

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    Usually whoever is doing the buying will give the group X amount of dollars to buy the group. It’s then up to the group ownership to decide how to disburse that (split evenly among the partners is most common assuming there are no tiers of partners). I think it’d be highly unusual for the corporation to pay each member of the group individually. I suspect the “under $100k” came from the partners and not the corporation.

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    I would bet the ranch that you are correct. (And since I do not own a ranch, that is a 100% leveraged bet. 😉 )

    #227340 Reply
    Liked by Kamban, billy

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