MD Preferred Blog

*The views expressed by the authors below do not represent the views or opinions of MD Preferred Services.

The Illusion of Partnership

Tuesday, April 10, 2018

Looking over a physician’s contract I was reviewing the other day I came upon a single sentence set into the “benefits” section:

“After twenty four (24) months of continuous employment employee will be eligible for consideration as a partner of group.”

I’ve seen this language in countless contracts. Many of my clients, especially those looking at an employment agreement for the first time, have found it extremely enticing, as it seems to hold out a carrot of great value, one to strive for.

My question is always: What does that sentence mean?

Partnerships, and the operational documents that govern them, are all over the map when it comes to meaning, purpose and design. I have worked with clients who belonged to larger groups that were extremely well designed, with the partners contributing a portion of their income to create an MSO or IPA type entity that provided services like billing, credentialing, payer negotiations, HR, and the myriad issues related to compliance. Other large groups have arrangements to share income from ancillary services. In these organizations partnership means something in value, beyond the ability to vote on group measures.

But the smaller groups, which is where the contract in question came from, tend to be much less defined when it comes to meaning (some have no idea of what partnership can look like or even how it could be organized). That was certainly the case in this matter.

My client, who had become an employee prior to our meeting, had found that there was truly little or no financial benefit in partnership. Since all of the partners followed the dictum “eat what you kill”, the partnership had no cash, and it’s only assets were the furniture and fixtures found at their two offices. The partners had abdicated all HR decisions to the office manager; she was also in charge of reporting and oversaw billing and collections. However, other than the individual income reports generated for the docs, there was no financial reporting on the partnership.

The practice was successful for its doctors, but the partners were timid about making tough decisions, and partnership “meetings” were more about getting it over with than really exploring current and future operations. There were too many employees and none of the partners was interested in tight financial management. There was no budgeting for the costs of practice improvements.

In short, this partnership was nothing more than mechanism to require a response to cash calls for unanticipated expenses.

My client was staging his departure as a result—our analysis was that this partnership would be fraught with problems unless major changes could be made (and the existing partners had demonstrated no interest in doing so).

Partnership was an illusion. Make sure to ask lots of questions if you see this clause in a contract, just to see if it really has any weight. Tom Ellis III

Tom has been a healthcare consultant in the North Texas area for over twenty years, and has worked with a variety of clients, focusing on physicians.  More information on Tom can be found at www.ellisandassoc.com.  

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