Medical Practice Opportunities, Inc.
By
Michael S. Worpell, D.P.M., F.A.C.F.A.S.
and
Ted Carlson D.P.M., J.D.
The business definition of an associate is a person united with another or others in an act, enterprise,
or business. It usually excludes a person who is part of the covered entity's work force. The
relationship between the associate and the covered entity is generally governed by a contract that
specifies the rights and responsibilities of each party and is usually limited to a specific term. This is
often a complex relationship influenced by a multitude of factors which can affect its success or failure.
Each party entering into this contract should perform its due diligence with respect to the potential
benefits and pitfalls the relationship will entail.
The current trend among today's podiatric physicians and surgeons, upon completion of their
residency, is to seek an associate level position with an existing clinic, practice, or individual
practitioner. Their motivation for this may be due to several common issues facing current residency
graduates. Unfortunately, although most current residency programs provide sufficient medical training
to their enrollees, there is little training in practice management or billing issues. Therefore the
associate seeks their role to provide exposure to billing practices, revenue production, and practice
management skills. The recent residency graduate also may still be unsure of their medical abilities
and seek mentorship through a seasoned practitioner. Another reason they may seek an
associateship is that, upon exiting their formal education and residency, they are burdened with
significant financial debt. This makes it difficult for them to take on the financial liability to purchase an
existing practice and, even if they wanted to purchase, might preclude them from finding institutional
financing. Finally, many new practitioners simply want to work for someone else. They want a salary
and benefits package without the responsibility of running a business.
There are a number of motivations for an existing practitioner, practice, or clinic to consider adding an
associate. There may be a desire to lessen the work load on the individual practitioner and provide
for vacation and on call coverage. Adding an associate may be seen as a way to increase revenue
production for the practice and dissipate fixed overhead expenses. The addition of a newly trained
doctor may enhance the scope of practice and may provide an opportunity for the seasoned
practitioner to learn new skills. Another motivation is to bring in a new practitioner in anticipation of a
future sale of the practice and its assets.
Due diligence refers to the care that a prudent person might be expected to exercise in the
examination and evaluation of risks affecting a business transaction. The decision of a physician to
become an associate with a practice, or for a practice to add an associate, should be viewed as one
of the top financial and business decisions an individual will make in their career. Frequently, the
parties do not take enough time, or have the ability, to research the practice's ability to sustain
another practitioner and/or the potential benefits and pitfalls of this future relationship.
The employer needs to review the patient demographics when considering the addition of an
associate. They should review the patient flow for the practice and, more importantly, new patient
generation. The key to sustaining the addition of a new practitioner lies in the practice's ability to
generate new patient referrals, while sustaining its existing patient base. A financial analysis of the
practice should be preformed and the net cash flow determined. The employing doctor or practice
needs to consider how much of the net cash flow is expendable to cover the additional overhead
expense and salary of the associate should they not generate enough revenue during the first year
or two of their employment. A review of the infrastructure of the office needs to be performed. Will
additional staff be necessary to support an incoming doctor? Is there enough office space and
equipment to allow another practitioner to efficiently see patients? Is the waiting room big enough?
The employer has to consider how they want to distribute the new patients and referrals that are
going to come in to the office. They also need to consider what type of compensation and benefits
package they plan to offer the new practitioner. Finally, they need to decide what their long-term
goals are for the associate. Are they willing to offer equity in the practice, and, if so, how much?
The perspective associate needs to review several considerations when examining a potential
associate position. Initially the associate needs to sit down, preferably with a financial consultant,
and review their financial needs. This will include the cash flow necessary to service existing debt,
while providing for reasonable accommodations and primary living expenses for themselves and their
families. This will serve as an initial basis for their requested compensation and determine whether
they can even consider an offer for a position. They need to discuss with their spouse and family
members which geographic region they want to settle in. They should consider what type of podiatric
medicine and surgery they want to practice. Are they willing to perform palliative care and general
podiatry, or do they just want to perform surgery? Do they want to practice with only one other
practitioner, a group practice, an orthopedic practice, or a multi specialty clinic? They need to obtain
a clear understanding of what their responsibilities will be in a prospective position. They need to
establish a clear understanding of the billing procedures in the practice, and determine whether they
believe the billing practices are ethical and they can abide by them. They should have a clear
understanding of the patient demographics they will be seeing as the new associate. These
demographics should consider age, type, and insurance characteristics. Finally, they need to
consider their long term goals when taking this associate position. Do they want to remain an
employee indefinitely, or do they anticipate an offer of equity?
The associate and the employing doctor, practice, or clinic each will have skills or attributes from
which the other party seeks to benefit. These provide the incentives to form a business relationship.
These skills and attributes need to be carefully considered and discussed to ensure a contract that is
fair and equitable to both parties.
The employer offers many things that may be attractive to a potential associate. They, hopefully,
provide an established patient base and referral sources to allow for expansion of the practice with
the new associate. They provide the practice management and billing knowledge necessary for
revenue production. They have an established infrastructure with regard to staff, building, and
equipment to allow for the associate to practice podiatric medicine. They hopefully provide a
mentorship that is based in sound medical, business, and personal ethics. They may provide the
potential for future equity in the business for the associate.
The potential associate brings with them certain attributes that may benefit an employer. They may
bring to the practice advanced surgical skills and techniques that can open the scope of services
provided by the practice. They may posses the ability to train the more seasoned practitioners in
these newer skills. They provide the ability to increase revenue production for the employer which
could serve in the ultimate financial benefit of the practice. They can provide on call and vacation
coverage that can be a significant financial benefit for an employer by maintaining continuous,
uninterrupted revenue flow. Finally, they may represent a viable candidate for the future sale of the
practice; thereby ensuring the employer's equity will not be lost.
This is a legal and binding agreement involving two or more parties that sets forth what the parties
will or will not do. A contract is formed when competent parties mutually agree to provide each other
some benefit, such as a promise to pay money in exchange for a promise to deliver goods or services.
A contract will usually describe the responsibilities of each party. This may include either broad
definitions or detailed specifics for each party. It is best to engage a legal counsel familiar with health
care employment contracts in the local jurisdiction to determine the degree of detail necessary in
outlining each party's responsibility. The contract must clearly state the method of compensation for
the associate. This method of compensation may be straight salary, straight percentage, or a
combination of both and may involve additional incentive measures. The benefits should be clearly
defined with regard to health care, vacation, time lost, continued medical education, mal practice
coverage, and retirement. The term (length of time) of the contract needs to be stated. Typically, this is
2-3 years, but is essentially up to both parties for negotiation. Most contracts will contain a noncompete
clause preventing the associate from future practice in a given geographic area for a specific length
of time should they not remain with the practice for whatever reason. There are multiple other
discretionary inclusions in a contract that might include a future buy in provision, ethics clause, patient
allocation, and a possible escape clause. Obtaining legal counsel knowledgeable in medical contract
preparation is essential for each party, before they enter into any contract.
Unfortunately, too many associateships end in estrangement of the parties and, sometimes, law
suits. The reasons for these failures are multiple. These may include lack of performance by the
associate leading to insufficient revenue production to support the associate's salary. There may
have been insufficient infrastructure in regard to the staff or office to accommodate the new doctor
and expansion of either of these may have been fiscally prohibitive. The parties may have found
conflict in billing or medical ethics. There are often personality conflicts involved. Frequently, the
conflict can be traced to unreasonable expectations by one or both parties. The associate may feel
they are worth more than they are getting paid or that the employer is making too much money off
of their services. There may be unwitnessed verbal commitments that are not fulfilled. Most of these
pitfalls can be prevented if each party seriously undertakes their obligation of due diligence, seeks
fairness, and strives to keep lines of communication open.
The forming of a medical associateship is a complex business relationship that should be entered into by both parties with full disclosure. It requires an act of due diligence by all parties to ensure the viability of the business, the medical/billing ethics, personality characteristics, and individual expectations have been reviewed by both parties. If these things have occurred prior to the signing of a contract, the success of the business venture will surely be enhanced.