7 Reasons Why Becoming a Partner at a Medical Practice is Overrated

Overrated.001Most grads I’ve interviewed, are interested in learning how the partnership works in our medical practice. I’ve always thought this was a crazy question; especially during the initial stages of getting to know the people and the practice.

This is the equivalent of asking a girl on a first date:  “How long do we have to date before I can become your husband?”

Crazy, right? Anyway, regardless of how crazy it sounds to me, young physicians are very interested in this topic. So I wanted to give you a little behind the scenes of what it means to become a partner at a medical practice.

1 – There isn’t a pot of gold at the end of the rainbow

Most young physicians want to become a partner for the money. The assumption is that once you become partner, rivers of cash will flow into your bank account. The truth is, there is NOT a pot of gold. Most pediatric practices are poorly managed. Moreover, in primary care, you are only as rich as the amount of (cough, private, cough) patients you see in day. Many pediatricians do make a very good living, but not by merely becoming a partner; but rather as a result of their understanding of the business.

 2 – Partnership does not give you control automatically

Becoming a partner may give you some control, but more often than not, it is an illusion. Despite what the senior partner has told you, you’re a young, unproven whipper-snapper. And most senior partner(s) are hard-headed. They’ve managed their practice their way for 30-years. Relinquishing control is not going to happen just like that.

3 – You will have to assume administrative duties

Once you become partner, you will mostly likely volunteer (because nobody else raised their hands when they asked who wanted to take care of this…) to manage some aspect of the practice (i.e. practice management, IT, operations, human resources or all of the above). As a result, you will not be as financially productive as your peers. Thus be prepared to justify your administrative duties as it translate to revenue for the practice.  Be prepared to put in more un-paid hours.

4 – As a partner, you’ll now get paid after all the employees have been paid

As a partner, you get paid after all the expenses and the employees get paid. So when cash flow gets low, or payers delay payments or unforeseen expenses come along, partners are the first to suspend their pay so that the business can continue running.

5 – Your name goes on all the loans and lines of credit

May I be candid? Partners don’t want more partners because that means they have to split the pot one more time. So the upside of adding another partner comes down to diversification of risk. Let’s say the practice has $500,000 line of credit and four partners. Each partner is responsible for $125,000. With a 5-partner, each is only financially responsible for $100,000.

6 – You assume risk for the business

As an employee, if the business goes bankrupt, you’re out of a job. But as a partner, you assume all the practice liabilities with the rest of the partners. All of the sudden your home, properties etc. are in jeopardy if they were put up as collateral. Or if your name is on the lease, or mortgage, you will have a hard time applying for another loan until the liabilities are settled to the bank’s satisfaction.

If all partners are outstanding and responsible people, then the matter should be resolved without a problem. But if they aren’t….

7 – Getting out will cost you more than it took to get in

Breaking a partnership can be as bad or worse than a divorce. Dividing assets, employees, accounts receivables, leases, locations, buildings, computers, equipments, furniture… the list goes on.  And to make matters worse, you’ll have to resolve these issues with people you dislike.

When one gets in to a partnership, one hardly ever thinks about the breakup. The truth is, consensus is virtually non-existence, progress moves at glacier speed and most often than not, you walk out with far more resentment than anything else.

I understand why someone would want to become a partner. Becoming a partner says you belong. But more important than that, a partnership gives you the sense you aren’t simply working for the man, but rather, working for yourself and the future of your family. It also provides a sense that you are in control of your destiny. I get that.

Becoming a partner isn’t the way to achieve that dream.

Believe me when I tell you that becoming a partner is not all that people make it out to be. Sure, there are examples of people joining great partnerships. And I’m sure your friend’s neighbors wife’s cousin knows of a doctor that became rich once she became a partner. But those are few and far between. Or flat our exaggerations.

There is only one way to achieve what you want – and that is – open up your own practice.

Here is the thing, for the same amount of work, grief and potential sacrifice you’ll put in as a partner, you will have the potential to earn more over the span of your career, practice medicine on your own terms, meet the needs of your patients the way you best see fit and overall have a much more rewarding career owning your own practice.

10 thoughts on “7 Reasons Why Becoming a Partner at a Medical Practice is Overrated”

  1. Do you believe that in this environment (shrinking reimbursements and increasing admin overhead) is it still viable to start an independent practice? ( I am factoring in that the answer may vary based on specific regions of the country) but, would like to hear your thoughts on it.

    1. I absolutely believe that there is plenty of upside to start a pediatric practice in our current environment. I’ve spoken with numerous consultants that have told me they are starting to see an upswing in doctors wanting to start their own practice. Many of them are going solo too.

      Chip and in devoted a full episode of our awesomecast to the independent physician here is the link http://pediatricinc.com/2013/10/09/18-is-the-independent-physician-a-dinosaur-pediatric-practice-management-awesomecast/

      Here is an interview I did a while back http://pediatricinc.com/2012/08/22/leaving-a-hospital-job-to-start-a-solo-practice/

      One last resource http://pediatricinc.com/2012/01/04/should-i-open-a-medical-practice-in-this-environment/

      Good luck

      B

    2. Just to reiterate what Brandon said: OF COURSE it’s a great time to open a pediatric practice. I think PCC has worked with more start up practices in the last 18 months than in the previous 36. Naturally, your circumstances will be very localized and where you plan to open a practice may be easy or difficult.

      One myth I’d like to dispell, though, is that pediatric payments are shrinking. As a rule, they are not. In fact, they have increased substantially the last 5-10 years, well ahead of inflation. There’s a lot of “woe is me!” talk among private physicians that I think is misplaced.

  2. All the problems above could have been easily solved e,g:

    1. Decent practice ownership agreement signed before joining
    2. Practice managers and not doctors administer practices. A lot of owners do not understand basic governance and the need to have decent systems and training and avoid micro managing.
    3. Your business model makes passive income (earn while you sleep and not eat what you kill i.e. by charging doctors like the author a percentage of their gross income to run their practice. Also mentoring young doctors is they key role of an owner.

    I do agree poor management explains the reasons for this the authors experience. I am sure there are better well run practices out there. The worst thing is to allow non-doctors to own and control your profession. If you do this you will never be able to advocate for your patients. The smart ones realise this.

  3. Brandon-

    I think you nailed it on the head. The reason partners are successful is because they focused on developing a strong practice by providing compassionate care for children. Merely being a partner does not lead to financial success. In my 20 years being involved with practice management, I’ve seen too many times where people don’t realize what’s involved with running a private practice. They often focus on the rewards and not the hard work to get there.

    The biggest issue I see is the financial liability. Whether you end up with 5 or 30% of a practice, creditors and plaintiff attorneys go after everyone listed as a shareholder. It is important to realize that with the benefit comes great responsibility to learn how to run a business- on top of nurturing a growing pediatric practice.

    1. The financial liability is something we can’t stress enough. Doctors, especially the young ones, focus too much on the potential income, and not nearly enough on the financial liabilities.

      Appreciate your comments.

      B

    1. Thanks Mary Pat. Funny thing is that I wrote this article for a publication – which shall remain nameless. They solicited a piece from me and I thought this piece fit their demographics.

      Well, they didn’t like it at all. And they rejected the piece as if I had solicited them (that is what ticked me off the most). Not only that, they weren’t very nice about it.

      Anyway, I still thought it was a good piece and I wasn’t about to waste it.

      That is the great thing about having your own blog… you don’t have to wait for somebody to “approve” anything.

  4. All of these things are true. Plus you will spend many evenings in partnership meetings that resolve nothing. I left partnership to be a hospital employee and go home at 4 every day.

    1. Exactly. There is a lot more than meets the eye. I figure if you are going to work as hard, might as well open up your own practice.

      Thanks for the comment Kristen.

      B

Comments are closed.