Transitioning From A Solo Practice To A Group Practice

Author(s): 
Steven Peltz, CHBC

   I explained to John that he had the following choices.

   He could continue as he is but would need to expand his hours in order to be more accessible to patients. He would have to invest in more patient friendly activities, such as taking the time to call the patient after every surgery, brighten up the office and add a water dispenser and maybe coffee along with having his staff take courses in customer service. However, in the long run, it will be more difficult to maintain his current cash flow.

   He could join the group and jump in full force to see how it impacts his quality of life. He would have to work with the group’s bookkeeper and his wife would have to leave after a transition. He should do everything he can to understand everything about the group as quickly as he can so before 18 months is up, he can make an informed decision whether to stay or leave. He tried to sell his practice but no one was interested in paying what he asked for.

When There Is A Competing Offer From Another Group

John’s brother-in-law Paul is an internist in a group of 12 about 15 miles from his office. He gets referrals from that practice but knows that they also send their patients to a number of other podiatrists in town, including the seven-man group.

   While John and his wife were considering what to do about the invitation from the large group, one night at dinner with his brother-in-law and both wives, his sister-in-law said, “John, why don’t you consider joining Paul’s group?” John and his wife looked at each other and were speechless for a moment. John’s wife broke the silence and asked what she meant.

   She said that Paul has often said that his group could use a full time podiatrist in the office and it would be great if John were to be the one. That precipitated a cascade of questions from John and his wife. What would he do with his office? Could he rent it? Would his patients follow him? What would happen to his referral base? Three days later, John received a summary of an offer to join Paul’s group practice.

   The offer was as important for what it said as for what it did not say.

   In the group, John would receive 50 percent of collections from his services. He now receives between 45 and 50 percent of his collections. He would be the only podiatrist the internists could refer to. He could set up his office, buy new equipment and would have to have the same malpractice insurance as the others in the group. He would have to purchase a tail from his present company. The tail insurance (extended endorsement) covers practitioners when they leave a claims made malpractice policy and go to another malpractice policy. It may be equal to about the fifth year premium on the claims made policy. The group would pay all those expenses and they wanted to set up an in-office surgical suite for him.

   John knew he would probably lose his other referring physicians as they would not want to refer their podiatric patients to another primary care office. He found out that Paul had done a study to see how many podiatry referrals went out each week and it was about 10 fewer patients a week than he sees now. He felt he could attract other patients from the area surrounding the practice. He started to feel very good about the offer until he asked Paul what the buy-in would be to become a partner.

   It seems in that state and many others, owners of a medical practice must all have the same state license. That meant that only an MD could be a partner, not a DPM.

   John was still interested and asked if he could share in the profits of the large practice and still not be a partner. It took three weeks before Paul told him he could share the profits but there were a few partners who did not like the idea. John asked Paul to have his partners approve him attending a partner’s business meeting. At the meeting, it was clear that the group looked at John’s addition to the practice as a way to make a contribution to the overhead by capturing revenue that they were sending out of the office. While a few of the partners thought it was a good idea, one partner said very bluntly, if you join us and then decide to leave, or if we terminated you, you would have to start your practice all over again outside your restrictive area and we would probably hire another podiatrist.

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