Legal Issues in Physician Partnerships

November 1, 2018

More and more frequently, physicians associate with partners rather than establishing a solo practice. There are numerous benefits to such relationships, including the cost sharing of staff, of advertising and marketing, of retaining accounting and legal firms, and insurance. Partners can also help reduce the time you spend in administrative tasks and away from the actual practice of medicine and patient care. 


There are many types of legal relationships and associations that your attorney can set up for you. Those relationships range from full partnerships to simple office-sharing arrangements; they can take the form of open-ended partnerships, limited liability partnerships, single specialty groups, and multi-specialty groups. In evaluating and considering an association with another physician or practice group, it is imperative that you consult with your attorney, accountant, financial planner, and family. These relationships will have a significant impact on your income and legal liability exposure. Make sure that you spend enough time to get to know your prospective partners. They need to have the same goals and practice style that you do, or you will end up spending more time in disputes with your partners than you will in collaborating on growing your practice. Your practices should complement one another in order to gain the greatest benefit from the relationship. You also need to be in agreement on the business plan, and on how much autonomy you will have in your patient selection, procedures that you use, and the future practice that you want to develop. 


Whatever format you choose, establish a good base of ongoing communication and a conflict resolution plan. No partnership or relationship will be beneficial unless all parties are committed to making it work, and believe that they are being fairly compensated for their time and effort in the practice. Have your attorney review and develop your partnership arrangement, cost sharing agreement, and business plan so that it is equitable and protective of the interests of all parties. Agree in advance on what circumstances will result in a termination of the relationship and a parting of ways, as well as the obligations of each party with respect to ongoing patient marketing, patient retention and solicitation of employees. And make sure that all parties are comfortable that the terms and conditions of their agreement are set forth in writing, and that they are not relying upon an oral understanding or side agreement. 


Your attorney will be a key source of information and problem solving, and some of the issues that your attorney will help you resolve include: 


1. Ownership and control matters: who is in charge of selecting the office, equipment, staff hiring and termination decisions, other investments, the malpractice carrier (if for the practice or partnership) and the right to make decisions about new and past expenditures. Also, who owns the name of the practice, the telephone numbers, trademarks and website, and other intangibles related to a successful and ongoing practice.  


2. The duration of the agreement, and how frequently it will be reviewed for renewals, adjustments and termination 


3. A careful description of the duties and expectations of each party in managing various aspects of the practice. An agreement as to the buy-in to the practice, and how that buy-in is handled (by promissory note, in cash, as a percentage of collections, etc.).  


4. The allocation of expenses between the parties. This includes both fixed expenses (rent, employees, leases, certain personal expenses necessary to the practice) and variable expenses (medical supplies and expenses, any individual marketing costs, accounting and legal expenses, billing and collection expenses) 


5. An agreement on the code of ethics that each practitioner will adhere to, including state board, federal and malpractice carrier requirements, as well as any additional requirements and guidelines imposed by medical and practice societies (such as the ASPS and ACS) 


6. The conditions, timing and expense of termination the relationship. This involved everything from who keeps the office, staff issues, various costs associated with terminating a relationship and going separate ways, such as costs advanced for products or services, draws against future income, costs of collection of past services, costs of copying records, and other such matters. It may also include any legally permissible restrictions on the departing physician’s practice, and any costs or payments due on exit of the practice (whether through a liquidated damages clause or buy-back of the partnership interest, etc.) These issues are best ironed out in the beginning, when all parties are focused on the benefits of the relationship, and not adverse to each other at the end of any relationship. 


7. Indemnity and hold harmless provisions and responsibilities, including for physician decisions and practice concerns, staff decisions, and office management matters 


8. The handling of accounts receivable and collections, and the timing of the release of funds and draws against future collections, and the priority of various expenses which take precedence over any distribution to physicians and partners


9. The conditions under which various financial matters will occur, including bonuses, advances and draws, salary increases, staff reviews and salary increases, and payment of any individually incurred liabilities or expenses 


There are many more considerations necessary for a successful association and relationship, without regard to the particular legal structure and relationship that the parties select. Your attorney will advise you on the pros and cons of each relationship and the consequences of decisions you make with respect to the issues raised above. Most importantly, the relationship requires that all parties perceive that it is mutually beneficial and fair, and that they be committed to maintaining that fairness and professional support through the challenges of building a successful plastic surgery practice. 


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