Home / Featured / How To Evaluate A Practice Opportunity

How To Evaluate A Practice Opportunity

Bill Kalogredis-1

Professional, Philosophical, Interpersonal and Management/Governance Considerations

By  Vasilios J. Kalogredis, Esq.

Too often, when a physician is evaluating a practice opportunity, the doctor is overly focused on the purely economic aspects of it.  This is not to say that dollars and cents are not important.  However, I have often seen problems in a relationship between a physician and his/her employer caused not mainly by money, but by other important aspects of the relationship.

This article will focus on some of those other considerations, as well as a few money issues.  I strongly urge anyone looking into a new opportunity to ask the below questions and be honest with oneself as to the answers.

PROFESSIONAL CONSIDERATIONS

How does the practice care for patients?  What procedures are and are not performed in the practice?  What are the attitudes of the senior physicians in the Group about quality of care, being up to date from an educational and training standpoint, and the like?  Compatibility in this area is very important.  How patients are assigned and whether there are subspecialty areas of expertise among the doctors should also be understood.  How long does it take for a patient to get an appointment and how are patients assigned?

PHILOSOPHICAL CONSIDERATIONS

A doctor should evaluate whether or not he or she is comfortable with the decision-making process in the practice.  Does one’s family (and the doctor, of course) want to live in that general vicinity?  Do the physicians in the Group with whom one is negotiating have compatible financial, family and patient care priorities?  If they do not how does the practice deal with those differences?

INTERPERSONAL COMMUNICATIONS

Do the physicians in the Group relate comfortably and honestly with each other?  What is a practice’s history with associates and partners?  Has there been a lot of stability at the doctor level or has turnover been a major part of what has transpired in that practice?  These are things that need to be openly and honestly determined?  If there has been a lot of turnover, one should determine why that has happened.  Sometimes it is an economic thing.  Other times, it may relate  to a situation whereby the doctors are unhappy with each other and the environment is not a pleasant one.

If people have left, it is important to determine why they have left the practice.  Ideally, one should be sure to speak with those who have left.  Recognize that they may have an axe to grind.  Some of what they say one might need to take with a grain of salt.  However, if many have left and the story is pretty consistent among them as to why they each left, that should mean a lot.

I would always ask during the interview process, why the practice is hiring a new associate/partner at this time.  This can tell a lot of things.  Are the senior doctors looking to retire and sell the practice off?  Has the practice grown dramatically and therefore is in serious need of new doctor help?  Are they looking to bring in someone with skills a bit different than what they have in their practice in order to expand their services?  For example, we know of many dermatology practices which decide to add a Mohs Surgeon to the mix in order to take advantage of the volume inherent in that practice for such services.

MANAGEMENT/GOVERNACE CONSIDERATIONS

Is the practice running efficiently?  A lot of this can be determined when one visits the practice and sees how happy (or unhappy) people seem to be, how “crazy” the reception/waiting area is and how “on schedule” the practice runs.

Are the senior doctors receptive to change?  Do they appear to have stayed “current” in the way they run their practice from a clinical standpoint (with state of the art equipment for example)?  Does the reception area look like something out of the 1960s, without having been repainted or recarpeted for decades?

Find out what a typical day/week would be like for the new doctor if one were to join that practice.

Ideally, one should spend at least a day or two in the practice going through the office during hours, visiting the hospital, meeting the staff and fellow physicians and seeing how the doctors treat patients in the office.  Talk to people about the practice and its doctors to try to determine how they are perceived in the community.

One should talk openly about how schedules and coverage are handled.

How are new ideas and procedures implemented?

How are disagreements and conflicts among practice members handled?

To whom would the new doctor report?

One should ask whether they are any current problems or conflicts within or outside of the Group which impact the Group and which could influence one’s decision relative to the practice.

How competitive is the area in this specialty?  What is the potential for growth?  Is this practice viewed as the preeminent one in its specialty in the area?

If and when one were to become a partner, determine whether one would be an equal partner and what type of vote would be needed for certain decisions to be made.

FINANCIAL CONSIDERATIONS

Of course, finances are an important part of the equation.

Although it can sometimes be touchy, and is generally something to be addressed after the first visit, it is important in evaluating various alternatives to determine the economic viability of the Practice.  This may require the assistance of experienced health care advisors.

One should determine what the criteria are for partnership or promotion within the practice.

What is the timing for partnership anticipated to be?

Will there be a buy-in involved and if so, how is it determined?  What is the price expected to be?  Over what timeframe would the buy-in be made?

I often ask “What does partnership mean?”  People ask me what I mean by that.  I have seen “partners” who really are little more than glorified employees.  In other words, as a partner, once any buy-in has been finalized, is that doctor truly compensated as other partners are (from an equality and/or same formula basis)?  What happens when someone leaves the practice as far as a buy-out is concerned?  Does the buy-out mirror the buy-in?

Are equal ownership, income and responsibility as to partners contemplated?

How exactly is “net income” in the practice determined and split amongst the owners?  Is that approach something everyone is comfortable with and is it consistent with group and individual goals?

CONCLUSION

There are many things to consider in evaluating an opportunity.  This article will give a physician some of the key things to think about before making a final decision.

* Vasilios J. Kalogredis, Esq. is President and founder of Kalogredis, Sansweet, Dearden and Burke, Ltd., a health care law firm in Wayne, Pa.  Among his areas of expertise are group practice arrangements, practice sales and mergers,  and doctor contract drafting and negotiation.  He may be contacted at 610-687-8314 or by e-mail at BKalogredis@KSDBHealthlaw.com.

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.