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How Doctors Should Negotiate Partnership Agreements, According To Contract Attorneys

Do you hope to become a partner in your medical, dental or veterinary practice one day? If so, it’s important to begin an employment contract with that in mind.

We spoke to three attorneys who regularly help doctors review and negotiate their contracts — Michael J. Salchert, shareholder at Larkin Hoffman, Jillian M. Clark, transactional associate at Byron, Carlson, Petri & Kalb, and Justin Marti, attorney and principal of Marti Law Group. Here’s what they had to say about becoming a partner in a practice.

Some doctors may have the opportunity to become a partner in the practice or group they are going to be employed in. How does this affect negotiations? 

MS: Often, promises are made ambiguously about an equity position in a smaller practice. The owners are not sure about what, how much, and when partnership is ideal for them, so they push it off until forced to make a decision. 

The challenge with this is that a doctor may come into a practice and start contributing to the practice growth without having set a time or metric for when partnership will be an option and without establishing the protocol from determining the value of the buy-in. It is important for doctors to set a definitive timeline or production metric for when partnership is a reasonable discussion to have, and to determine how much equity may be offered and how the price for the equity will be established. 

Many times, doctors don’t want to push the discussion because it is uncomfortable, but not talking about it up front can lead to working for years and then discovering that equity was never in the cards for them—a colossal waste of time. In larger practices, the path to partnership is often established, so it is only a matter of asking how the process works, and the doctor deciding up front if that is something that is reasonable to them. 

JC: If this is something the doctor knows is a deal breaker, they need to be clear up front, while understanding that the initial contract is like a trial run so see how the doctor performs at the practice. While you may not be able to obtain a partnership offer with your first contract, the doctor should make it clear that it is their goal to ultimately to become a partner. 

To this end, it may make sense to include a shorter termination time on the contract if the doctor is not offered partnership within a certain period.

JM: When we are advising a client, we always start by saying to think with the end in mind. Do you want to own a practice someday? Could this practice potentially be a fit for that long-term objective? If that is the case, it is a good idea to discuss at the outset what a potential buy-in/partnership arrangement would look like and document it in the agreement. 

Agreements should include language as to when the parties will meet to determine if there is a chance to buy-in/partner, as well as a method for valuing the practice. It’s great when the parties come together and want to take the next step of partnership, but where we see countless deals fall apart is on the valuation. 

We see a much higher success rate when the two sides take a proactive approach in how they want to structure a deal and value the practice when the time comes. Some decide to draw a line in the sand and say this is the value as of today that we will use. Others agree to go out and get two independent appraisers, and if the values are too far apart, they get a third to come in. There are myriad ways to attack this, but the important part is planning the strategy from the beginning to avoid a painfully long process down the road.

Approaching Your Next Employment Contract

As you prepare for your next job, it is important to have a clear plan when it comes to negotiating your employment contract. These tips provide a guide, but each situation is unique. 

We recommend speaking with a contract attorney who can advise you on your specific needs and goals. If you need help finding a contract attorney, our Build Your Team program can get you connected to one for free.

Michael, Jillian and Justin answered more questions about contract negotiation. Find them here:

Panacea Financial, a division of Primis. Member FDIC.

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