Spring 2006 issue of Horizons

Why would you want another person in your practice?

description of the compensation method used.

The letter of intent is not always given to prospective employ- ees but, if provided, will include the following: • A brief description of the future employment contract • A brief description of the requirements for ownership including: 1. Years needed to become eligible for partnership 2. Formula for buying into the practice 3. A description of the compensation formulas 4. A buy/sell formula The employment agreement will include the following: • Term of the contract • The financial arrangement, which usually includes a base compensation level that should be in the range of compensa- tion for doctors with similar experience levels • A potential bonus equal to 50 percent of collections over a baseline amount, usually about 200 percent of the base com- pensation level • A description of the professional staff benefits, continuing medical or dental training, retirement plan participation requirements and call arrangements • A non-compete clause depending on the state in which the practice is located Questions? Contact either Dan Bindler, Partner-in-Charge, Health Care Services Group 314-290-3316 dan.bindler@rubinbrown.com or Tonja Hilton, Partner-in-Charge, Small Business Group 314-290-3334 tonja.hilton@rubinbrown.com

The upside of growing your practice: • From an economic viewpoint, the most efficient practices today consist of two to four doctors. Between four and 10, the doctors' efficiency usually declines and then starts to grow above the level of 10. • From a quality of life view, practicing with an associate allows shared calls, vacations and reduced day-to-day pressure. • There also is the advantage of collaboration with your associate. The downside of taking in a partner or associate: • The new associate's opinion will have to be considered in making decisions about the practice. • An associate may not work well with you personally or with your management style and professional point of view. • Taking in an associate may require startup costs because of the investment needed to get them scheduled, insured and the possible need for additional support staff. When considering the addition of a new doctor, you must decide where to begin your search. New doctors may come from networking with old friends in the profession, referrals from professors and vendors, and from residency programs around the country. Bringing in an experienced doctor has the advantage of reducing or eliminating startup costs but usual- ly precludes the engagement period that comes with taking in a person coming out of residency. Some new doctors do not want to be involved in management of the practice and have no interest in becoming a partner. However, in most instances we find that the incoming doctor prefers to be a partner and the question becomes at what point in time. It is typical to see an engagement period of two to three years. Generally two legal documents are required when recruiting a doctor or resident - first, a letter of understanding, and sec- ond, an employment agreement. The letter of understanding usually includes a job offer with terms and a description of the criteria needed to transition from an employee to a partner or employee shareholder. The letter also should include a

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