Ophthalmology Practice Partnership: What Should Physicians Consider?
Joining an ophthalmology practice as a partner can provide a physician with an opportunity to move beyond employment and become an owner. However, partnership involves more than simply receiving an ownership percentage.
The financial structure, responsibilities, decision-making authority, compensation, and long-term expectations should all be understood before entering into an agreement.
For physicians considering ophthalmology practice financing, understanding the partnership structure can also help determine whether financing may be needed to purchase an ownership interest.
Start With the Partnership Structure
The first question is what type of partnership is actually being offered.
A physician may be purchasing a specific percentage of an existing practice, becoming a shareholder in a professional corporation, or entering another ownership arrangement.
The legal and financial structure should be clearly explained before the physician commits.
How Much Ownership Will You Receive?
Ownership percentages can vary considerably.
A physician should understand exactly what percentage they will own and whether that percentage represents an interest in the operating practice, real estate, or another entity.
If multiple entities are involved, each should be clearly identified.
Understand How You Will Be Paid
Partnership does not necessarily mean that all owners receive the same compensation.
Compensation may include salary, productivity-based compensation, distributions, or other arrangements.
The physician should understand how income is calculated and how ownership affects compensation.
What Expenses Will You Share?
Owners generally have responsibilities that employees may not have.
Depending on the practice, partners may share expenses related to:
- Staffing
- Office space
- Equipment
- Technology
- Insurance
- Marketing
- Administrative operations
- Future capital investments
Understanding how expenses are allocated can be just as important as understanding compensation.
Decision-Making Matters
Ownership should come with clearly defined rights.
A prospective partner should understand who makes decisions regarding hiring, equipment purchases, expansion, compensation, locations, major expenses, and other important business matters.
The ownership percentage alone may not tell the entire story.
Look at the Partnership Agreement
The partnership agreement or shareholder agreement should be carefully reviewed before signing.
It may address ownership transfers, voting rights, distributions, retirement, disability, death, termination, buyouts, and other situations that could arise during the relationship.
An attorney familiar with healthcare transactions should review the agreement.
Ask About Future Capital Contributions
A partnership may require owners to contribute additional money in the future.
For example, the practice may eventually need to purchase expensive equipment, renovate the facility, open another location, or make another major investment.
A physician should understand whether partners will be expected to contribute additional capital and how those contributions will be calculated.
Consider the Other Partners
A partnership is also a professional relationship.
The physician should consider the partners’ approach to patient care, business management, growth, work schedules, compensation, and decision-making.
Differences in business philosophy can become more significant once physicians share ownership.
What Happens When Someone Leaves?
The agreement should explain what happens if a partner retires, becomes disabled, dies, leaves the practice, or wants to sell their ownership interest.
The buyout formula and valuation methodology can have a major financial impact.
These provisions are much easier to address before a problem occurs.
Partnership vs. Employment
Employment provides a simpler relationship in many cases: the physician works for the practice and receives compensation without taking on ownership responsibilities.
Partnership can provide greater control and the potential to participate in the financial performance and future value of the business.
However, ownership also brings additional responsibilities and financial risk.
Don’t Focus Only on the Buy-In Price
A partnership opportunity should not be evaluated solely by asking how much it costs to become an owner.
Consider the complete picture, including expected compensation, distributions, expenses, debt payments, capital requirements, ownership rights, and potential future value.
A lower buy-in price does not necessarily represent the better opportunity.
Get Professional Advice Before Signing
A prospective partner should consider working with an attorney, accountant, valuation professional, and financing specialist as appropriate.
Each can help evaluate a different part of the transaction.
The goal is to understand exactly what is being purchased, how the practice operates, and what financial obligations come with ownership.
Final Thought
An ophthalmology practice partnership can provide a meaningful path to ownership, but the details matter.
Physicians should understand the ownership percentage, compensation structure, expenses, decision-making rights, future capital requirements, partnership agreement, and exit provisions before becoming a partner.
Taking the time to evaluate these terms carefully can help a physician determine whether the partnership is financially and professionally aligned with their long-term goals.
