Sale to Private Equity, will I lose bonus?

[glapapa]

1 year into practice and received the dreaded news that the current owner is selling to PE.

Per my contract, my productivity bonus based on collections does not get distributed until after the new year.

If I leave the practice, is there a chance I could lose what I’m entitled to? Certainly will consult with an attorney on the matter. I made sure that current contract states termination for “good cause/reason” will result in pro-rated pay of bonus, but sale of practice isn’t specifically listed as a “good reason”.

Curious if anyone has ever been in this scenario and thoughts on how to best navigate.

Likely hundreds of thousands at stake here.

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[Agast]

Your current contract does not transfer over to the private equity group with the sale of the practice, they will try to get you to sign a new one

 

[glapapa]

Your current contract does not transfer over to the private equity group with the sale of the practice, they will try to get you to sign a new one

Yes correct; I’m concerned if I don’t agree to sign, current owner will withhold bonus as leverage. I should mention I’m generating the majority of practice revenue at this point.

 

[Agast]

Yes correct; I’m concerned if I don’t agree to sign, current owner will withhold bonus as leverage. I should mention I’m generating the majority of practice revenue at this point.

If you’re planning on leaving and you’re the revenue generator, it sounds like Private Equity is buying a dud! Maybe they should be working to keep you happy

 

[Ducttape]

make sure your resume is up to date.

if you are interested in taking the plunge in to setting up your own practice, now might be the time to do so...

 

[glapapa]

make sure your resume is up to date.

if you are interested in taking the plunge in to setting up your own practice, now might be the time to do so...

I think this may be the path.

I know the PE firm will try to keep me happy with an offer in the form of “carried interest” or shares, but who knows what the tangible value of that will actually be in 3-5 years.

 

[Agast]

I don’t know if @ateria radicularis magna is still around but his group sold to PE and he left

 

[drusso]

1 year into practice and received the dreaded news that the current owner is selling to PE.

Per my contract, my productivity bonus based on collections does not get distributed until after the new year.

If I leave the practice, is there a chance I could lose what I’m entitled to? Certainly will consult with an attorney on the matter. I made sure that current contract states termination for “good cause/reason” will result in pro-rated pay of bonus, but sale of practice isn’t specifically listed as a “good reason”.

Curious if anyone has ever been in this scenario and thoughts on how to best navigate.

Likely hundreds of thousands at stake here.

"They will never love you back."

 

[sdnuser001]

I think this may be the path.

I know the PE firm will try to keep me happy with an offer in the form of “carried interest” or shares, but who knows what the tangible value of that will actually be in 3-5 years.

Anyone have experience buying shares of a private equity MSO? I would think it's a favorable investment since the PE group isn't going to buy the practice unless they feel like they can turn a profit in the next few years

 

[gdub25]

This isn’t dreaded news in my opinion. I’m not an expert by any means but I have some experience with private equity. Know several PE firms and have had many dinners, zoom calls, and done consulting deals with them. Have had many offers for my practice as well and gone through offers, etc. I think most fear the worst when they hear private equity and a lot of people parrot what they have heard told to them but in reality very few have actual experience with this type of deal. PE is buying the group you’re a part of because there is profit to buy. You are probably generating that profit and doing so under your current contract. They have to honor that contract as it is a contract between you and the practice they are buying. They can absolutely try to get you to sign a new one either before they buy or when your contract term is done and you can negotiate. They would be unlikely to want to buy the practice if you are the primary revenue generator and they have no assurances you’re planning to stick around so they would want to make sure your happy if that’s the case. However, if you’re just one of a handful of guys in the group then the risk is much lower if you walk and you’re absence will be easier to absorb and you’ll be easier to replace.

You have some reasons to ask some questions and I’m not saying you shouldn’t be on alert but there is a decent chance your pay doesn’t change and in a lot of cases could increase depending on the size of the PE firm, their portfolio, and pull in your particular market.

 

[drusso]

This isn’t dreaded news in my opinion. I’m not an expert by any means but I have some experience with private equity. Know several PE firms and have had many dinners, zoom calls, and done consulting deals with them. Have had many offers for my practice as well and gone through offers, etc. I think most fear the worst when they hear private equity and a lot of people parrot what they have heard told to them but in reality very few have actual experience with this type of deal. PE is buying the group you’re a part of because there is profit to buy. You are probably generating that profit and doing so under your current contract. They have to honor that contract as it is a contract between you and the practice they are buying. They can absolutely try to get you to sign a new one either before they buy or when your contract term is done and you can negotiate. They would be unlikely to want to buy the practice if you are the primary revenue generator and they have no assurances you’re planning to stick around so they would want to make sure your happy if that’s the case. However, if you’re just one of a handful of guys in the group then the risk is much lower if you walk and you’re absence will be easier to absorb and you’ll be easier to replace.

You have some reasons to ask some questions and I’m not saying you shouldn’t be on alert but there is a decent chance your pay doesn’t change and in a lot of cases could increase depending on the size of the PE firm, their portfolio, and pull in your particular market.

It's a Ponzi scheme. It only works if the doctor worker bees work harder.

 

[gdub25]

Not true at all. Real example.

Practice has a two young docs, pretty busy, getting about 60 referrals a month each and doing 150 injections a month each. Both bring home about 600k a year in profit after paying overhead. Their system is inefficient and each guy has his own midlevel which they really don’t need. PE buys them and optimizes the clinic and prior auth process so the midlevels are no longer needed cutting overhead by 220k a year, docs see their own follow ups and are able to collect an extra 15% (midlevels only collect 85% of what a doc does with many insurances unless “incident to” billing is used and again many insurances won’t recognize). Billing in this two doctor practice wasn’t very good either because they were paying a billing company 5.5% of collections and the company wasn’t collecting everything they should. PE brings billing into their centralized organization and not only saves the 5.5% but also increases the collection rate by another 6% by collecting what the billing company was missing. Right here we see an example of how PE can squeeze an extra few hundred thousand out of a pretty good clinic just by optimizing the setup. In this scenario the PE firm can make a few hundred K a year which they can flip for a multiple to a bigger firm and both docs are relieved of having to run the business while nothing about their take home pay would have to change. They still make 600k a year without having to manage the practice any longer and get a good payout as well. Add in that PE had the capital to market and scale into new towns, add new doctors, move the existing doctors into an ASC and there you have it. Private equity making money while the docs get a good deal as well.

 

[sloh]

Not true at all. Real example.

Practice has a two young docs, pretty busy, getting about 60 referrals a month each and doing 150 injections a month each. Both bring home about 600k a year in profit after paying overhead. Their system is inefficient and each guy has his own midlevel which they really don’t need. PE buys them and optimizes the clinic and prior auth process so the midlevels are no longer needed cutting overhead by 220k a year, docs see their own follow ups and are able to collect an extra 15% (midlevels only collect 85% of what a doc does with many insurances unless “incident to” billing is used and again many insurances won’t recognize). Billing in this two doctor practice wasn’t very good either because they were paying a billing company 5.5% of collections and the company wasn’t collecting everything they should. PE brings billing into their centralized organization and not only saves the 5.5% but also increases the collection rate by another 6% by collecting what the billing company was missing. Right here we see an example of how PE can squeeze an extra few hundred thousand out of a pretty good clinic just by optimizing the setup. In this scenario the PE firm can make a few hundred K a year which they can flip for a multiple to a bigger firm and both docs are relieved of having to run the business while nothing about their take home pay would have to change. They still make 600k a year without having to manage the practice any longer and get a good payout as well. Add in that PE had the capital to market and scale into new towns, add new doctors, move the existing doctors into an ASC and there you have it. Private equity making money while the docs get a good deal as well.

Unicorns

 

[Ducttape]

No offense. But it sounds like the office just needed to hire a better business manager....

 

[glapapa]

Not true at all. Real example.

Practice has a two young docs, pretty busy, getting about 60 referrals a month each and doing 150 injections a month each. Both bring home about 600k a year in profit after paying overhead. Their system is inefficient and each guy has his own midlevel which they really don’t need. PE buys them and optimizes the clinic and prior auth process so the midlevels are no longer needed cutting overhead by 220k a year, docs see their own follow ups and are able to collect an extra 15% (midlevels only collect 85% of what a doc does with many insurances unless “incident to” billing is used and again many insurances won’t recognize). Billing in this two doctor practice wasn’t very good either because they were paying a billing company 5.5% of collections and the company wasn’t collecting everything they should. PE brings billing into their centralized organization and not only saves the 5.5% but also increases the collection rate by another 6% by collecting what the billing company was missing. Right here we see an example of how PE can squeeze an extra few hundred thousand out of a pretty good clinic just by optimizing the setup. In this scenario the PE firm can make a few hundred K a year which they can flip for a multiple to a bigger firm and both docs are relieved of having to run the business while nothing about their take home pay would have to change. They still make 600k a year without having to manage the practice any longer and get a good payout as well. Add in that PE had the capital to market and scale into new towns, add new doctors, move the existing doctors into an ASC and there you have it. Private equity making money while the docs get a good deal as well.

Getting rid of mid levels and seeing all my own follow ups/med refills would take up the time I could use to see new patients/do procedures/implants.

Not a great example.

 

[GlowInTheDark]

Few months from partnership, group is selling to an MSO. Now I get to buy “shares” at some point and all my revenue is getting shaved by overhead and the MSO’s cut.

Can I blame boomers? Cause they’re the ones who were all aboard.

 

[gazzer]

Not true at all. Real example.

Practice has a two young docs, pretty busy, getting about 60 referrals a month each and doing 150 injections a month each. Both bring home about 600k a year in profit after paying overhead. Their system is inefficient and each guy has his own midlevel which they really don’t need. PE buys them and optimizes the clinic and prior auth process so the midlevels are no longer needed cutting overhead by 220k a year, docs see their own follow ups and are able to collect an extra 15% (midlevels only collect 85% of what a doc does with many insurances unless “incident to” billing is used and again many insurances won’t recognize). Billing in this two doctor practice wasn’t very good either because they were paying a billing company 5.5% of collections and the company wasn’t collecting everything they should. PE brings billing into their centralized organization and not only saves the 5.5% but also increases the collection rate by another 6% by collecting what the billing company was missing. Right here we see an example of how PE can squeeze an extra few hundred thousand out of a pretty good clinic just by optimizing the setup. In this scenario the PE firm can make a few hundred K a year which they can flip for a multiple to a bigger firm and both docs are relieved of having to run the business while nothing about their take home pay would have to change. They still make 600k a year without having to manage the practice any longer and get a good payout as well. Add in that PE had the capital to market and scale into new towns, add new doctors, move the existing doctors into an ASC and there you have it. Private equity making money while the docs get a good deal as well.

can you please give us a basic understanding of how the payout is calculated and on what terms?

 

[drusso]

can you please give us a basic understanding of how the payout is calculated and on what terms?

Why don't the doctors just optimize things themselves and keep ALL of the profit? Why share any of it with non-MD/DO PE?

 

[gazzer]

Why don't the doctors just optimize things themselves and keep ALL of the profit? Why share any of it with non-MD/DO PE?

I don’t think anyone is opposed to this. Certainly something pp owners such as yourself are constantly looking at. I was asking a different question.

 

[RaceCanyon]

Why don't the doctors just optimize things themselves and keep ALL of the profit? Why share any of it with non-MD/DO PE?

They may want the M-F 7/8 AM-4PM hours...

 

[Doctodd]

When you sell, you can buy my practice in south florida so I can start coaching baseball and fishing more.

 

[gaseous_clay]

Anyone have experience buying shares of a private equity MSO? I would think it's a favorable investment since the PE group isn't going to buy the practice unless they feel like they can turn a profit in the next few years

Depends on the PE group and the executive team support they provide the portfolio practice. A lot of PE groups buying up medical practices are unable to resell them for profit.

 

[gdub25]

can you please give us a basic understanding of how the payout is calculated and on what terms?

Practice makes 1 mil in profit/yr. Solo doc and he takes no salary from the business so the 1mil a year in business profit is also his take home pay. PE says they’ll buy 70% of his practice for a multiple of 5x. This means they are buying 700k per year in income at a 5x multiple. The doc would get 3.5 million in a payout and continue to keep 30% of profits moving forward. The doctor will have a contract to continue us to work for 5 years before they can move on. The deal usually has contingencies on how the payout is done to prevent the doctor from losing steam.

Why don't the doctors just optimize things themselves and keep ALL of the profit? Why share any of it with non-MD/DO PE?

Most doctors are not good at business. Look at the income thread. Some of us make 350k while others make 800k-1ml. If doctors knew how to work 4 days a week and make 800k a year they would do it. These forums are full of discussions with negative outlooks on private practices that make money that is seemingly too good to be true. If we all knew how to make it happen we would and it’s normal to be a skeptic or critic when we can’t.

Depends on the PE group and the executive team support they provide the portfolio practice. A lot of PE groups buying up medical practices are unable to resell them for profit.

Very true. Many invest and don’t understand the business. I have consulted for PE firms who bought pain clinics and 4 years in had still not increased profitability. The solutions were pretty simple but they were specific to the business of pain management and were not things the PE guys would have known. Example, doc taking 15 minutes to do an inter laminar ESI and only able to do 20 procedures in a day is someone that you need to replace. They didn’t know this is too slow.

 

[Vasanervo]

Practice makes 1 mil in profit/yr. Solo doc and he takes no salary from the business so the 1mil a year in business profit is also his take home pay. PE says they’ll buy 70% of his practice for a multiple of 5x. This means they are buying 700k per year in income at a 5x multiple. The doc would get 3.5 million in a payout and continue to keep 30% of profits moving forward. The doctor will have a contract to continue us to work for 5 years before they can move on. The deal usually has contingencies on how the payout is done to prevent the doctor from losing steam.


Most doctors are not good at business. Look at the income thread. Some of us make 350k while others make 800k-1ml. If doctors knew how to work 4 days a week and make 800k a year they would do it. These forums are full of discussions with negative outlooks on private practices that make money that is seemingly too good to be true. If we all knew how to make it happen we would and it’s normal to be a skeptic or critic when we can’t.



Very true. Many invest and don’t understand the business. I have consulted for PE firms who bought pain clinics and 4 years in had still not increased profitability. The solutions were pretty simple but they were specific to the business of pain management and were not things the PE guys would have known. Example, doc taking 15 minutes to do an inter laminar ESI and only able to do 20 procedures in a day is someone that you need to replace. They didn’t know this is too slow.

How many minutes would be just right for the ESI? Starting fellowship next year. Pardon the basic question.

 

[GoBeers]

How many minutes would be just right for the ESI? Starting fellowship next year. Pardon the basic question.

15 minute time slot is normal. the ESI itself should take 2-3 minutes. but it's setting up, getting patient on off bed that eats up the other time.

full 8 hour day of procedures, you should be able to do 25-32 procedures (mix of mbb, esi, rfa, joint injections) in full day in office procedure room.

 

[Vasanervo]

15 minute time slot is normal. the ESI itself should take 2-3 minutes. but it's setting up, getting patient on off bed that eats up the other time.

full 8 hour day of procedures, you should be able to do 25-32 procedures (mix of mbb, esi, rfa, joint injections) in full day in office procedure room.

Thanks a lot. How about mbb, rfa? Target times?

 

[Dr. Ice]

Thanks a lot. How about mbb, rfa? Target times?

Do it right first, do it fast later

 

[MitchLevi]

8 hrs of procedures is 40.

 

[RoloTomassi]

Solo doc and he takes no salary from the business so the 1mil a year in business profit is also his take home pay.

Are you just saying this for simplicity in your example? I thought you had to give yourself a reasonable salary.

 

[gdub25]

No, you do not have to take a salary for any reason other than for tax advantage purposes as far as I’m aware. That’s the only reason we take salaries and we take really low salaries at that.

 

[GoBeers]

Thanks a lot. How about mbb, rfa? Target times?

20 minutes unilateral rfa. 30 minute b/l rfa. 30-45 minute SCS trial. 15 minutes everything else.

the problem with in-office procedures are the fact that IVs can be difficult on patients, patients come late, having an MA vs. rad tech moving the c-arm, and of course the occasional unexpected difficult anatomy

 

[BobBarker]

I could do 70 in a day at the hospital. No lunch, start at 730. Probably the most procedures in a day has been 50 in the office. But doing a bilateral cervical RFA on a fully awake person, takes a lot more time than doing a unilateral on someone under light sedation like I did back then.

 

[BobBarker]

B/l rfa needs to be less than 20. Basic procedures less than 10.

 

[Taus]

B/l rfa needs to be less than 20. Basic procedures less than 10.

One or two rooms? Staff to help turnover room, position, prep?

 

[GoBeers]

B/l rfa needs to be less than 20. Basic procedures less than 10.

those are some amazing times that cannot be accomplished with just skilled proceduralist alone

 

[BobBarker]

One room. Just me and my assistant.

 

[paindoc34]

50 a day?! Man, you guys hustle. My rate limiting factor is staff/turnovers. Overhead goes up when you need to hire PRN help on procedure days. I'm averaging about 15 min for room time, so i get through about 25 a day

 

[BobBarker]

Medical assistants load the 3 closest exam rooms to the procedure room with the upcoming procedures and use flags to tell me which patient to get next. I escort the last procedure patient out, pass her off to a medical assistant, grab the next procedure patient and walk to procedure room. My assistant has cleaned the room and started prepping for the procedure. Lay the patient down, I prep. Draw up with my assistant, she then gets the c arm into position while I drape and point. Procedure takes place. Rinse and repeat. Rarely will I go across the hall and see an office visit while she handles everything after a procedure and gets the next patient ready. It is about economy of motion and being willing to do some of the work yourself to improve efficiency. Think like Henry Ford.

 

[GoBeers]

Medical assistants load the 3 closest exam rooms to the procedure room with the upcoming procedures and use flags to tell me which patient to get next. I escort the last procedure patient out, pass her off to a medical assistant, grab the next procedure patient and walk to procedure room. My assistant has cleaned the room and started prepping for the procedure. Lay the patient down, I prep. Draw up with my assistant, she then gets the c arm into position while I drape and point. Procedure takes place. Rinse and repeat. Rarely will I go across the hall and see an office visit while she handles everything after a procedure and gets the next patient ready. It is about economy of motion and being willing to do some of the work yourself to improve efficiency. Think like Henry Ford.

must be all non-sedation cases, in which case, this makes sense.
however non sedation b/l RFA in under 20 minutes is still impressive.

MAs who aren't efficient themselves with c-arm is excruciatingly painful and the minutes (+fluoro) add up.

awesome how efficient you are.

 

[lobelsteve]

Medical assistants load the 3 closest exam rooms to the procedure room with the upcoming procedures and use flags to tell me which patient to get next. I escort the last procedure patient out, pass her off to a medical assistant, grab the next procedure patient and walk to procedure room. My assistant has cleaned the room and started prepping for the procedure. Lay the patient down, I prep. Draw up with my assistant, she then gets the c arm into position while I drape and point. Procedure takes place. Rinse and repeat. Rarely will I go across the hall and see an office visit while she handles everything after a procedure and gets the next patient ready. It is about economy of motion and being willing to do some of the work yourself to improve efficiency. Think like Henry Ford.

And the most important thing: patient’s mouth is taped shut to prevent the talking and questioning.

 

[BobBarker]

And the most important thing: patient’s mouth is taped shut to prevent the talking and questioning.

Correct.

 

[cowboydoc]

One room. Just me and my assistant.

To be fair to newer readers of the forum, statements regarding production, efficiency and getting hospital systems to work in the physician’s favor coming from @BobBarker are like Arnold Schwarzenegger talking in an ad for a protein shake.

That shake won’t get you swole. Bob is a BEAST. Results are not typical. Your can probably learn a lot from Bob, but don’t take his statements as typical, expected or average.

 

[BobBarker]

Completely only slightly related but a hilarious post from 10 years ago that everyone missed regarding cardiac anesthesia.

We place all of our lines in holding, too. I also drop on OG and suction contents then remove it for my TEE prep. I have the nurse put the foley in and clip the chest hair at this time as well. I then tape the eyes shut and proceed to the OR.

PMR friends: the patient is awake and talking to you in holding.

 

[bedrock]

B/l rfa needs to be less than 20. Basic procedures less than 10.

Bob, you are the man. Insanely efficient.

However anyone doing less than 20min bilateral RFA, so 15 minutes, is not doing good RFA.

I’ve know several docs over the years with blazing speed on RFA, and then I’ve repeated RFA with efficient but SIS technique and all of these patient had much more pain relief after my RFA.

There is such a thing as too fast with certain procedures.

 

[BobBarker]

I’m just good with the head math. Takes less than a minute to drop the left side in position since I already know the angle and depth from the right side. For lumbar, cervical slower since I drop one in at a time. Lumbar steering all 3 at once.

 

[gaseous_clay]

No, you do not have to take a salary for any reason other than for tax advantage purposes as far as I’m aware. That’s the only reason we take salaries and we take really low salaries at that.

How did you get in the business of consulting for PE?

 

[nvrsumr]

you have to pay yourself a w2. Those ss and medicare taxes don’t get paid otherwise.

 

[gdub25]

Bob, you are the man. Insanely efficient.

However anyone doing less than 20min bilateral RFA, so 15 minutes, is not doing good RFA.

I’ve know several docs over the years with blazing speed on RFA, and then I’ve repeated RFA with efficient but SIS technique and all of these patient had much more pain relief after my RFA.

There is such a thing as too fast with certain procedures.

The only way I ever got better/smarter/faster/efficient was by looking at others who did extremely well and seeing what they did differently. If Bob can do a bilateral RFA in 10 minutes, why can’t you and I. The answer is we can, we just have to be willing to accept that we need to make changes. The number one thing I see hindering growth when evaluating other pain practices is docs outsmarting themselves with justifications on why their practice functions the way they do. Our practice has grown profitability immensely since we first started because we have been willing to accept change. RFA used to take me 20 minutes, it never should have.

you have to pay yourself a w2. Those ss and medicare taxes don’t get paid otherwise.

This may be correct. Again, we do pay ourselves salaries at the direction of our accounting team and I know it’s for tax purposes. The exact reasoning I do not remember.

How did you get in the business of consulting for PE?

They have pitched us many times in the past wanting to acquire our practice. We’re young and haven’t wanted to sell but went ahead and went through some of the due diligence to see what a deal might look like. The firms were impressed enough with our model, our finances, and our overall approach to running a pain clinic that they felt we could provide some valuable advice on their prior acquisitions.

 

[callmeanesthesia]

I’m just good with the head math. Takes less than a minute to drop the left side in position since I already know the angle and depth from the right side. For lumbar, cervical slower since I drop one in at a time. Lumbar steering all 3 at once.

I think I’m reasonably quick procedurally. Nowhere near you but sub-20 minutes for bilateral lumbar RFA for actual procedure time, and I’m pretty meticulous about placement and angulation. But it’s all the stuff around the procedure that still costs me time. Can you explain a little more about that?

I have an MA doing fluoro and moving patients in/out, and one scribing/setting up trays. So while I’m doing the procedure the scribe puts in the note template and pulls up the next patient’s chart and imaging. When I’m done with the procedure the fluoro MA gets the patient down and out of the room, the scribe drops the next procedure tray, and I sign the note and review the next patient’s chart and imaging. That usually takes about 3 minutes. The next patient is brought in, then I talk to them. Here’s what I’m guessing is making me slower, but I don’t see how to “fix” it without compromising quality: I work with 2 mid levels, so I’m meeting a decent number of these patients for the first time right then. I review their imaging and new patient note, sometimes the note from the referring doctor, and briefly examine the patient. At least a couple times a day I’ll change what procedure we are doing, or at least what levels we are doing for MBBs. If the procedure is a 2nd MBB the conversation takes about 10 seconds but if it’s someone new to me with a lot of questions it can easily be 5 minutes. I discuss the injection, then the fluoro MA helps the patient on the table while I glove up and draw meds.

Overall I’m scheduling 15 minutes for routine injections and unilateral RFs, 30 minutes for bilateral RFs, and 45 minutes for stim trial and kypho (procedure itself isn’t that long but the discussion is longer and I’m prepping and draping everything myself). 2-3 double books per half day, so 7:30-4:00 with an hour for lunch, usually 25-30 patients per day.

Bob and gdub25, suggestions for improving flow?

 

[BobBarker]

Yea, no mid levels and no lunch.