Have You Reviewed Your “Partner” Agreements Lately?

Have You Reviewed Your “Partner” Agreements Lately?

Most physicians in group practice understand the need to have their internal practice economic and governance-related arrangements documented in writing. If no agreements are in place, a junior physician could leave with no notice without a restrictive covenant and take a lot of patients with him or her. A senior physician, without the proper agreements, could retire or die with no entitlement to a buy-out. Even if certain documents do exist, they may be old and outdated in light of the current legal and economic environment. Thus, it is very important to examine your practice inter-doctor documents periodically, perhaps every two or three years or so, to see if any changes are warranted. Partnership Agreements The form of the documents will vary depending upon the type of entity. If the practice is a professional corporation, the documents typically include Employment Agreements for the shareholders, a Buy-Sell or Shareholders’ Agreement and Bylaws. If the practice is a partnership, there would be a Partnership Agreement. If the practice is a limited liability company, an Operating Agreement would be the governing document. The most obvious and important issue that needs to be looked at in light of the difficult healthcare environment is the buy-out. If the buy-out is a set dollar amount that was agreed to in better days, it should be reduced to a more realistic value today. If the buy-out is expressed as a percentage of the gross receipts for a period prior to termination (e.g., an annual average over the prior three calendar years), the percentage may be too high since the overhead is almost certainly higher than in...