April 3, 2015

Transferring Ownership to a New Associate Doctor? Take Your Time

transferring ownership of practice

Since creating Associate Agreements is one of the things we do, I’m often asked for advice when a practice owner is hiring an associate employee whom the owner hopes will eventually become a partner or even buy the practice. This tends to happen when a doctor is getting ready to retire, wants to reduce hours, or wishes to focus more of their own time on a particular specialty.

In these situations, the owner usually comes to me wanting resources or guidance on how to search for or pick the right associate, and what to have in place for smoothly transferring ownership of the practice down the road.

Here’s my answer: This is one of the most difficult and dangerous things to decide and set up in advance. Why? You’re saying you want to create a partner-like relationship with someone – which is almost the equivalent of marrying someone – before you get to know them. In fact, though, your associate needs to begin as your employee, not your partner.

There are many possible pitfalls of building too much into your agreement before you begin working together. For one thing, it is all too easy to set an expectation which could unintentionally confer legal obligations. Be careful!

Before going further, I like to ask why the practice owner thinks they need this particular type of arrangement. Here are typical responses:

“We’ve been told it’s a good idea, so…”
“I’m ready to retire.”
“I’ve been injured and am dealing with a disability,” or even, “I’m terminally ill.”
“This is how I bought the practice, so I thought it would be the best way to go.”
“We are having trouble attracting and keeping associates, so we thought a path to ownership might cure that issue.”
“I just want OUT!”

Once that “why” question is answered, it’s much easier to formulate a plan that takes your preferred timeline into account but doesn’t jump the gun. Keep in mind that we always want to date the person we are going to marry. And often for years.

So what’s the secret to setting this up successfully? Create an associate employee agreement with your prospective partner/purchaser that allows you time to evaluate their work and how well you work together. The “getting-to-know-you” phase is there for a reason, even with an employee.

If you are an owner in a similar situation and would like to ask questions about this issue, please give me a call at 602-476-1418.

Friendly Disclaimer: This information is general in nature and is not intended to provide legal advice or replace individual guidance about a specific issue with an attorney or HR expert. The information on this page is general human resources guidance that is believed to be current as of the date of publication. Note that CEDR is not a law firm, and as the law is always changing, you should consult with a qualified attorney or HR expert who is familiar with all of the facts of your situation before making a decision about any human resources or employment law matter.

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Please note: CEDR Solutions specializes in providing expert HR support to owners and operators of independently owned medical and dental practices.