This eBook hopes to educate physicians about the things that they need to be aware of to understand what their employer or managing partner is looking for in a new partner or young associate.
This eBook is for:
- Physicians in their first 10 years of practice whether they’ve taken their first job and they’re about to join a private practice or they’re about to begin their private practice and looking to add productive partners and other physicians in their specialty.
- Young physicians who are just starting, who may have found a practice, and received a partnership agreement or an offer to join as an associate. In such situations, these physicians are presented with a very sophisticated business employment contract.
- The experienced partner/owner who wants to make sure to attract the best partners and young physicians they can as well as protect themselves and the other existing partners they already have.
First, I’d like to educate experienced doctors, young doctors, and partners about the legal risks to make them world-wise. Many of their informal conversations and negotiations about joining a practice, leaving a practice, or inviting someone else often cement someone’s interest in attracting or joining new physicians or new partners.
The result of this education would be for them to speak in an informed way about things they can contribute to the partnership and legal risks that they are willing or unwilling to take on. They can also weigh the consequences or the risks more effectively when comparing one opportunity with a small practice versus a different opportunity with a larger practice, a hospital, or some sub-specialty.
The Common Types Of Business Structures
The most common types of business structures today are professional partnerships or professional associations that consist of physicians themselves, typically anywhere from three to five and as many as twenty different partners.
Each state has a different way of determining the entity, and most states treat physician partnerships the same way they treat any other business partnerships. It doesn’t matter whether you’re a law firm, a group of CPAs, a franchise owner, or a family business that’s owned by four brothers. They are all a partnership.
When physicians look for work, they are typically looking to join a partnership or, in some cases, a regular corporation. In the past 10 years, several corporations have moved into the medical industry. Many small partnerships or physician practices have sold their practices to a larger company. They joined a corporate structure as an employee and have left the world of what most of us call entrepreneurship, a small business.
The Different Types Of Practices
Depending on the kind of practice that physicians are in, there are different types.
Small Hospitals: If a physician practice gets a contract with a small hospital, they will have that job or that contract for one to three years. These practices are typically limited to one specialty. This type of practice may also work directly with the consumer in and around their local office.
These practices can have many offices or just have two. Think of your pediatric or your orthopedic offices. It’s a common clinic or an office that patients can go to visit.
Larger Hospitals: More specialized practices typically associate with larger hospitals because that’s where the traffic and that’s where the patients go.
Surgeries usually happen in a hospital, not a private surgery center—although there are more types of surgery centers popping up everywhere. But most of the types of business structures that you’ll be dealing with are 1) a physician joining as an employee of a hospital or some corporation, corporate structure, or 2) a physician that has joined a private practice, which is a partnership. In each business structure, you are joining as a partner.
The Best Business Structure For A Medical Practice
The best business structure does depend on the medical practice and the specialty. A good structure also depends on how many employees, how many physicians, and how many providers are joining it.
If you’re a small medical practice, the best structure for medical practice would be a small business, as a sole proprietor.
If you’re a one- or two-person business, there is a specific structure. Although each state is different, in these cases, you would be a professional association, a sole proprietor. You’d be a business owner and you would hire all of your employees and your business would be treated just like any other small business.
You would be the generator of revenue. Thus, the taxes or the income tax that that business and that operation are taxed on would be based on the structure of that business, which is typically an S-Corporation or a professional corporation. With legal help, you can bypass some of the larger corporate taxes, and it would flow directly to you, the small business provider.
If you’re a larger practice, it would be a professional association. You could choose between a partnership with a group of managing partners or you could have one partner that would grow the practice. Either way, there would be a corporate tax on legal liability.
Every state has different tort reform or medical liability insurance laws. Most states require that physicians carry medical insurance. Most financial providers, attorneys, and tax professionals would advise new physicians to create a structure that protects their liability in exchange for the cost of paying for insurance.
The Cost of Insurance
The other variable that comes into play is the cost of insurance. This is based on how the physician values liability, and what risks they have anticipated, which depends on the kind of specialty they have. It also depends on whether or not the state (or states) they practice in is a litigious state or a litigious area of practice.
The most litigious areas of practice are the ones where the patients are either protected or most at risk. These areas involve newborns, young children, and surgeries. The public generally looks at those types of cases as more litigious or agrees that if someone makes a mistake with those kinds of patients in those scenarios, it usually ends up in a lawsuit.
For more information on Business Law in Florida, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (813) 367-6874 today.
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