Business
Build foundation for new practice model
■ A column examining the ins and outs of contract issues
By Steven M. Harris — is a partner at McDonald Hopkins in Chicago concentrating on health care law and co-author of Medical Practice Divorce. He writes the "Contract Language" column. Posted Oct. 2, 2006.
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Tired of practicing in a foundation or similar model? You are not alone. The main complaints we hear about foundation models are the high cost of doing business and poor billing and collection efforts by management. These can lead to lower compensation for physicians, who then start to feel they can make more and do it better in smaller settings.
But before you leap, please note there are traps for the unwary.
Read your contract for employment with the foundation and understand it. If there is a disagreement between you and the foundation, the terms and conditions of the contract will break ties.
Your contract may allow you to recruit current staff, such as your receptionist, nurse and physician assistant, but they may not be receptive.
That expensive model you would like to leave is expensive, in large part, because of the high cost of staff salaries and benefits. Your support staff will expect you to match, or certainly come close, to what they were getting from the foundation.
Be careful to check whether you (and staff) need to be employed at year-end to receive matching pension or other benefits from the foundation. If so, plan your departure in January so you will not leave this match on the table.
Hopefully, the foundation will have insured you on an occurrence basis, thereby alleviating the need to purchase a reporting endorsement or "tail" insurance. Occurrence basis refers to liability insurance that covers settlements or claims for harm sustained by others because of events occurring while a policy is in force, regardless of when a claim is actually made.
If you need continuing coverage, determine if you can procure a policy from the same carrier as the foundation, thus controlling costs.
If you have occurrence coverage and procure a commercial professional liability insurance policy when you start your private practice, your premiums will be determined with no risk of prior claims. Accordingly, when you prepare your financial forecast for the new practice, remember to figure a much lower premium, one that approximates a first-year physician leaving a fellowship or residency program.
Many of your patients may want to follow you, but may have health insurance plans that cover only care provided by foundation physicians.
Because your schedule is determined several months in advance, patients might be caught in the switch. Be sure to notify patients that services performed as of the date of your privatization might not be covered under their insurance plans.
Billings for services you rendered will likely continue for awhile after you are gone. Make sure you know who owns the cash that you generated prior to leaving but was collected afterwards.
If the foundation is keeping your collections, you might have to procure a working capital loan to finance the start of your private practice.
When presenting your loan proposal, make sure the bank understands that your practice is mature, and that underwriting not consider your practice a risky startup.
Do just about anything you can to keep your telephone number. Have the foundation assign it to you, even if you are forced to pay a little for it.
If you are comfortable in your current office space, determine if the landlord will lease it to your practice.
Be careful! For example, if you've been working for a hospital that dominates the foundation, the hospital might own the real estate that houses your practice. If the foundation is upset you are leaving, do not expect any breaks from the landlord.
There may be other concerns, but everything should be negotiable. You might be exhausted at the end of the transition, but if this truly is a move you want to make, you should be happy when it's done.
Steven M. Harris is a partner at McDonald Hopkins in Chicago concentrating on health care law and co-author of Medical Practice Divorce. He writes the "Contract Language" column.