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Three thumbs up for group medical practice. Learn the dos and don'ts of starting a group practice.

Group Practice: The Dos and Don’ts of Setting up a Practice With Colleagues

August 18, 2023 by Laura Tobias, American Physician Institute Leave a Comment Categories: All Posts, Group Practice Tags: group medical practice, group practice

Last updated on October 13th, 2023

Many healthcare providers find setting up a group practice with colleagues a rewarding endeavor. A group medical practice can help alleviate physician burnout and create a more holistic treatment environment for patients. However, such an endeavor requires considerable planning and careful consideration. Everything from conflict resolution to equity division must be taken into account, and there are numerous additional aspects to navigate.

Recognizing the key elements to implement and build a successful and sustainable private practice is crucial; all parties must identify common challenges professionals in a collective practice face and devise a business plan to counter those challenges.

This article will review tips for establishing successful group practices with colleagues. It will cover equity, hiring, vesting, resolving conflicts, selling, and dissolution in group practices.

Establishing a Group Practice: What Partners Need to Know

Joining forces with colleagues in today’s healthcare market can be an exciting and lucrative prospect, but it’s necessary to protect the interests of practice members, staff members, and patients at all times. To do so, it’s imperative to understand some dos and don’ts of setting up a private practice. While collaboration is the key to survival for any private practice, several additional factors must also be considered, including who will primarily deal with the administrative burden of the practice.

Do determine how equity will initially be divided

When colleagues form a group practice or join 2 or more solo practices, equity must be divided in a way that strikes a balance reflecting the contributions and potential of each group member. The most basic way to divide equity is to do so in equal shares, which is a common starting point. However, dividing equity into equal shares is not the best approach for every group practice.

Several factors must be considered when deciding how equity will be divided, including patient base, workload, experience, expertise, and financial investments.

Don’t overlook hiring new clinicians and vesting shares of equity

New clinicians will inevitably be hired over time, so it is vital that a well-defined process for integrating them into the group practice and allowing them to vest equity shares is established early. Each candidate’s skills, compatibility with the group’s goals and values, medical practices, and qualifications must be evaluated to maintain a cohesive team environment within the group.

When hiring new members, clinicians, and partners into group practices, be sure to define clear expectations for equity vesting, including the applicable timeline and criteria. Doing so will help ensure that incentives align with the long-term goals and success of the group practice.

Do outline procedures for diluting equity as time goes on

As the group practice evolves and grows through the years, diluting equity to accommodate new group members will be necessary. Diluting equity must be done thoughtfully, and all existing practice group members must agree on the dilution execution.

Clear guidelines for how the dilution will be carried out are essential to ensure the execution aligns with the objectives of the practice and the long-term interests of all group stakeholders. Transparency and effective communication during the process is crucial for maintaining trust and respectful harmony between partners.

Do settle on the concept of voting shares per group practice member

Voting shares represent partners’ or group members’ power when making decisions that impact the practice. Voting shares should be distributed between the founding group practice members early on. It’s important to balance allowing for experience and equal representation when determining voting shares.

Decision-making processes should also be determined at the onset of the practice’s founding; will unanimous votes rule, or will only a majority be required to pass decisions for major practice changes? Regardless of the protocol chosen for decision-making and determining voting shares, decisions should always be made collectively in the practice’s best interest.

Do determine partnership dissolution protocol

During the life cycle of independent group practices, partners will depart for various reasons, whether they transfer out to start a solo practice, join another large group practice, retire, etc. Before any group members leave, it’s crucial to have a partnership dissolution agreement in place to address in detail what happens during these scenarios.

The procedures for when a member of the group practice exits must be clearly outlined and include non-compete clauses, guidelines for the transfer of patients, and buyout options. Establishing protocol proactively will ensure minimal disruptions occur and continuity of patient care continues.

Don’t disregard procedures for settling disagreements in the practice

It’s inevitable in any partnership, group, or team that disagreements will happen. Establish a framework for dispute resolution before conflicts arise. Open communication should be encouraged, and the practice must cultivate an environment where diverse opinions are respected and valued.

Consider whether arbitration, mediation, or other structured processes for conflict resolution will be used and when it will be necessary. Establishing procedures for resolving disagreements can maintain productivity and patient care quality while preserving relationships, potentially avoiding damage the group might otherwise suffer.

Do consider what happens when selling the group practice is an option

While selling the group practice may be the furthest thing from members’ minds when forming the practice, it’s something that must be outlined as part of the group’s business plan. At some point, the time to sell may arise as an attractive option, but selling can be a meticulous process characterized by complex negotiations and stressful meetings.

Professional counsel, such as financial consultants and attorneys, should be retained to guide members through outlining the procedure for selling the practice. Evaluate potential buyers based on their commitment to continuing patient care at the current level and compatibility with the practice’s values. Consider financial terms while retaining patient interests as a priority throughout the transition.

Setting up a group practice with colleagues

With ongoing communication, transparency, and careful planning, setting up a group practice with other healthcare professionals can be exciting and rewarding. By following the suggestions and avoiding the pitfalls outlined in this article, group physicians can lay a solid foundation for a successful, strong practice.

Consider each member’s expertise and contributions, establish a fair equity division, and create clear guidelines for equity vesting. Outline definitive processes for resolving conflicts, making decisions, and dissolving or selling the partnership. When the right proactive measures are taken early on, a thriving group that serves patients with high-quality care can flourish.

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