A lot of time, money and energy go into interviewing, hiring and training an associate. Having been in practice for 36 years, I have been in different sides of this equation: as a solo owner, a practice owner with multiple associates and more recently – and after selling my practice – as an associate.
What can you do to increase the likelihood that this business relationship between owner and associate would last?
We best backtrack a little and ask yourself why you want an associate in the first place. Some may want to hire an associate to reduce their hours yet maintain availability of care for their patients. Others might want to open up extra days and times that are not currently available. Some might be moving into the twilight years of their careers and require an exit strategy. Some might even think associates will make them rich while they work less. The latter is the wrong attitude when hiring an associate as having an associate, or associates, requires more energy, time and money than one might think.
Here are some points to consider if or when hiring an associate for your practice.
Hiring an associate needs to be a win/win for both parties
When hiring an associate it is important to set up a financial formula that you, the owner, would accept if the role was reversed. One of the reasons most associates fail is because one of the parties feels like they are being taken advantage of. For example, senior doctors may be getting the prime hours while the associate is left with the less desirable days and hours. A senior doctor not offering a fair split to the associate is another scenario doomed for failure.
While there are many factors that determine what the split should be, associates should be receiving anywhere from 30 per cent on the low side to 60 per cent on the high side of their income. Factors that determine the percentage split can range from high rent locations, high overhead cost, how new patients are allocated, how much marketing is done, and hours that are allocated, among other things.
Matching practice philosophy is paramount
It is important to hire someone who shares your values in practice – whether you are a subluxation-based, pain-based or rehabilitation-based practitioner. It can be frustrating if you are a subluxation/wellness-based doctor and you hire a pain-based graduate. This does not mean that one cannot learn from the other, but expect this to lead to many challenges along the way. It is always best to find someone who is either aligned with or open-minded to grow in the direction that the practice is based on.
Patient allocation is key
It is very important to determine patient allocation and have it in writing in the contract. This one factor has been at the helm of many associate disputes.
New patient allocation is usually determined by what one might call “hot” or “cold” leads. A hot lead would be a new patient referred in by another patient. For example, the front desk staff should first ask, “Which one of our patients can we thank for referring you to our office?” This quickly determines whether this is a hot or cold lead. If the new patient is referred by a patient that the associate sees, then the patient should go to the associate. If the new patient is referred by the owner or senior doctor (as we often will refer to in this article) then the new patient goes to the senior doctor or owner – if indeed the senior doctor is the owner.
On the other hand, a rotation system should be set up for cold leads. New patients coming from cold lead sources, such as the internet, walk-in, massage referral, etc., should go to the doctor who is up next in the cold lead rotation system. If the referral source is from a previous patient who is no longer active, then one must determine the time frame for when the hot lead changes to a cold lead.
An important area to discuss is the protocol for payment when one doctor covers for the other. If a senior doctor covers for an associate, payment can vary from the junior doctor receiving as little as 10 per cent to 40 per cent. The range is big but, again, it must be discussed in advance so both parties are in agreement.
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The associate must be aware that the senior doctor might be providing all the overhead costs and the service itself; and the senior doctor must understand that this is income that would not exist without the associate being there. Again, the percentage can vary depending on the situation, but it has to be evaluated and written up in advance in the contract.
There should also be a policy for when a patient wants to switch from one doctor to another in the same office, as this is where egos get bruised and associateships often fail.
The best way to minimize situations where patients are switching doctors is to talk to the patients and say, “You are best to continue with [insert doctor’s name here], as they were your initiating doctor and know your case very well.”
If the patient insists, however, then you better have a policy for how to handle this situation. Our policy was to check our egos at the door and do what was in the best interest of the patient. If a patient wants to switch then that is their choice; however, it is unprofessional to encourage this at any time in practice. This is considered “poaching” of patients and it can be one of the most destructive behaviours that can certainly lead to conflict. Stopping this behaviour early or, better yet, setting policies in advance with respect to this can save a lot of problems.
Have a frank conversation about goals
The goals of the associate, both short-term and long-term, are very important. The owner may be thinking of bringing in a long-term associate who would eventually buy them out. Whereas, an associate might be thinking of a short-term role to pay off some student debts and then eventually open up their own practice.
It is important for both the owner and the associate to be honest in their short- and long-term goals as this will serve them well if and when the associateship ends.
Some associates might think that geographic and non-competition clauses do not hold up in court. However, the courts may now be taking a stronger stance in this area as legal firms are taking strong measures to protect their goodwill.
One problem that I often see occurs is when an associate starts bringing in more than their share of the overhead. They then start feeling the relationship has become lopsided and that the financial arrangement should be altered or they threaten to leave. What the associate does not realize is that they were subsidized from day one, so there has to be a “pay back” period, which could be several years depending on how long that process took to occur. In addition, as an associate gets busier, office overhead cost tends to grow as well.
Having said this, I have also heard of many cases where the associate has been taken advantage of for many years. This is another reason why getting everything in writing prior to engaging in any relationship, will benefit both parties.
Buying in or buying out – that is the question
If the relationship is working well and the owner wants to eventually sell the practice, it is a good idea to have it appraised by a professional who is at arms length from either the owner or the associate. As a rule of thumb, most practices go for about half of the earnings averaged over the last three years of practice. This includes all equipment that go with the normal operation of the clinic. There are some variables when it comes to specialized equipment. If the building is owned, then that obviously changes the formula.
Another option that is available for an associate who wants to leave is to buy his or her goodwill from the owner. This allows the associate to usually set up within the geographic boundary and allows both the associate and owner to keep money in their own pockets, rather than paying lawyers to fight it out in court. This leaves a good feeling for both the owner and associate, and potential makes for good vacation coverage when required.
The associate can also buy-in along the way and, as a result, ensures they have first dibs in the practice sale when the time comes along with less of a payment.
The one thing that both parties need to do is get legal advice before engaging in any of these arrangements as too many failures and disappointments have occurred as a result of being cheap or ignorant.
The more you can agree on and get in writing ahead of time the better off any associateship will be. I cannot stress this enough.
Dr. Ed Lubberdink has been a chiropractor for 36 years. He is now helping other chiropractors negotiate and implement successful associateships through his Associate Resolution Contact Services. He listens to both sides of the situation and works as an arbitrator to create good working solutions for both parties.