Lewis Blumenthal, M.D., was in OB/GYN solo practice for 12 years. Because his patients could go into labor at any time, he essentially was always on call.
"I wanted more of a set schedule so I could be with my family," he says.
So, four years ago, Blumenthal brought on another physician and later formed a partnership, Women's Health Consultants, a three-physician practice with offices 37 floors above downtown Chicago.
Blumenthal originally brought on Scott Hite, M.D., as an employee. Blumenthal had to work out an employment contract with Hite, buy malpractice insurance, talk about a partnership if the relationship worked out and discuss terms for a partnership.
When it became evident that the two physicians were compatible, they began negotiating a buy-in, a process that took three to four months.
"I've been through a lot worse," he says. "If it was too unwieldy, then it would tell you something about the partner."
Negotiations centered on issues with each physician's accounts receivable, the share of hard assets each brought to the practice and goodwill. Existing patient rolls, for example, add intangible worth.
"You can't put a value on that," Blumenthal says. "You can't sell patients."
The same valuation techniques would be used in any future buyout agreements, according to Blumenthal, who already has drawn up succession plans in case a partner wants to retire or leave the practice.
"Our particular contract has a clause to outline a buyout," Blumenthal says.
Women's Health Consultants later brought on Kellie Butler, M.D., as a third partner and leased space to a fourth, independent physician. None of the three partners holds a majority stake.
One hurdle they faced, he says, is negotiating payer contracts for new physicians.
"Getting them into managed care plans can take well over a year. That's a very big issue. Most people don't realize how difficult it can be," Blumenthal says.
"You would have to evaluate what kind of discounts you are willing to accept."
But having additional partners paid off for Blumenthal.
"You have more clout in negotiating contracts," he says. "It's a better lifestyle and, when dealing with managed care, three heads are better than one."
With three owner-physicians, the practice was able to buy a bone densitometer to generate additional revenues from in-office osteoporosis screenings. Blumenthal says he never could have afforded the machine as a solo practitioner.