We’ve been noticing a recent trend of dental practice partnerships breaking down. The most common reason is how each partner clinician is remunerated.
We recently received this enquiry. It’s been heavily redacted.
“We setup the clinic with us 4 partners as 25% equal share holders. The clinics been doing well. We all initially had a handshake agreement that we would each take 40% for our clinical work and either share any profit or cover losses from the remaining 60%. We have 1 partner that bills considerably more than us 3 other partners. This partner now wants more profit given he bills more. This is causing significant distress between us partners and I feel we’re heading towards a major break down.”
Initially, all partnership handshake agreements need to be documented through proper agreements.
We’ve written about this several times. It comes down to understanding the difference between being a clinician and business owner. If, as a clinician working in your own practice, you are paid at a fair market rate, then that’s all the reimbursement you are entitled to for clinical work. That’s it. If 1 partner billed 1.5 million and the others 500K. Then the 1.5 million billing partner would get 600K and the 500K billing partners would get 200K (ignoring lab fees) for their clinical work. The higher billing partner is earning more simply from billing more. They shouldn’t be entitled to more profits of the business as well.
If the surgery had profits of say 1 million then this goes to all the owners of the business. It’s split according to the share holder percentage (in this case 25% each). It doesn’t matter if one of the partners did more dentistry (clinical billings) than the others, as owners they are on an even footing. They all took an equal risk and each was reimbursed the fair market rate for their clinical work.
The same applies to the growth in the value of the business. Each owns 25%. It doesn’t matter how much each works or how much each contributes to the billings. It’s a 25% split for the value of the business.
Let’s also consider this from another perspective, what would happen if the practice made a loss? All owners would be expected to contribute their shareholder percentage to cover the loss. It works both ways.
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