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Defining Partnership: Non…Equity Partnerships

Katz, Barbara

doi: 10.1097/01.EEM.0000264927.28300.8f
Career Source

Ms. Katz is the president of the Katz Company, an emergency medicine consulting firm dedicated to providing expert physician recruitment services and training emergency medicine residents in effective job searching.



It almost sounds like an oxymoron, non-equity partnerships, but in fact, there are many groups that fit this category. These groups are owned by one or a minority of the working physicians that offer partnership after usually one to two years. Partnership in this case really does mean profits without responsibility, but it also can mean profits without any managerial input. Simply stated, the “quality” of the group depends on the owners, their management style, and their ability to attract top physicians. These principals run the gamut from unpredictable dictators to benevolent, generous leaders.

Urban myths and legends of abuses of this model abound, but there is a positive side of the non-equity partnership. Dan Walsh, DO, one of the owners and the managing partner of Emergency Medicine Consultants of Lorain County in Ohio, was once an original minority partner in a regional group that was absorbed by a much larger, national contract group, with which he became a regional vice president.

About five years ago, Dr. Walsh and his partner, Alan Starr, MD, mortgaged their homes and all of their belongings to start EMC. Because it was just the two of them, they chose the non-equity partnership format. “We offer a no liability, no responsibility opportunity to share in the profits of the organization in an ongoing fashion,” Dr. Walsh said. “This doesn't mean there is no input. All decisions regarding staffing levels, lengths of shifts, protocols, and the selection of physician partners are made in a democratic fashion. Financials also are shared with the physician partners.”

The group runs three sites including a large suburban medical center ED, a low-volume community ED, and a new, incredibly successful free-standing ED in a fashionable Cleveland suburb that combined have more than 85,000 patient visits per year.

Dr. Walsh said he and Dr. Starr chose this partnership format because they had seen the pitfalls of “management by committee” after years of working in emergency medicine. “We feel this model affords the physician the opportunity to forge policy and share profitability without the liability of direct equity ownership,” he said. “But let me be clear. Alan and I are dedicated to ensuring that the entity continues as an independent, physician-owned and operated group after we retire.”

Although Dr. Walsh acknowledged that a physician interested in equity ownership may have to wait, he said the possibility of achieving it was infinitely better than with large regional or national contract groups.

All the emergency physicians working with EMC are independent contractors by choice. Many physicians, particularly graduating residents, are unfamiliar with this income format. “Our physicians elected to be independent contractors because of the tremendous tax benefits and the ability to tax-defer large amounts into retirement,” Dr. Walsh said. “It's like having your own business, and that's the greatest tax advantage there is, whether you choose to incorporate yourself or not.”

Drs. Walsh and Starr have been adding staff because of a constant rise in census among their three locations, and one of the benefits they provide to their physicians is the availability of a top tax accountant to teach the unfamiliar how to make the most of being an independent contractor.

While this is an above-average example of non-equity partnership, there are many others. There are also quite a few horror shops where physicians work as indentured servants at the whim of the owners with no say in how the department is run. For any physician who is seeking this type of opportunity, also known as “the perks without the pains,” there are some important questions that need to be asked to avoid the bottom-of-the-barrel jobs.

  • ▪ If no equity is conferred, what does partnership mean?
  • ▪ When a partner shares in profits, how are those profits determined and distributed?
  • ▪ What, if any, affect do physician partners have in managing the ED?
  • ▪ What is the employment basis, employee or independent contractor?
  • ▪ If employee, what benefits are made available without cost to the physician?
  • ▪ If independent contractor, are malpractice and tail coverage still provided to the physician at no cost? Is there a tax advisor available for consultation?
  • ▪ Will there be potential for equity ownership down the road?

As with any job search, details are the key. It is up to the physician to ask the questions and make certain he gets detailed answers.

In many ways, the non-equity partnership can be a good way for graduating residents to begin their careers. It is an opportunity to experience a partnership track and learn the business of emergency medicine without having to shoulder the sometimes overwhelming responsibilities or equity ownership. The challenge here is to find a non-equity partnership opportunity with a group that is focused on forging an equitable and stable work environment dedicated to quality patient care.

© 2007 Lippincott Williams & Wilkins, Inc.