THE REVOLVING DOOR

THE REVOLVING DOOR
The Never-Ending Challenge of Adding and Removing Partners 

By Lorin E. Patterson, JD

A considerable portion of each one of my days seems to involve counseling our ASC clients on the various means of adding (and/or removing) physician partners to, or from, their membership lists. Few aspects of an ASC’s operations can be more important. A maxim which I often refer to in this area is “an ASC will only be as successful as its ability to secure and retain a solid core of busy, local, and clinically interested physicians.”

I frequently remind my clients that it is never too early to start the recruitment process. Too often poor organization at the founder’s stage results in ASC projects simply never “getting out of the gate.” During my upcoming presentation at the today’s surgicenter conference, I will outline the contents of a solid (and essential) founder’s agreement. I will also discuss the important duties that each founder should be required to perform. Finally, I will identify the types of physicians who make, or don’t make, good founders at the “ground floor” level.

Attracting the interest of qualified physicians is, of course, only the first step that an ASC must take in adding investors. Pricing strategies are always of interest to our clients whether they are just commencing operations or have been operating for some time. I will discuss the legal requirements that all buy-ins be conducted on “fair market value” terms and what that really means. I will also discuss the challenge that “the price of success” presents for many operating ASCs. This challenge consists of the fact that successful operations often result in prohibitively high buy-in prices which can render on-going recruitment efforts difficult. I will address specific mechanisms which I have used in my practice to help mitigate this problem.

An ASC’s success will depend largely upon the quality of the non-compete and buy/sell provisions in its operating or partnership agreement. During my presentation, I will address the specific issues which should be considered when crafting or updating such provisions.

Unfortunately, it will generally be necessary for ASCs to remove partners at some time during their life cycles. For obvious reasons, buy-out events comprise the most common source of civil litigation resulting from an ASC’s operations. Further, buy-out obligations can place quite a financial strain on ASCs. We will discuss effective means of wielding buy/sell provisions while also avoiding litigation. We will further address buy-out strategies which my clients use to reduce the financial impact of a “separation” while also being fair to the departing partner.

This presentation will address numerous issues of keen interest to those who are just developing an ASC and those who have been operating one for a number of years. I look forward to seeing you in Las Vegas!