With increasing pressures on practitioners running independent practices, more are seeking the security of a corporate network. KAREN CROUCH breaks down the key components when negotiating your future.
The ophthalmic industry is no stranger to corporate networks, and medical practitioners need to make informed decisions when considering joining one. An essential, preliminary step is to assess basic alterations to one’s lifestyle and changes from totally independent business management to an environment which may be quite different; not to say it will be challenging but will certainly require adjustments.
Legally binding contracts and service agreements provide the glue for business management and operating infrastructure. One of the larger GP corporates attracted unwanted press some time ago for suing its doctors for breach of restraint of trade and for failing to work contracted hours, highlighting the need for upfront, thorough assessment of requirements of such agreements and likely impacts on a practitioner’s ongoing working life.
The essence of ‘corporatisation’ is acquisition of a medical practice by a large corporation serviced by several practitioners, commonly supported by a service agreement for (newly joining) principals behind the practice to continue providing their services. Of key concern to the principals – previously the owner – is what they will receive in exchange for parting with ownership of their medical practice and how financial proceeds will be treated for taxation and personal wealth creation purposes.
The decision to sell an owner’s medical practice, and thereafter contract with the corporate to continue providing services, can be fraught if they do not obtain legal and tax advice on both sale of their existing practice and their continuing obligations in the new corporate environment.
“Independence in exercising one’s decision making in such clinical matters is essential to the practitioner and health of their patients.”
There are many considerations when deciding whether to corporatise. These may include sacrificing the benefits and independence of ownership including development of a practice culture that is consistent with the owner’s personal principles and vision.
Termination
Generally, contracts will provide for termination at any time by mutual agreement. However, most contracts to enter a corporate practice are set for fixed periods of time, usually a significant number of years. This is a huge commitment by newly joining principals to ensure longer term stability, longevity and profitability. Owners should be wary of entering fixed term corporate contracts that provide no opportunity to opt out should they become dissatisfied with working or patient management conditions. It is essential that owners fully and thoroughly explore the practice, facilities, prevailing corporate culture and legal obligations to ensure they will be able to work to their satisfaction (and expectations of the new principal) in the facility. A friendly discussion with a currently practising, previous practice owner, is suggested.
Restraint of trade
It is customary for service agreements to include reasonable restrictions that the practitioner must not provide medical services in a specified area and for a specified period after, or while, the agreement is in force. There is no hard and fast rule about geography of the operating areas or what time period is reasonable. Each situation must be judged according to individual circumstances and appropriate legal advice obtained.
In Idameneo Pty Ltd v Dr Teresa Angel-Honnibal [2002] NSWSC 1214, Justice Palmer stated:
“A factor to which the court has regard is whether the parties have, as a result of negotiation on equal terms, freely made a bargain in which the particular restraint has been sought by one and given by the other… the party seeking to enforce the restraint still bears the onus of showing, by sufficiently persuasive evidence, that the protection of the covenant is no greater than is reasonably necessary between the parties.”
Independence
The service agreement should contain a clause that the practitioner has “sole and unfettered right to make decisions about the treatment of patients” and will not be subject to any direction from the corporate concerning the way in which the practitioner provides services to their patients. Independence in exercising one’s decision making in such clinical matters is essential to the practitioner and health of their patients. It is advisable to envisage, to the greatest extent possible, the future when a practitioner may no longer wish to practise under the guise of the corporate but resume independent practice. You may find yourself having to start from scratch, having to leave your (corporate) practice, patients, records and staff behind as you move on to re-establish your name, reputation and clientele in a different environment, with which you were hitherto familiar.
Consider your options and future carefully before deciding to join a corporatised practice. These caveats are not intended to discourage interested practitioners but to bring attention to potential challenges of a new working environment which is influenced by another parties. Many large corporates operate successfully and to the personal satisfaction of their private practice owners.
About the Author: Karen Crouch is the managing director of Health Practice Creations Group, a company that assists with practice set ups and the administrative, legal and financial management of a practice. Contact her via email kcrouch@hpcnsw.com.au or visit www.hpcgroup.com.au.
More reading
How to handle patient complaints
Advertising standards: Questions to ask yourself
