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March 20, 2012

Update buy-sell agreements to sidestep conflict when physicians leave

A lot can change in a practice over the course of a few years—the group’s culture can shift, its financial standing may improve or decline, it may lose or gain physicians—and a practice may be setting itself up for financial or legal troubles if it doesn’t keep its buy-sell agreement up-to-date to reflect these changes.

Buy-sell agreements are the cornerstone of most private physician practices because they establish a process for bringing new owners onboard and outline the financial and professional obligations of each member when a physician leaves the practice. But many practices leave these crucial agreements sitting on the shelf to collect dust for years at a time, which can be a “ticking time bomb” in this rapidly changing healthcare environment.

It’s amazing how these things get executed but they don’t get looked at for years and years, and the only time they get looked at is when an event happens that forces them to do it. That’s when all the land mines start getting stepped on, and in some cases, that’s when the lawsuits start occurring. That’s why it’s important to conduct brief internal review of buy-sell agreements annually, and a more thorough audit if there’s a drastic change to the practice’s structure.

The ideal time to do this is during the practice’s annual corporate meeting when a lawyer and accountant are present. It can take as little as five minutes to make sure the stipulations of the agreement still match up with the goals and realities of the practice. You’re not necessarily going to solve it at that meeting, but it’s an easy opportunity to take five minutes to see if you need to update your agreement.

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