Write out your physician group's retirement policy

With a written plan in place for transitioning into retirement, you'll find it much easier to communicate jointly about that touchy issue. As always, you must consider the group's needs as a whole above the needs of the individual physician. Here are just some of the questions to address in formulating the retirement policy:

• Spacing retirements. If two physicians retire at the same time, it may effectively kill the small- to mid-sized group. If a practice requires no fewer than two years between each physician's retirement, it enables the integration of new doctors.
• Forcing retirement. Sometimes the partner who refuses to retire really needs to retire; for example a partner who doesn't keep up the necessary skill level. Such an issue is a valid reason for forcing a partner into retirement for the good of the group.
• Succession planning. Will you replace the retiring partner with another doctor? A nurse practitioner or physician assistant? Or will a subspecialist now best meet the practice's needs?
• Financial issues. What about accounts receivable for that partner's work? Do they belong to the practice or to him/her? Will you pay them out directly, or as part of the separation agreement? Consider these payout issues long before any retirement occurs.
• Referral patterns. Many senior partners provide their group's major referral sources. Have a plan in place to nurture those referrals so they stay with the practice. The same goes for the retiring doctor's patients-slowly transition them over to other group members.

Practice continuation agreements

I meet and talk with many physician sole practitioners. Honestly, I find them fascinating and have many as clients. Being solo provides a variety of challenges. One is succession. One thing I see out there is that solo practitioners have no contingency plans in plan should something happen to them like a disability or a death. Of the two, disability is the most common occurrence.

So to me, the biggest question they face is: What would happen if you were unable to work for a period of time, or permanently? Would your physician practice continue to operate as usual during your absence, or would it be chaos? This is why sole practitioners need a practice continuation agreement in place right now.

We all know how patients will leave the practice the longer the physician is away from it. And if the physician passes away suddenly without a practice continuation agreement in place, the value of the practice immediately drops to zero. That leaves nothing to provide for a spouse and family. The estate could also be sued if returns aren't filed in time due to a lack of a succession plan.

Do you have a practice continuation agreement in place? If not, find a colleague who would be willing to take over your practice in the event of a permanent disability or death or will cover your practice during a period of temporary disability. Protect yourself and your family.

How to handle penalties against non-compliant partners

You cannot effectively impose penalties against non-compliant partners without clear provisions for punitive action. Our experts, thus, urge providing for sanctions, and specifically for monetary penalties, within your group documents.

Ask your attorney if your present contracts permit assessing penalties for non-compliant behavior. If they do, undertake partner-level adoption of a specific penalty system. Among other reasons, just doing so (and following it whenever necessary) helps prove the group's intent to carry out an effective Medicare compliance program, possibly mitigating any fines in case of audit.

These days, effective groups' documents should specifically address performance expectations and permit penalizing for failure to meet them. You are better served to improve your legal structure before a problem arises than to find yourself hamstrung when you need to act.

Restrictive covenants protect against competitive practice

A restrictive covenant on your existing partners is important to governing the practice for its own success. For starters, if you don't impose such restrictions on yourselves, you will find it difficult to justify them to young doctors you bring into membership.

Many groups flounder because they accommodate their partners' varied priorities rather than their best organizational goals. The solution: Make all partners subject to restrictive covenants. In addition, having the restriction apply to all says that the group is more important than any partner.

Yet, even if logical and correct, this advice may not convince a partner to surrender present freedom to stay or leave at will. But if you recognize that your long-term security depends on group success, you may have to accept restrictions.

Design a fair retirement exit

Physicians generally enjoy more flexibility regarding retirement than do members of many other professions. But sometimes a declining doctor refuses to acknowledge his or her diminished capacity, causing a confrontation that's often embarrassing.

You can reduce your chances of facing such a showdown with a sensible mandatory retirement age that includes extension options. First, provide that a doctor must retire at a stated age, often 65 or 70. But allow him or her to apply in advance each year for an extension.

Require the senior to apply at least six months before the mandatory retirement date, after which the group must vote yea or nay within two months. A competent doctor can thus continue past mandatory retirement age if it really suits the member and the group.

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