INTRODUCTION:
A.F. Where to begin? There are a multitude of issues which arise in the acquisition or disposition of a professional practice. Beyond those issues dealing with a price, what assets are included, and when is the sale to take place, there are more difficult issues to deal with all of which may well come down to those five customary questions, namely, Awho, what, where, when and why@ -- and don=t forget Ahow@! Each of these questions can have an impact on the purchaser or seller in terms of whether a practice is saleable and under what terms and conditions.
When dealing with the different questions concerning the purchase and sale of a practice, the doctors will undoubtedly be concerned about price and what is included in the Adeal@. However, from experience garnered from years of involvement in the transition of chiropractic practices, it is the opinion of the writer that the most important question of all is Awhy@. The answer to this question leads logically to dealing with all of the other issues involved in the disposition of a practice.
WHY is the practice being sold? Is the vendor retiring from practice? Is the retirement voluntary or is the practitioner being forced to retire because of ill health, financial or professional difficulties? This might be the appropriate time to provide a definition of a bona fide commercial transaction, which might be described as a transaction between a willing purchaser and a willing seller for good and valuable consideration and acting at arm=s length from each other. In the Aordinary@ course of events the willing purchaser and willing seller would negotiate a price for the practice which is based upon objective factors resulting from the experience of prior sales and professional evaluations of the practice. Almost all practices have a worth -- some more than others. In some cases the worth of a practice has to be established for purposes other than a sale, ie. a matrimonial valuation, estate valuation, insurance claim. In the later instances the objective tools used for valuations are applied to assume that a sale of the practice would be between a willing purchaser and a willing seller without unusual factors. It is these factors that might come into question in dealing with Awhy@ the practice is being sold.
If the vendor is ill; if he or she has died and an estate is disposing of the practice; if there
are severe financial difficulties being experienced by the vendor the value of the practice and the method of dealing with a disposition of the practice will have to be tailored to deal with the difficulties. Both the purchaser and the vendor must be cognizant of any factors which may affect an orderly transition of the practice from the vendor to the purchaser. At the end of the road, that is to say, when the practice has been sold and delivered to the purchaser, the only thing that should have changed in the office is the doctor. The location remains the same, the equipment remains the same and hopefully the staff and patients remain the same. To put the matter in a proper perspective, there are three relevant bodies in the practice, namely, the doctor, the staff and the patients. The only body that should change is that of the doctor.
If the vendor is selling for retirement purposes or to relocate his or her office, these reasons must be considered in terms of where the practitioner is relocating. Is the vendor leaving practice permanently? Is the relocation permanent? While the intentions of the seller may be sealed in a contract with the use of a non-competition and non-solicitation provision, it is important to avoid any hard feelings which may be transmitted to patients of the practice by a seller who didn=t appreciate the seriousness of an agreement by which he or she agreed not to treat patients of the practice or establish an office within a certain geographical area of the practice which had been sold. Again, why is the seller selling and where is he or she going?
E.W. From a financial standpoint, the vendor must be clear on their motivation and committed to complete the transaction. Often, practitioners decide to sell without preparation, only to find that their net return is insufficient to satisfy their objectives. The main reason this occurs is because they haven=t clarified their objectives in the first place. If one decides to retire, for example, while the practice is on a downward trend, the net proceeds would not be the same as the practice being sold at its peak. If you were depending on a maximum selling price for your retirement, you should plan to put your practice in shape before putting it up for sale.
There is also the issue of selling for the wrong reasons. A practice may be offered for sale in order to get out of a costly lease or other fixed overhead, for example. Don=t be surprised when a prospective purchaser cannot be found! Clearly, a seller seeking to escape problems will realize a minimum return, if any.
Motivation and commitment go hand in hand. Once a decision is made to sell, the seller must be prepared to follow through. Waffling on the decision to sell can have devastating results; from lost revenue due to confusion in the practice, to potential litigation if a sale transaction is not completed. Having a clear objective and a strong commitment can help ensure a smooth transition.
Purchase and Sale of a Professional Practice
The following article and those dealing with this topic were originally written by myself and Ernest Wolkin, C.A. http://wolkin.ca/ and appeared in Canadian Chiropractor http://www.canadianchiropractor.ca/ . This topic will be presented in a number of postings.
PURCHASE / SALE OF A CHIROPRACTIC PRACTICE
Allan Freedman, LL.B.
Ernie Wolkin, C.A.
A.F. As the chiropractic profession continues to progress through its second 100 years of history, a natural result will be the increasing number of chiropractic practices that will be transferred from one doctor to another doctor through a voluntary or involuntary financial transaction. With respect to the matter of the voluntary transfer of a chiropractic practice, the customary transaction involves the purchase/sale based upon a willing purchaser acquiring the practice from a willing seller based upon fair market value. An involuntary sale might include either a disposition by a trustee in bankruptcy or an estate on behalf of a deceased practitioner.
Through a series of articles, we will be reviewing the various issues involved in the sale and purchase of a chiropractic practice, including the terms, conditions, warranties, representations, searches and valuations involved in dealing with a sale and purchase. There are different considerations involved in the various transactions depending on which Aside of the fence@ the practitioner finds him or herself. Just as important is the fact that there are a number of different parties who may be involved in the transaction, namely, the vendor, purchaser, their spouses, lawyers, accountants, real estate agents, appraisers, bankers, and landlords. It is the intent of the authors to acquaint the reader with an understanding of the issues involved in the transactions in order that the doctor will be in a position to meet the challenge of acquiring or disposing of a chiropractic practice in a professional manner in order to achieve not only the highest financial gain but to ensure that there is an orderly transfer of the practice to ensure that interests of the patients are maintained as being the most important factor in the transaction.
We have approached this topic in a novel fashion. The various topics which will be discussed in the series of articles will be commented upon within both the legal context and accounting context. The reader may well find that the comments of the two authors may not always be in agreement. In some cases, the important considerations relating to matters of finance may not necessarily be the same considerations relating to those of a legal nature. In other cases, the information presented by the authors may seem completely redundant. In any event, in those instances where the author is Allan Freedman, LL.B., the initials "AF" will be used. In those instances where the author is Ernest Wolkin, C.A., the initials "EW" will be used.
It should always be kept in mind that it is always left to the purchaser and/or seller to ascertain what might be in his or her best interests. For the most part, what we are about to endeavour upon is novel in approach and fraught with risk. Hopefully, when the series of articles has been completed, the reader will be better educated and in a position to deal with the contingencies of a sale or purchase of the practice. After all, we are all, at some time, going to be leaving professional practice in the 21st Century!
PURCHASE / SALE OF A CHIROPRACTIC PRACTICE
Allan Freedman, LL.B.
Ernie Wolkin, C.A.
A.F. As the chiropractic profession continues to progress through its second 100 years of history, a natural result will be the increasing number of chiropractic practices that will be transferred from one doctor to another doctor through a voluntary or involuntary financial transaction. With respect to the matter of the voluntary transfer of a chiropractic practice, the customary transaction involves the purchase/sale based upon a willing purchaser acquiring the practice from a willing seller based upon fair market value. An involuntary sale might include either a disposition by a trustee in bankruptcy or an estate on behalf of a deceased practitioner.
Through a series of articles, we will be reviewing the various issues involved in the sale and purchase of a chiropractic practice, including the terms, conditions, warranties, representations, searches and valuations involved in dealing with a sale and purchase. There are different considerations involved in the various transactions depending on which Aside of the fence@ the practitioner finds him or herself. Just as important is the fact that there are a number of different parties who may be involved in the transaction, namely, the vendor, purchaser, their spouses, lawyers, accountants, real estate agents, appraisers, bankers, and landlords. It is the intent of the authors to acquaint the reader with an understanding of the issues involved in the transactions in order that the doctor will be in a position to meet the challenge of acquiring or disposing of a chiropractic practice in a professional manner in order to achieve not only the highest financial gain but to ensure that there is an orderly transfer of the practice to ensure that interests of the patients are maintained as being the most important factor in the transaction.
We have approached this topic in a novel fashion. The various topics which will be discussed in the series of articles will be commented upon within both the legal context and accounting context. The reader may well find that the comments of the two authors may not always be in agreement. In some cases, the important considerations relating to matters of finance may not necessarily be the same considerations relating to those of a legal nature. In other cases, the information presented by the authors may seem completely redundant. In any event, in those instances where the author is Allan Freedman, LL.B., the initials "AF" will be used. In those instances where the author is Ernest Wolkin, C.A., the initials "EW" will be used.
It should always be kept in mind that it is always left to the purchaser and/or seller to ascertain what might be in his or her best interests. For the most part, what we are about to endeavour upon is novel in approach and fraught with risk. Hopefully, when the series of articles has been completed, the reader will be better educated and in a position to deal with the contingencies of a sale or purchase of the practice. After all, we are all, at some time, going to be leaving professional practice in the 21st Century!
Valuations:
If you are contemplating going through the process of obtaining a valuation of your professional practice, you should be prepared to deal with the production of information concerning your practice. The following is a list of some of that information. It is imperative, however, that every practice, every transaction and every valuation be dealt with as a unique exercise which may require additional and important information and disclosure.
1. A copy of financial statements of the practice for the last three years together with a copy of the front page of your income tax return confirming your professional fees.
2. Details concerning your gross billings since your last year end.
3. Are your gross billings all a direct result of patient billings? If not, what percentage of the gross billings is attributed to billings generated by associates? Details of any portion of gross income that is related to income from associates or the sale of vitamins, orthotics, back rests etc. and the amounts of each?
4. A copy of the present lease for the premises in which the practice is being maintained.
5. If there is a corporation involved in the operation of the practice?
a. Is there an agreement between the corporation and yourself?
b. Provide a copy of the financial statements of the corporation for the previous 3 years.
6. Can your practice be defined as being “straight, mixer, activator, etc., etc.?
.
7. Do you have any specialty designations, ie. Fellow of Sports Sciences, Radiologist, etc.?.
8. Is there a majority of patients who require acute or maintenance care?
9. Do you receive referrals from any particular source? If yes, what is the source of the referrals, and would that source of referrals continue after a sale of the practice?
10. A list of the equipment in the office.
11. How many chiropractic support staff are involved in the practice?
12. How many of the staff will remain at the location should a sale of the practice take place?
13. Is your spouse working in the office? If not, did she/he work in the office?
14. What is the name of the practice? Is it registered?
15. Are there any associates in the practice? Have there been any other associates of the practice (chiropractic or otherwise)? How many? Details have to be provided as to when they were involved in the practice and why they left?
What are fees for services established by your office? Initial visit? Subsequent visits? Breakdown between billings, ie. 3rd party insurance, WSIB, patient payments?
Upon receipt of the above information, an opinion as to value should be able to be prepared with respect to the practice. However, there may be further information which might be of assistance in the preparation of the opinion having regard to the peculiarities of the particular practice. For example, should the location of the practice be in a community which is peculiar to a particular segment of the population or is otherwise unique, that issue would have to be taken into account. Examples of such peculiarities might include ethnic or language characteristics or communities which are inundated with or lack practitioners. Each characteristic has some bearing on the attractiveness of the practice. The "bottom line", for the most part, rests with the ability of the purchaser to maintain the "status quo" of the practice, which invariably allows the practitioner to maintain a cash flow to allow for payment of expenses, the return of the purchase price, and receipt of a reasonable profit.
1. A copy of financial statements of the practice for the last three years together with a copy of the front page of your income tax return confirming your professional fees.
2. Details concerning your gross billings since your last year end.
3. Are your gross billings all a direct result of patient billings? If not, what percentage of the gross billings is attributed to billings generated by associates? Details of any portion of gross income that is related to income from associates or the sale of vitamins, orthotics, back rests etc. and the amounts of each?
4. A copy of the present lease for the premises in which the practice is being maintained.
5. If there is a corporation involved in the operation of the practice?
a. Is there an agreement between the corporation and yourself?
b. Provide a copy of the financial statements of the corporation for the previous 3 years.
6. Can your practice be defined as being “straight, mixer, activator, etc., etc.?
.
7. Do you have any specialty designations, ie. Fellow of Sports Sciences, Radiologist, etc.?.
8. Is there a majority of patients who require acute or maintenance care?
9. Do you receive referrals from any particular source? If yes, what is the source of the referrals, and would that source of referrals continue after a sale of the practice?
10. A list of the equipment in the office.
11. How many chiropractic support staff are involved in the practice?
12. How many of the staff will remain at the location should a sale of the practice take place?
13. Is your spouse working in the office? If not, did she/he work in the office?
14. What is the name of the practice? Is it registered?
15. Are there any associates in the practice? Have there been any other associates of the practice (chiropractic or otherwise)? How many? Details have to be provided as to when they were involved in the practice and why they left?
What are fees for services established by your office? Initial visit? Subsequent visits? Breakdown between billings, ie. 3rd party insurance, WSIB, patient payments?
Upon receipt of the above information, an opinion as to value should be able to be prepared with respect to the practice. However, there may be further information which might be of assistance in the preparation of the opinion having regard to the peculiarities of the particular practice. For example, should the location of the practice be in a community which is peculiar to a particular segment of the population or is otherwise unique, that issue would have to be taken into account. Examples of such peculiarities might include ethnic or language characteristics or communities which are inundated with or lack practitioners. Each characteristic has some bearing on the attractiveness of the practice. The "bottom line", for the most part, rests with the ability of the purchaser to maintain the "status quo" of the practice, which invariably allows the practitioner to maintain a cash flow to allow for payment of expenses, the return of the purchase price, and receipt of a reasonable profit.
Further Postings
While initial interest in the Blog has been interesting and worthy of continuance. I should let you know what is in the future. It is my intention to post information on the valuation of a practice -- the course notices from teaching for 32 years and issues relevant to any interested party. I have not allowed for comments -- even my time is limited -- but if there are issues to be dealt with -- my email address is all over the Blog.
Postings
For those of you who are sitting patiently by waiting for the next posting -- I have finished a 3.5 hr presentation to the Vocational Rehabilitation Association and doing a presentation at CMCC this weekend. Thereafter, in between writing a chapter for a medical text edited by a faculty member at McGill, I will start posting further articles, etc.
otherwise, shut off the computer and enjoy summer!!!!
allan freedman
otherwise, shut off the computer and enjoy summer!!!!
allan freedman
Question:
2. Which of the following statements relating to carrying on practice are correct?
a. A benefit of being a sole practitioner is the equity in ownership of the practice.
b. The benefit of being an associate is the control over office procedures.
c. The benefit of being an employee is the lack of a capital investment.
d. The benefit of being a partner is the immediate income from salary.
e. The benefit of being a sole practitioner is the deductions paid weekly for income taxes.
a. A benefit of being a sole practitioner is the equity in ownership of the practice.
b. The benefit of being an associate is the control over office procedures.
c. The benefit of being an employee is the lack of a capital investment.
d. The benefit of being a partner is the immediate income from salary.
e. The benefit of being a sole practitioner is the deductions paid weekly for income taxes.
Associate Agreement - Part 2
SIGNAGE
If the sign of the practice is to be changed, who is going to pay for the sign? If the names of both practitioners are to be set out on the sign, are there going to be steps taken to ensure that the associates are not represented as being "partners"? The appropriate principle of law indicates that persons carrying on practice together may be looked upon as partners if they either agree to be partners or they hold themselves out as partners. It is imperative that the signage or letterhead of the Clinic set out the fact that the practitioners are carrying on practice as associates, as the case may be, without misleading or confusing patients or anyone else who interacts with the practice. This same principle applies to letterhead for the practice if the names of the practitioners are to be set out on the same letterhead.
ADVERTISING
While the question of who is going to pay for advertising might seem like the most important question to be considered by the parties when dealing with this issue, it is not as important as dealing with the question as to who has control over its content. Obviously, the advertising content must be in conformity with the licensing board standards of the profession. However, neither party may wish to sign a "blank cheque" to allow the Clinic or the associate to engage in extensive advertising or even minimal advertising without the other practitioner's consent.
NAME OF THE PRACTICE
The agreement should set out clearly as to how the chiropractic practice is to be referred to, ie. "chiropractic clinic" or "Smith Chiropractic Practice". This may be important in maintaining the goodwill associated with the practice. The issue may not be very important if the associate has his or her own computer billing system, letterhead and, most importantly, a telephone, all of which allows the associate to establish a "practice within the practice". In any event, the use of a practice name should not be confusing to any patients attending at the Clinic.
TELEPHONE
In the case of a telephone, the options are that the Clinic will provide a telephone or the associate will provide his or her own telephone. The decision will have important consequences to both parties. If the Clinic provides a telephone system to the associate the Clinic can control the goodwill of the practice particularly when or if the associate chooses to leave the practice, together with more control on auditing practice issues concerning such matters as patient appointments. The associate might wish to use a separate system to allow for an easier transition upon a termination of the relationship. Expenses relating to long distance telephone calls will have to be delineated in the agreement.
Time and Space:
Unless otherwise stated in the Agreement, it may be presumed that the Associate has unrestricted access to the premises. If that is the case, it is incumbent upon the Senior Practitioner to ensure that he or she has properly outlined in the Agreement any limitations which should be placed upon the accessibility to the premises by the Associate. The access may relate to time and/or facilities. In the case of "time" the premises may be available on a full time basis or a part time basis. The parties may outline the specific days and time during which the premises are available to either of the Practitioners.
The Associate may also be designated certain treatment rooms which may be accessible to the Practitioner. In any case, the more important issue is whether the accessibility is exclusive to the Associate as compared to those situations where premises are available to a number of individuals at the same time, as in the case of a group practice.
For the purposes of the Senior Doctor, consideration should be given as to whether any additional associates will be brought into the practice at some time in the future. If exclusive use of part of the premises is given to an Associate, the Senior Doctor will be restricted from negotiating the use of the same facilities during the same time period to another associate.
Access to Computers:
While the issue of "computers" as it relates to Associateship Agreements is usually thought of in terms of billings, the issue should also be considered in terms of patient record keeping and future accessibility.
In the case of patient information, is the computer to be used by the Associate? What is the cost of adding the Associate as a designated practitioner on the Computer? Consideration must be given by the Senior Doctor as to what accessibility will be granted to the Associate in terms of the contents of the computer and more importantly what will happen upon a dissolution of the relationship. The parties must remember that the compute software is licensed and not owned by the Senior Doctor.
INSURANCE:
There are various types of insurance which must be considered by the parties to the Agreement, namely: malpractice insurance, occupier=s liability insurance, life insurance and disability insurance.
Malpractice Insurance:
There should be little discussion over the issue of whether the parties will maintain protective insurance. The only issue may be whether the parties will be obtaining coverage from the same company. The importance of this issue arises in those instances where the practitioners have assisted in the mutual treatment of a patient or action is taken against all of the practitioners as a result of an accusation that the practice constitutes a partnership. What the parties will not want is a situation where each of the practitioners is being insured by a different company whose position with respect to the handling of the complaint is being dealt with differently, ie. One company is of the opinion that the complaint should be settled while the other company wishes to vigorously defend the claim.
Occupier's Liability Insurance:
The Senior Doctor should maintain occupier's liability insurance which will deal with matters of potential liability arising from such things as "slip and falls" and "equipment difficulties" such as a table leg breaking and injury resulting to a patient. It is unlikely that malpractice insurance will cover such situations.
It is important that such coverage includes not only the owner/tenant of the premises and the employees and agents of the Senior Doctor but also any Associates at the premises. While this would appear to be a trite issue, at least one instance has arisen in which an Associate was placed in jeopardy as a result of not being included as a "named insured" on such a policy of insurance.
Life Insurance:
If there is to be a provision in the Associateship Agreement dealing with a buy-sell provision, it is imperative that there be life insurance to assist in the transaction. This is particularly important in those associateship agreements where the parties involve an established practitioner and a new graduate. This issue will be discussed in greater detail with the issue of the buy-sell provision of the Agreement.
Disability Insurance:
Since the Senior Doctor will wish to be compensated for his or her investment in the Practice notwithstanding the inability of the Associate to practice due to illness or injury, and in the event that there is a minimum payment being provided to the Senior Doctor, it is important that the parties consider the appropriateness of the Associate maintaining disability and overhead insurance.
Whose Patients are They?
The most often asked question relating to the issue of "patients" is: Who do the patients belong to? While the question may seem inappropriate having regard to the fact that it is improbable that a patient has signed an agreement with the Senior Doctor, and even if the patient has signed an agreement it is unlikely that it is enforceable, professionally or otherwise, the question has some importance in terms of the issue of a non-competition or non-solicitation provision.
As indicated previously, the parties to the associateship agreement may agree to any provisions as long as same are not illegal or contrary to public policy. The issues concerning "patients" usually involve the question of how patients will be designated to a particular practitioner, ie. On a rotational basis if a particular patient is not requested, and secondly what occurs if the associateship arrangement is terminated.
Termination of the relationship, as it affects the patients causes concern to the practitioners. The issue of what happens to "patients" upon termination of the agreement may relate to the matter of a non-solicitation provision, in that a practitioner may agree not to treat or approach a previous patient after leaving the premises. As long as the practitioner is not abandoning the patient, (alternative care is being provided to the patient in accordance with professional requirements and standards) the parties may agree that some sort of compensation is payable by the Associate to the Senior Doctor for each patient that leaves the practice with the Associate after the termination of the Agreement.
In addition, it is important that each doctor maintain a copy of the patient records in the event that both doctors, at some point during the association, have provided care to the patient. As a result, the Agreement may require that the Associate compensate the Senior Doctor for the copying of the patient records upon the termination of the relationship.
Consistency in Technique:
Having regard to the various techniques which may be practised by a chiropractor, ie. Acupuncture, activator, etc., it is important that consideration be given to the issue of whether there should be consistency in the method of practices by the practitioners. A patient should not be subjected to mixed messages relating to practice techniques. A patient should not be told by one practitioner that a particular modality is essential to a chiropractic practice when the other practitioner does not use such a technique or advises the patient that such treatment is not as appropriate as a "hands on" approach. If the practitioners make use of different technique approaches whether such techniques involve something as simple as the use or non-use of modalities, it is important the issue be dealt with in a pro-active sense so that the patients are provided the message that the practitioners wish to disseminate.
Associations:
While this provision may not be a serious matter which requires much negotiation between the parties, this issue may involve the parties considering the consistency between the practitioners as to their approach to practice. As such, if the Senior Doctor requires the Associate Practitioner to maintain membership in a provincial association or other professional group then such a requirement should be set out in the Associateship Agreement.
If the sign of the practice is to be changed, who is going to pay for the sign? If the names of both practitioners are to be set out on the sign, are there going to be steps taken to ensure that the associates are not represented as being "partners"? The appropriate principle of law indicates that persons carrying on practice together may be looked upon as partners if they either agree to be partners or they hold themselves out as partners. It is imperative that the signage or letterhead of the Clinic set out the fact that the practitioners are carrying on practice as associates, as the case may be, without misleading or confusing patients or anyone else who interacts with the practice. This same principle applies to letterhead for the practice if the names of the practitioners are to be set out on the same letterhead.
ADVERTISING
While the question of who is going to pay for advertising might seem like the most important question to be considered by the parties when dealing with this issue, it is not as important as dealing with the question as to who has control over its content. Obviously, the advertising content must be in conformity with the licensing board standards of the profession. However, neither party may wish to sign a "blank cheque" to allow the Clinic or the associate to engage in extensive advertising or even minimal advertising without the other practitioner's consent.
NAME OF THE PRACTICE
The agreement should set out clearly as to how the chiropractic practice is to be referred to, ie. "chiropractic clinic" or "Smith Chiropractic Practice". This may be important in maintaining the goodwill associated with the practice. The issue may not be very important if the associate has his or her own computer billing system, letterhead and, most importantly, a telephone, all of which allows the associate to establish a "practice within the practice". In any event, the use of a practice name should not be confusing to any patients attending at the Clinic.
TELEPHONE
In the case of a telephone, the options are that the Clinic will provide a telephone or the associate will provide his or her own telephone. The decision will have important consequences to both parties. If the Clinic provides a telephone system to the associate the Clinic can control the goodwill of the practice particularly when or if the associate chooses to leave the practice, together with more control on auditing practice issues concerning such matters as patient appointments. The associate might wish to use a separate system to allow for an easier transition upon a termination of the relationship. Expenses relating to long distance telephone calls will have to be delineated in the agreement.
Time and Space:
Unless otherwise stated in the Agreement, it may be presumed that the Associate has unrestricted access to the premises. If that is the case, it is incumbent upon the Senior Practitioner to ensure that he or she has properly outlined in the Agreement any limitations which should be placed upon the accessibility to the premises by the Associate. The access may relate to time and/or facilities. In the case of "time" the premises may be available on a full time basis or a part time basis. The parties may outline the specific days and time during which the premises are available to either of the Practitioners.
The Associate may also be designated certain treatment rooms which may be accessible to the Practitioner. In any case, the more important issue is whether the accessibility is exclusive to the Associate as compared to those situations where premises are available to a number of individuals at the same time, as in the case of a group practice.
For the purposes of the Senior Doctor, consideration should be given as to whether any additional associates will be brought into the practice at some time in the future. If exclusive use of part of the premises is given to an Associate, the Senior Doctor will be restricted from negotiating the use of the same facilities during the same time period to another associate.
Access to Computers:
While the issue of "computers" as it relates to Associateship Agreements is usually thought of in terms of billings, the issue should also be considered in terms of patient record keeping and future accessibility.
In the case of patient information, is the computer to be used by the Associate? What is the cost of adding the Associate as a designated practitioner on the Computer? Consideration must be given by the Senior Doctor as to what accessibility will be granted to the Associate in terms of the contents of the computer and more importantly what will happen upon a dissolution of the relationship. The parties must remember that the compute software is licensed and not owned by the Senior Doctor.
INSURANCE:
There are various types of insurance which must be considered by the parties to the Agreement, namely: malpractice insurance, occupier=s liability insurance, life insurance and disability insurance.
Malpractice Insurance:
There should be little discussion over the issue of whether the parties will maintain protective insurance. The only issue may be whether the parties will be obtaining coverage from the same company. The importance of this issue arises in those instances where the practitioners have assisted in the mutual treatment of a patient or action is taken against all of the practitioners as a result of an accusation that the practice constitutes a partnership. What the parties will not want is a situation where each of the practitioners is being insured by a different company whose position with respect to the handling of the complaint is being dealt with differently, ie. One company is of the opinion that the complaint should be settled while the other company wishes to vigorously defend the claim.
Occupier's Liability Insurance:
The Senior Doctor should maintain occupier's liability insurance which will deal with matters of potential liability arising from such things as "slip and falls" and "equipment difficulties" such as a table leg breaking and injury resulting to a patient. It is unlikely that malpractice insurance will cover such situations.
It is important that such coverage includes not only the owner/tenant of the premises and the employees and agents of the Senior Doctor but also any Associates at the premises. While this would appear to be a trite issue, at least one instance has arisen in which an Associate was placed in jeopardy as a result of not being included as a "named insured" on such a policy of insurance.
Life Insurance:
If there is to be a provision in the Associateship Agreement dealing with a buy-sell provision, it is imperative that there be life insurance to assist in the transaction. This is particularly important in those associateship agreements where the parties involve an established practitioner and a new graduate. This issue will be discussed in greater detail with the issue of the buy-sell provision of the Agreement.
Disability Insurance:
Since the Senior Doctor will wish to be compensated for his or her investment in the Practice notwithstanding the inability of the Associate to practice due to illness or injury, and in the event that there is a minimum payment being provided to the Senior Doctor, it is important that the parties consider the appropriateness of the Associate maintaining disability and overhead insurance.
Whose Patients are They?
The most often asked question relating to the issue of "patients" is: Who do the patients belong to? While the question may seem inappropriate having regard to the fact that it is improbable that a patient has signed an agreement with the Senior Doctor, and even if the patient has signed an agreement it is unlikely that it is enforceable, professionally or otherwise, the question has some importance in terms of the issue of a non-competition or non-solicitation provision.
As indicated previously, the parties to the associateship agreement may agree to any provisions as long as same are not illegal or contrary to public policy. The issues concerning "patients" usually involve the question of how patients will be designated to a particular practitioner, ie. On a rotational basis if a particular patient is not requested, and secondly what occurs if the associateship arrangement is terminated.
Termination of the relationship, as it affects the patients causes concern to the practitioners. The issue of what happens to "patients" upon termination of the agreement may relate to the matter of a non-solicitation provision, in that a practitioner may agree not to treat or approach a previous patient after leaving the premises. As long as the practitioner is not abandoning the patient, (alternative care is being provided to the patient in accordance with professional requirements and standards) the parties may agree that some sort of compensation is payable by the Associate to the Senior Doctor for each patient that leaves the practice with the Associate after the termination of the Agreement.
In addition, it is important that each doctor maintain a copy of the patient records in the event that both doctors, at some point during the association, have provided care to the patient. As a result, the Agreement may require that the Associate compensate the Senior Doctor for the copying of the patient records upon the termination of the relationship.
Consistency in Technique:
Having regard to the various techniques which may be practised by a chiropractor, ie. Acupuncture, activator, etc., it is important that consideration be given to the issue of whether there should be consistency in the method of practices by the practitioners. A patient should not be subjected to mixed messages relating to practice techniques. A patient should not be told by one practitioner that a particular modality is essential to a chiropractic practice when the other practitioner does not use such a technique or advises the patient that such treatment is not as appropriate as a "hands on" approach. If the practitioners make use of different technique approaches whether such techniques involve something as simple as the use or non-use of modalities, it is important the issue be dealt with in a pro-active sense so that the patients are provided the message that the practitioners wish to disseminate.
Associations:
While this provision may not be a serious matter which requires much negotiation between the parties, this issue may involve the parties considering the consistency between the practitioners as to their approach to practice. As such, if the Senior Doctor requires the Associate Practitioner to maintain membership in a provincial association or other professional group then such a requirement should be set out in the Associateship Agreement.
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