Hey Docs: If You're Looking at a Private Equity Job..

ADAPTED FROM CUT & TELL E20: PRIVATE EQUITY IS EATING HEALTHCARE ALIVE

This is how I got interested in the topic in the first place. I was job hunting, and there were a lot of private equity groups out there offering very shiny deals.

One thing first. The most common response I hear from older physicians is that this isn't private equity's fault; it's that young doctors don't want to own their own businesses anymore. I have a problem with that. Doctors graduating today are in a completely different economic position from the physician selling off a thirty-year-old mature practice. You come out of training with $200,000 in debt, probably with kids because you're older, in a housing market that is far more expensive. 

The financial reality of being a doctor has also totally changed. Medicare reimbursements have been steadily declining for 30 years, with no sign of a turnaround, and doctors today have to hire (and spend more both time and money!) to meet the escalating administrative burden of extracting payment from private insurance. 

Asking that person to walk into a less stable situation with the goal of taking on more debt, because the pitch is usually that you'll eventually become a partner and buy in, is hard to fathom. It's not that young doctors don't want to. The math doesn't math. And even the best-positioned fresh grad can't compete with a private equity firm's offer to buy a practice. That's a little absurd.

So I respect the people I know who have taken private equity jobs. The money is very appealing, especially if you view it as a short-term play: get in, make money for a couple of years, get out. There's an argument for it. But you need to put extra scrutiny into the contract review. Here's what to look at.

Find out who owns the company and what their exit horizon is. They won't volunteer this. If the practice isn't owned by the doctor you're talking to, ask directly: who owns it, where does the money come from, and are they anticipating a sale within the time you plan to be there? An upcoming sale changes everything for you.

Be extra careful with restrictive covenants. You might sign with one group under one set of non-compete terms, and then that company sells to a different firm. Things go haywire. The job you signed up for changes, but the restrictive covenant doesn't; it persists beyond the sale, and you can end up trapped. Push for the most limited, shortest-duration non-compete you can possibly get.

Understand the compensation architecture. If there are incentives for you to recommend care that isn't based solely on your clinical judgment, that's where you'll find them. It will be written down. But the best way to understand it is to talk to another physician in the group and ask specifically: do you feel you have to hit a target every month, and what are you doing to get there? All of us like to imagine we're immune to the pressure to upsell. You're not, and you may not even feel it while you're in the job. And if you're in a system like that and refuse to play along, you'll be miserable anyway, because they won't be happy with you.

Look at staffing. Talk directly to the nurses and MAs. Ask how long they've been there, what they actually do, and whether they plan to stay. If everyone has been there six months or less, that's a bad sign. It means the people who built the place are gone, and you're walking into a very junior group with little institutional knowledge.

Clarify what happens in a sale, in writing. If it's not in your contract, they'll decide for you. You can absolutely advocate for a sale to trigger renegotiation at minimum, or for your compensation to be held steady. Talk to your lawyer about it.

By all means look at the private equity job. Explore what they're offering. But what the numbers show is that if you take one of those jobs, you may have more money in the short term, and you're probably not going to be happy. Remember, too, that these firms offer big paychecks to the first people in the door because they're eager to get started. Once they have you on a contract, the raises stop, and ultimately they'll come for physician salaries too. Maybe not yours, but the junior partner you were hoping to work alongside won't get the offer that gets them in the door.

Your first job is a big decision, and it deserves a long view. In residency you're accustomed to being beholden to systems that dictate everything about your life. Why go from that straight to a corporation that does the same? Are you going to be happy in a system where you'll be pressured to upsell? Is that what you got into this for?

Scrutinize those offers. Think about the long term, for yourself and for what we're doing to our profession. And advocate, in every way you can, to rebuild the rules around physician ownership of our practices and our system. If we don't, the trust we have with patients will keep eroding, and that isn't good for any of us.