Over the next several years, there will be a mass exodus of baby boomer physicians from medicine. This will
have an unprecedented impact, not only on society in general, but on their own practices and the partners they
leave behind. While most
individuals plan for their own retirement, few
groups have actually planned
for their succession. A well thought out succession plan is integral to the successful retirement of the individual
partner, the continued success of the active partners, and groups' ability to recruit new partners.
Now is the time to develop your group's succession plan, that is, before someone (or two) announces they are retiring
at the end of the year. You don't want to develop your plan when someone thinks they have a foot out the door. A plan
should be created when everyone is still in the same boat, there isn't a sense of urgency, and when all involved
can still be fairly objective.
A succession plan is both a financial and manpower plan for the future. It considers provider productivity, practice
overhead, buy outs, buy-ins, major purchases, tax planning, retirement contributions, etc. The manpower projection
is an opportunity for the group to determine where the practice wants to go or how it will evolve. It forces the
group to consider retirement dates, recruiting dates, staffing needs and type
of provider being sought after. The
practice can decide male vs. female, younger vs. older, local established competitor vs. new out-of-towner,
physician vs. extender, primary vs. specialist, etc. The group can also plan what services are to be offered and
where. Will the practice open/close a satellite as a result of a retirement/recruitment? Your written succession
plan is a powerful recruiting tool. It show candidates that you have a business plan and have done your homework
A complete financial and operational review of the practice is essential to developing a good succession plan.
The report validates information, gives the non-managing partners an opportunity to understand the economics of
their practice, and gets everyone on the same page before attempting the nitty-gritty of succession planning.
Otherwise, there will be disagreement over information, or just plain distrust of those in charge.
The plan should include an anticipated retirement/recruiting time table, potential trouble spots, contingencies,
and ramifications to active partners. Succession planning affords the group an opportunity to review and update
their operating agreement. Many of these agreements, (which were drawn up when everyone was young and hopeful),
are out of date and are often in direct conflict with current modus operandi.
There are many things the partners may want to consider or reconsider in succession planning including:
- Handling the retiring partner's patients
- Criteria for partnership
- Full/part time definition
- Voting/governance
- Vesting schedule to qualify for a full buy out
- Buy in formulas
- Buy out formulas
- Benefit packages
- Income distribution formulas
- Saving for buy outs
- Future leadership
- Services offered
- Staffing
An independent, objective and experienced third party should be utilized in succession planning.
They will serve as catalyst, mediator and convener. They will move the process along a time line and write
the succession plan. There is a lot of work involved and most practices will not have the necessary time (let
alone expertise) to devote to this important project. Enjoy your retirement, leave your partners happy.
Do a succession plan.
