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Medical Practice Member Compensation Part Two: Communal Office Sharing Arrangements

By: David S. Rintoul

In this series of articles, we’re exploring the various models of therapist reimbursement in the private practice setting and the pros and cons of each. There is no perfect model for how to reimburse clinicians, but there are clear benefits to collaborating as a group: sharing rent for a deluxe Stamford medical suite; being able to amortize a robust billing department among several practitioners; and the benefits of professional collaboration, to note just a few.

As we discussed in our prior article, the place to start in developing a therapist compensation model is determining your values: do you want to maximize the individual effort of each clinician, or actions that benefit the practice as a whole?  This is not an either or choice.  Rather, it is determining where you are on the continuum from only rewarding individual effort to only rewarding behavior that supports the practice.  Once you have identified where you want to fall in the continuum, you need to understand the pros and cons of each model and then selecting the one that best fits your needs as either the owner or clinician.

In addition to the percentage model discussed in the prior article, another common model of reimbursement for therapists in private practice is a communal office-sharing model. Generally, in this model there is no direct ownership of the practice itself, but rather all clinicians own their practice and simply divide expenses evenly. Ideally, this model satisfies many clinician’s desire to own his or her practice, while not having the risk of covering all the overhead in a single-practice office.

In this article, we discuss the communal version of the office sharing model where all the clinicians basically have an equal voice.  The landlord model, where one person controls the space (by ownership or lease) and then rents space to other clinicians, will be discussed in the next article in this series.

Pros of the office sharing model:

When it’s working well, the communal office sharing arrangement has many benefits to the clinician.  It typically offers the highest potential for individual profitability because there is buying power in groups, and expenses are shared.   You’re not sharing your revenue with others:  if you work hard, you get more money; if you want to take it easy and accept less money in return for more free time, your practice mates won’t care.  The ability to share the cost of a billing department to deal with insurance can be less important to therapy practices in the New York City area, such as Fairfield County counseling practices, which frequently only serve private pay clients.

The communal office sharing model addresses one of the biggest drawbacks of solo practice, which is the personal and professional isolation of not having co-workers.  It’s hard not to get stale or anxious if you don’t have peers to help sharpen your skills or to run a difficult patient issue by.  Office sharing gives you the relative autonomy of being by yourself without the overwhelming feeling of having to do it all on your own or the isolation that often gets created in a true solo practice.

Another advantage of this model is that the clinicians are often more likely to be credentialed as individuals, which means that therapists are often collecting their own checks from insurance companies. This reduces the need for the practice as a whole to address insurance issues, since they will be the responsibility of each clinician.  This means that the only paperwork you really need to be concerned about is your own, which can potentially save a lot of labor, procedural infrastructure and disagreement.

Cons to the Communal Office Sharing Arrangement

Just because someone’s a therapist doesn’t mean that they play well with others. For many therapists, autonomy is one of the reasons they go into private practice, to live the “you’re not the boss of me” dream.

Anecdotally, group practices seem to be more prone to interpersonal conflict than any other model of practice, because there is no inherent means of conflict resolution. While the owner of a private practice often can make decisions that may or may not be popular among the individual clinicians in that practice, there is a clear voice of direction.  Ultimately people have one of three choices if they don’t like something; they can leave; work through the owner to encourage change; or accept that they can’t change the situation and continue working at the practice anyway.  Regardless of which of these three choices a clinician makes, a decision is still getting made. In a situation in which no one owns anything in particular, disagreements can potentially be more persistent.

In a true shared model, there are many potential areas for disagreement. Clinicians may not agree on what expenses should be shared or how they should be shared. Clinicians might feel like expenses aren’t equitably distributed. Some members of the practice might be marketing more than others or desire a collaborative approach to outreach (marketing the practice over the individual), while others just want to market their own niche. Some clinicians might be using a room only a few hours every week and others might want that room shared to mitigate expenses. Also, it is harder to have a division of labor, both clinically and administratively.  You may want to refer a patient to another clinician who is great with eating disorder patients, but your only benefit from referring a patient to another clinician is the possibility that they will refer work back to you.  If you both worked for a practice, you could get a direct financial benefit from referring work.  Or, some clinicians may be better at writing for the web site, and another is good with staff management, but a pure shared-office setting provides little incentive for actions that benefit the practice as a whole.

While sometimes not having a clear person in charge can be appealing, clinicians who have worked in this kind of setting sometimes describe a” too-many-cooks in the kitchen” scenario, which leaves a lot of room for personalities or ongoing disagreements to emerge.  If any change requires a consensus of all the clinicians, change may be rare.

Because the marketing in these practices tends to be more driven by each individual clinician rather than developing a more “branded” company identity, combined with the increase in potential conflict with more and more members of the group, these practices tend to be and stay small, with people looking out primarily for their own interests.

Legal Issues with a Communal Office Sharing Arrangement

Legally, a shared office arrangement presents some three particular challenges, depending on how your state would classify the business arrangement:

  • Is it a lease? Each clinician might be considered to be a tenant leasing space in the office.  If you want to force the clinician out, you may have start an eviction.  While the eviction was proceeding, the clinician would still be able to come into the office.    If you tried to lock the clinician out, you be subject to criminal charges of entry and detainer.
  • Are the clinicians employees? If the practice is controlled by an executive committee (that is, a decision-making group comprised of fewer than all the clinicians) and the executive committee  determines prices and exercises control over the manner of treatment and quality of treatment, the non-committee member clinicians might be considered employees of the practice.  The ramifications of a clinician being considered to be an employee is beyond the scope of this article, but it can include liability for employment taxes, shared liability for malpractice claims, and exposure to employment discrimination claims.
  • Are the clinician’s partners? If there is any pooling of revenue that is divided among the clinicians, they could be considered partners.  This would give some clinicians a right to demand a share of other revenues, such as from a related business venture started by one of the clinicians, and could cause shared liability for malpractice claims.

You can avoid unintentionally creating a lease, an employee, or a partnership by putting your agreement in writing, and having all clinicians sign it.  These issues are complicated and fact-dependent, and you should have a lawyer draft the agreement.  Please don’t rely on this article in deciding these issues for your practice.  But, you can use this article to know what issues you need to address with a medical practice attorney admitted to practice in your jurisdiction in resolving these issues.

The Communal Office Sharing Arrangement – Good, But Probably Short-Lived

Michael, the co-author of this series who has experience as a clinician, has seen more of these kinds practices appear and disappear than any other kind. While it certainly doesn’t have to be the rule, they seem to lack staying power for the reasons mentioned above, and have trouble gaining the traction that more generally branded practices can achieve. No matter how much we like a fellow clinician or how similar we think we are to another person, being in business with someone else is never easy, no matter what kind of business it is. Being in business with multiple people can amplify those difficulties.

While potentially offering the single highest rate of return of any of the other models being discussed, group practices seem to primarily be small, transient, and more prone to internal conflict than many of their counterparts. While this doesn’t necessarily have to be the case, this model can certainly offer the opportunity to put your professional conflict resolution skills to a true test.

For medical practices located in Connecticut, Robert Cooper, David Rintoul, and the other members of the health care practice at ZNC, are happy to help Fairfield County and Connecticut medical practices develop and implement clinician compensation models that implement the vision and goals of the clinicians in a cost-effective, practical, and legally-compliant manner.