08 May The Associate’s Practice
Several years ago, Dr. Youngerdoc began practicing as an associate for Dr. Olderdoc.
Neither party wanted to formally state their objectives in a contract for entering into this associateship relationship. Dr. Youngerdoc was not prepared to make a commitment to the practice yet and did not want a restrictive covenant that would prevent him from practicing somewhere else in the area. Dr. Olderdoc did not want to spend the money for a contract at this stage of the relationship.
They agreed to base the relationship on trust for now and decided to practice together for a while, see how they got along, and then someday have a contract written up that would fairly state their objectives and obligations to each other. As time passed, the contract idea was forgotten about and no contract was ever drafted.
Dr. Olderdoc always assumed that Dr. Youngerdoc would purchase his practice one day. Dr. Olderdoc felt that was always the intention of their relationship. Dr. Olderdoc willingly introduced many of his patients to Dr. Youngerdoc and even allowed Dr. Youngerdoc to do their routine hygiene exams at times. Dr. Olderdoc also referred all new and emergency patients to Dr. Youngerdoc. Dr. Olderdoc was also able to extend the office hours and Dr. Youngerdoc spent a lot of time in the office as the only doctor on call. This gave Dr. Youngerdoc the opportunity of working with almost all the patients in the practice. Dr. Olderdoc was very happy with this relationship. His practice had experienced great growth with most of the new patients and virtually all of the younger patients being treated by Dr. Youngerdoc. Dr. Olderdoc eventually even began turning some of his established patients over to Dr. Youngerdoc and began significantly cutting down on his clinical time.
As most do, the relationship had its ups and downs, but Dr. Olderdoc felt that the good far outweighed the bad and he was really looking forward to the day that Dr. Youngerdoc would purchase his practice.
Dr. Youngerdoc, however, had totally different thoughts. Dr. Youngerdoc had decided that he would rather live and practice in another area of the country. Dr. Youngerdoc had been considering “selling his practice” and moving!
Dr. Youngerdoc felt that Dr. Olderdoc would not be willing to “buy Dr. Youngerdoc’s practice” since many of Dr. Youngerdoc’s patients were either former patients of Dr. Olderdoc or would have been patients of Dr. Olderdoc had Dr. Youngerdoc not been in the practice. But even so, Dr. Youngerdoc invested six years into working with those patients and had established a very good relationship with each of them.
Dr. Youngerdoc had no restrictive covenant (in fact, no contract at all) so he was free to practice wherever he wished. He was aware that Dr. Olderdoc believed that he owned the entire practice, but Dr. Youngerdoc knew that “his patients” would follow his lead. Dr. Youngerdoc also had come to understand that the real value of a practice was not equipment or furniture, but in the patient base. Dr. Youngerdoc rationalized that he had indeed established his own practice over the years and that “his practice” had substantial market value even though Dr. Youngerdoc was only an associate.
Dr. Youngerdoc talked with several practice owners in town about his plans and a couple of them expressed an interest in “buying Dr. Youngerdoc’s practice.” It seemed that all Dr. Youngerdoc would need to do is relocate to a buyer’s office; send out a notice of the move to all of “Dr. Youngerdoc’s patients”; and stay in the buyer’s practice for twelve months or so to ensure a smooth transition of “Dr. Youngerdoc’s patients” to the buyer’s location. After “Dr. Youngerdoc’s patients” had followed Dr. Youngerdoc to the new location, Dr. Youngerdoc would be free to move elsewhere.
Dr. Youngerdoc informed Dr. Olderdoc of his plans. Dr. Olderdoc was furious! Dr. Olderdoc told Dr. Youngerdoc he felt betrayed because a trust had been broken. Dr. Youngerdoc replied that he had never made any commitment to Dr. Olderdoc, and besides, Dr. Olderdoc had never made any commitment to him either. Dr. Youngerdoc said he had always felt that the reason they never put their arrangement into a contract was because Dr. Olderdoc did not want to commit to anything long-term with Dr. Youngerdoc.
Dr. Youngerdoc sold “his practice” to a doctor down the street and relocated to the buyer’s office. Dr. Youngerdoc and the buyer signed a contract by which the buyer agreed to pay Dr. Youngerdoc a set price for each patient that followed Dr. Youngerdoc to the buyer’s office. Interestingly, many of the patients that followed were former patients of Dr. Olderdoc (since it had been implied in Dr. Youngerdoc’s letter to the patients that Dr. Olderdoc would soon be retiring).
Dr. Youngerdoc practiced with the buyer for a year. He received just under $200,000 for “his practice” and moved to another area of the country as planned.
Dr. Olderdoc’s practice was totally decimated. Dr. Olderdoc had been counting on his practice value to supplement his retirement funds.
Dr. Olderdoc saved a little money by not bothering with a contract when he first brought Dr. Youngerdoc into his practice; but, he lost more than 75% of his practice value when Dr. Youngerdoc left the practice. Dr. Olderdoc is now faced with a financial disaster all because he didn’t see the need to invest a little money to protect himself and his practice value!