As pointed out by Tom Hutchinson in his blog "Physician Joint Ventures," it is important for physicians to consider the value of a buy-sell agreement when forming a new practice, starting an ambulatory surgery center, or investing in any other type of health care venture with other physicians and providers.
While it is always possible for investors to come to a mutual agreement in the future, a small amount of diligence upfront will reduce the time, effort, and expense needed once the priorities of the parties may start to differ or an unexpected event such as death, divorce, or disability occurs. Also, if parties have a difficult time negotiating the terms of the buy-sell agreement upfront, it may be a good opportunity for them to re-examine their business relationship.
Don't Get Caught Without a Buy-Sell Agreement
Friday, September 24, 2010 by
Thomas Hutchinson
Frequently when practices are forming, physicians ignore the importance of a buy-sell agreement (also known as a stockholders agreement). This document sets forth what happens to a physician's ownership interest in the practice in case of a his or her death, disability, bankruptcy, or divorce, or in the event the physician loses his or her license, prescriptive authority, medical staff privileges, etc.
Without this document, a practice can be left with a non-participating owner or a physician's ex-spouse or creditors as a partner. This document is also often the appropriate place for a non-competition/non-solicitation covenants.
Although the best time to implement such an agreement is on first day of a practice's operation, it can be implemented at anytime, so long as all parties are in agreement. Unfortunately, many practices only think about these issues when problems start to bubble up, which we are seeing more and more in the wake of health care reform and hospital acquisition activity.
If you would like to discuss a buy-sell agreement for your practice or joint venture, please contact me at 317-238-6254 or thutchinson@kdlegal.com.
Without this document, a practice can be left with a non-participating owner or a physician's ex-spouse or creditors as a partner. This document is also often the appropriate place for a non-competition/non-solicitation covenants.
Although the best time to implement such an agreement is on first day of a practice's operation, it can be implemented at anytime, so long as all parties are in agreement. Unfortunately, many practices only think about these issues when problems start to bubble up, which we are seeing more and more in the wake of health care reform and hospital acquisition activity.
If you would like to discuss a buy-sell agreement for your practice or joint venture, please contact me at 317-238-6254 or thutchinson@kdlegal.com.
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