In this episode of PodMD, Founder and Principal Lawyer Jackson Barret from Barret and Co Legal will be discussing the topic of navigating the legal side of private practice.
- Transcript
Please note this is a machine generated transcription and may contain some errors.
*As always, all in this PodMD podcast is intended for health professionals and the comments are of a general nature. Information given is not intended as specific medical advice pertaining to any given patient. If you have a clinical issue with one of your patients please seek appropriate advice from a colleague with expertise in the area.
Today I’d like to welcome to the PodMd studio, Principal Lawyer at Barrett + Co Legal, Jackson Barrett.
Jackson is a Commercial Lawyer who specialises in acting for medical practitioners in the course of selling or acquiring practices, with internal mergers and acquisitions amongst partner doctors, and with the day to day operational legal considerations facing practitioners.
Today, we’ll be discussing the topic of Navigating the Legal Side of Private Practice.
* We do hope you enjoy this podcast but please remember that the advice here is of a general nature and is not intended as specific advice about a given medical practice or legal issue. The views and opinions expressed in this podcast are those of Barret + Co Legal, not PodMD.
If you do have concerns or questions, please seek specific advice from Barrett + Co Legal or your current legal advisor.
Jackson, thanks for talking with us on PodMD today.
Jackson:Really glad to be here. Thanks for having me.
Question 1
The topic of today’s discussion is legal considerations for medical practitioners looking to progress from a contractor practitioner, to owning and operating their own practice.
Can you expand on what it is you’ll be sharing with us today?Jackson: Yeah, certainly. So, what I’m going to do is a little bit of a two-stage outline, the first stage being with respect to medical practitioners looking to acquire a practice of a general practitioner decides that they want to operate a clinic. I’m going to run through the legal considerations with respect to embarking on that venture because there’s many things to think about from a risk management perspective to ensure you know essentially what you’re getting into. The second subject that I’m going to speak to is essentially ‘life as a practice owner’, so it’s the next phase. “Well, now I’ve acquired A practice , what are some of the things that I need to have front of mind, particularly throughout the entirety of my career as the owner of a clinic?”
Question 2
Jackson, what are the first questions a medical practitioner looking to acquire a practice should ask of the selling medical practitioner?Jackson: So, there’s a number of things. We essentially have a list of due diligence items that either we on behalf of our client requests for them or if dialogue is still between the buyer and seller often they’re known to one another, the buyer can make that request directly to the seller. One of the primary things is a copy of the lease in circumstances where the owner of the practice leases the practice premises from a landlord because effectively when you’re buying the practice, that lease is likely to be transferred to you and any terms therefore that are within that lease including the rent and the length of that lease, will be transferred to you, so you need to know what you’re what you are sort of signing up to with the owner of that premises, who will be the landlord. Another thing that you want to be really sure on is that the premises from which you’ll operate the practice has Council approval where it is permitted to be used for the purpose of, say, a medical practice. So, you don’t want to enter into a transaction by a clinic where unbeknownst to you the particular trading premises actually can’t be used as a practice and that actually does happen in practice from time to time. Sometimes Council aren’t aware that a practice is being run from a particular premises, or they just haven’t gotten around to looking into it. But it comes to fruition that that premises actually can’t be used for that purpose. So, the way we confirm that is by a) asking for any planning permissions and some planning permissions will say that you know you can only have X number of doctors operating from that practice. So, you need to know that as well- at the outset, whether there’s a cap that council have imposed and at other times a specific permission from Council won’t be required because of, often how long a particular premises has been used as a clinic. So sometimes there’s no express permission required, but it’s still something that needs to be looked at. Another thing is employees. So, will you be taking on employees? If so, what are their current terms? How much are they being paid? Are there any non-standard terms that have been agreed to as between the seller of the practice and their staff because those staff might have an expectation that those non-standard sort of agreements continue to apply now that’s not necessarily the case, but if subjectively that’s what’s in the minds of staff, you want to have those conversations early. Really importantly as well you want to know whether or not any equipment that’s used in the practice is subject to a finance arrangement. Often equipment in medical practices, whether it’s a surgery or a general clinic, often their equipment is quite expensive and so practice owners will borrow money to purchase various items of equipment that they use in their day to day. In exchange, the lender of that money registers a security interest over set pieces of equipment, which means that if the practice owner fails to repay that money, there’s essentially rights of the lender to take back that equipment. So, if those loans aren’t paid by the seller of the practice, before the practice is transferred to the buyer, the buyers essentially potentially unbeknownst to them, taking equipment which is subject to potentially being seized by the lender if the seller of the practice fails to continue paying and after the sale of the business, they’ve got no interest in repaying it cause they’re not using the equipment anymore. So, that’s critical and the final thing is asking for what are called ‘service and facility agreements’ with any doctors that are working within the clinic. This is because by and large, doctors typically or a practice typically won’t employ their doctors, there’ll be an arrangement as between the clinic and the doctors where the clinic will provide services and facilities to a doctor on various terms, which are contained in a service and facility agreement.
Question 3
What happens to things like the business name? What if the practitioner selling the practice leases the premises from its owner?Jackson: So, the contract between the buyer of the practice and the seller of the practice will almost always provide that the business name is to be transferred at settlement and there’s a way of formalising that and that process is known to legal practitioners and indeed accountants and is handled as between them at settlement. The same goes with items of intellectual property, that being things like email accounts and logins and website credentials and social media accounts of the clinic, if any. It’s not the same as a business name where ownership is formally recorded. But, practical access to those accounts needs to be handed over. There’s also, as far as the lease is concerned, just turning back to that, which I’ve sort of touched on earlier, the contract between the seller of the practice and the buyer of the practice will also include a term that says the seller needs to obtain from the landlord an approval or a consent to either transfer the existing lease from the seller’s name to the buyers name. Or the entering into a new lease between the owner of the premises and the purchaser of the practice. It’s really critical to look at that lease document early because essentially a buyer wants to know that the lease that’s being transferred to them has a long time left to run. There’s no value in purchasing a practice where the lease essentially say, only has one year left because you have no security of being able to remain in the premises for a long time and all of the patients may know well, ‘that’s where the clinic is, it’s close to me’, so there’s lots of value in maintaining that premises. You want to look at the lease early to make sure that it’s got probably at least 10 years. If it doesn’t, then that’s something that needs to be negotiated really early.
Question 4
Before we turn to life as a practice owner after purchasing, is there anything else you would recommend for someone purchasing a practice?Jackson: Yeah, there’s many things. But in the interest of time, I’ll just touch on one that I think is really important and that is when purchasing a clinical or practice of any kind, often the seller has been working as the owner for a long, long time and their face and their name is known to lots of patients. They essentially carry a significant amount of goodwill and the value in the business in part, whilst it’s hard to quantify, a lot of that might be because they work in the practice and they get along with people, there’s relationships that are formed over a long period of time between potentially the owner of the clinic and patients. So, for someone buying a practice. It’s often really important to speak to the owner and ascertain whether or not they’d be willing to continue working for a period of time after settlement, and that’s to ensure that there’s a transition period where it’s not as though patients arrive for their appointment and unbeknownst to them, ownership’s completely changed hands and who they once loved to see there is gone and gone forever. So, what’s ideal is that for a period of, say, a year, that owner is still there and is able to introduce patients to the new owner so that the new owner can build, build trusted rapport with their patients with the assistance of the outgoing owner and often that’s documented by way of a service and facility agreement where instead of the seller being the owner, they’re now on the other side of it-they’re a contracted doctor working in the practice and their contract is between them and the person that they sold their practice to.
Question 5
So now that we’ve discussed purchasing a medical practice, what do practice owners need to be mindful of during the course of life as a practice owner?Jackson: A really big one is employees and typically your employees are not usually going to be doctors. Sometimes they are, but typically they’re going to be support services, reception- people that carry those roles. We’re not going to be able to go through in the time available, the host of rights that employees have which are containing common law and the Fair Work Act. But what I can say for present purposes is that they do have a host of rights and it’s critically important that employees are familiar with what those rights are, and in particular the two primary awards that apply to the medical practice or the health professionals and Support Services award and the Medical Practitioners Award and what’s the challenge for practice owners is determining ‘okay, what level of minimum pay actually applies to my staff?’ and what a practitioner essentially needs to do is compare- because the awards set out levels of essentially experience and what pay a practice owner is required to remunerate a staff member commensurate with that level of experience. So the practice owner needs to go ‘okay, well, I’ve got this staff members, what do they do? What do I require of them? Do they need a certain level of supervision? How long have they worked here for?’ Then compare that factual matrix with the award – the levels that are set out in the award, and that’s a really difficult task. So, for practice owners, if they are ever renegotiating payment terms with staff, that’s often really prudent to actually speak to a lawyer and say ‘look, I think that they’re at about this level. What do you think?’ and work through it that way. This is not just in relation to remuneration, there’s a whole host of other things that are contained in the act and these awards that practitioners need to be across. Which essentially, we could do a whole other podcast on that and probably many but it’s something that if practice owners don’t feel confident that they understand their obligations and they should speak to a lawyer and even read some of the resources online themselves.
Question 6
Jackson, what about contractors?Jackson: So, contractors which I’ve already touched on – the legal relationship between a practice and the actual GP’s or medical practitioners that work in the practice is different to that of an employee relationship. Instead for most of the time, those general and medical practitioners of other varieties will work under a service and facility agreement with the practice, and that is where the practice essentially agrees to make available to that contractor GP, services and facilities. Services might be things like admin support, support during delivering certain kinds of treatment and procedures and the facilities are the tangible, so they’re the physicals- That’s the location and that’s, you know, different items of planning and equipment that are used by practitioners in their day to day. So, the relationship is really different and essentially often what happens is doctors are entitled to remuneration in proportionate to the amount that they bill and that they charge to their to patients that come and see them. So, these types of contracts have been the subject of many, many cases in in various courts and tribunals across Australia because of the way in which often when they’re drafted poorly, there might be an argument raised by a GP or a medical practitioner, that the relationship was more one of employment- so employee and employer. With that what can follow if that argument is successful, is that retrospectively and well down the track, a clinic might be required to pay leave entitlements and other and other entitlements that arise under an employment award. So the way those documents are drafted is critical to get right. You want to ensure that the relationship is quite clearly set out as one of this – ‘Hey, we as a practice we’re providing you services, you’re not an employee of us but we will allow you to work from this from the clinic that we operate and in exchange for that, the practice is usually entitled to a service fee’. So, having those documents drafted correctly is absolutely critical. So for anyone that thinks that they haven’t had those types of documents reviewed in some time, they really should because there’s been recent commentary around the way in which they should be prepared- which in practice in recent years has changed the way many lawyers that work in this space draught those documents.
Question 7
What other legislative regimes are there for GP’s to be wary of?Jackson: Yeah, there’s really an endless number. Again, it’s something that we could do a whole other podcast on, but I guess the challenge for any professional, really, but in particular general practitioners and medical practitioners because they’re held to a really high standard- is being really good at what you do and working day-to-day on business operations, but also you know as a clinician, as a General practitioner and treating patients, balancing that with actually knowing where the law is at and what regulations and codes and what standards might apply to you in your day to day. I mean, there’s a variety of things that people, practitioners should be across. There’s the health practitioner regulation, national law, AHPRA have a code of conduct. There’s the National Safety and Quality Health service standards and these things set out numerous obligations that practice owners need to be across. Those are things like the right way to store patient records, safety protocols and they need to be available as well for people to turn to- so not just sort of saying ‘yeah, I’ve got safety protocols – they’re hidden under a box in the backroom’. No, they need to be accessible to staff. There’s, you know, prevention and control management of infectious diseases, there’s patient consent issues, there’s authorisation requirements that need to be followed as far as communicating with other medical professional supports of a particular patient. There are essentially so many things that is a really real challenge for practice owners because yeah, it’s difficult to run a practice, treat your own patients and be across these things. But I’d encourage any practice owner to essentially block out some time, whether it’s on a monthly basis or a quarterly basis, to essentially put some thought into whether there’s been any changes in the regulations that they need to be across so that they’re, you know, continuing to learn and stay across any legislative updates that apply to them and their work.
Question 8
Jackson, thank you for your time here today in the PodMD Studio. To sum up for us, could you please identify the three key take home messages from today’s podcast on navigating the legal side of private practice?Jackson: Yeah, absolutely. So, I think the key takeaways from today are probably when looking to acquire a practice, it’s obtaining legal advice really early. I see many times people come to me wanting to buy a clinic and they say to me, ‘look, we want to complete settlement of this transaction in a week. We’ve already agreed to all of the terms’ and then I start asking questions like, ‘well, do you actually know what the employees are being paid at the moment? Do you know what contracts with contractor practitioners provide? Have you looked into whether any of the equipment is financed?’ and nine times out of 10 they haven’t. So, speaking to a lawyer early is critical. Getting your documentation right. So that’s your employment contracts, it’s your service and facility agreements. That’s critical because you don’t want to trigger inadvertent taxation implications or inadvertent requirements to pay leave entitlements to those that you thought were not employees. Another one is just treating people is that it’s really it’s high risk and so medical practitioners, GP surgeons, they’re held to a high standard and there’s a host of regulatory requirements that other professional services aren’t exposed to. So, with how busy day-to-day life is these things can often go by the wayside. But I think it’s really important to, like I said before, set aside some time on a regular basis to ensure that you’re apprised of updates and things that are changing in the law.
Jackson thanks again for your time and the insights you’ve provided.
Jackson: No worries at all. Thank you for having me.
