PE part 2

My last post about Private Equity prompted some spirited discussion on Twitter which I thought was really great. It was gratifying for me to help spur a robust conversation about a topic that a lot of folks feel very strongly about. I’m happy to see how deeply we care collectively about our specialty. Finally, in these times of heavily polarized perspectives and embarrassingly uncivil vitriol spewed uncontrollably, I have faith that even though we may disagree strongly, we do so with respect. That respect is based in the faith that we have a shared desire to see our specialty not just survive but thrive in these challenging times. For all of those reasons, thank you all for your engagement and giving this topic some thoughtful and passionate air time.

As you all know, Twitter’s “bite sized” format doesn’t work well for conveying more nuanced thoughts and I think that hindered some of the discussion. I wanted to share an anecdote that might help provide some more context as we think about this complex topic:

When I started with my private practice 22 years ago, I signed a five-page contract that I’m pretty sure was printed off of contracts.com or some other repository of generic legal forms. By the time I left the same practice four years later, the employment contract had expanded to over 50 pages in two separate volumes, an employment contract and a partnership contract. These were authored by a local law firm at substantial expense to the practice; nevertheless, the culture of our group had been, up to that point, one of honor. In other words, if you said it, you meant it.

When I signed the generic five page contract, the president of the group had promised me that the group would cover my tail coverage if I were to leave. We shook hands and that was that. Fast forward four years and now the group’s business manager (not the president) is telling me that I owe over $100,000 for my tail coverage. During a meeting of the corporate group (my eight partners sitting in a room), they voted against honoring the president’s agreement and requiring me (the vice president of the group) to pay my own tail coverage. I was, to say the least, disappointed.

One of my fellow partners came to me afterwards and said, “you know, Bob, if it was up to me, the group would pay it. But I had to vote for what was in the best interest of the group.”

That is the moment when I learned why corporations exist: diffusion of responsibility. I’m pretty sure none of my eight partners, if they had sole decision-making capacity, would have said to my face that they would renege on my tail. But as a group, as a corporate entity, they shielded themselves from the unpleasantness of individual accountability. In other words, the individuals can make decisions that are in the best interest of the corporation (and not necessarily themselves, wink wink) and absolve themselves of personal responsibility.

The radiology groups who have decided to partner with Private Equity firms probably used a similar approach. The decision to partner probably wasn’t a driven by a single person’s (financial or otherwise) agenda, it was a decision that was made in the best interest of the corporation. This would also apply to just about any other important decision that would affect any corporation.

I often share this story with my junior colleagues and trainees so that they understand the critical difference between personal relationships within a practice group and the professional relationships in the context of a corporation. Just like when Line Monkey rejected the idea that individual physicians are primarily motivated by profit- naturally, none of us could agree more with that sentiment. But the fact is that physician corporations DO practice for profit, otherwise the corporation is not viable. How the individual physicians practice medicine on a daily basis has little if not nothing to do with the physician corporation that only exists because it is profitable, just like a PE firm.

Many (sidechickVIR, Doug Hidlay, Sonny Bagla, Patrick Patten, Patrick Davidson, and others) brought up other important considerations on the impact of PE on practice operations, physician wellness, quality, and the communities in which we live; and all of them seem entirely valid from my perspective. What I am trying to highlight is that if our biggest complaint about PE is that they are generating outsized profits from imaging, well, there are a lot of us who also profit from imaging, albeit using a completely different methodology. I would suggest that we might be better served by being more measured in our opinions about PE. The impact of PE on the ability or inability of groups to practice good medicine is not and has not been the point of my blog post, although many have addressed this. I'm not denying the importance of these topics but it is beyond the scope of this and my previous post.