Letter of Intent

The letter of intent is an interim step of the offer process, which comes after interviewing and mutual interest is established, but before contracts are extended. It is a promise to bargain in good faith based on the principles outlined in the letter. It is also generally not legally binding. If a practice is serious about taking on a physician, it should have no problem providing a letter of intent. A candidate should not, under any circumstances, go with a "we'll work that out when the time comes," scenario. The letter of intent will, most likely, cover the income expected, expenses that will be covered, planned buy-in agreements, and bonus structures.

Buy-in Agreements

A candidate might get a letter of intent from the practice describing its conditions for partnership. While partnership can never be guaranteed and buy-in terms and amounts are not really employment contract issues, a letter of understanding should be expected. The buy-in procedures will establish a framework for sharing income and expenses in the event the physician becomes an owner. The letter of intent will not be legally binding for the physician or for the practice, but it will let the physician know where they stand when the contract runs its course. Miscommunications tend to happen any time money is concerned, so it is advisable to get as much in writing as possible.

The letter of intent will not indicate the amount of money a physician will make or owe to become an owner. A candidate will probably not have a partnership opportunity until 1 to 3 years after starting; the letter of intent should give a reasonable estimate of what to expect at that time.

Bonus Structure

Bonus numbers will vary by specialty, but it is a safe bet to insist it be tied into production. Bonus numbers tied into capricious and arbitrary reviews or group profitability are out of the physician's control and tend not to materialize to the degree expected. However, there is no set formula to determine how this arrangement will be structured. Presumably though, the current owners will have already spelled out how they share income and expenses. Ideally, the physician should receive a similar arrangement, which should be written up in detail later in the contract.

These articles are included to inform you, in general, about healthcare legal issues. The information contained herein is not intended to provide solutions to individual problems. It cannot be relied on as legal advice. We caution you to not attempt to solve individual problems on the basis of this information and advise you to seek competent legal counsel to address your specific issues.

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