The stroke happens on a Wednesday. By Thursday the practice has covered the week by moving three schedules and canceling a half day of well visits, which is what practices do, and everyone treats the arrangement as temporary because at that point it is. Six weeks later the partner is in rehabilitation and improving, and no one can yet say whether the improvement stops at part-time. That is the week the questions arrive that nobody wants to ask out loud. Does the paycheck continue, and for how long? Who is covering the call nights in March? And at what point does an absence stop being an absence and become a change in the ownership of the practice?
Disability is the most probable of the catastrophic events and the least planned for. It leads the list of events that force a practice valuation, and it is the only one on that list where the person whose interest is being valued is still a partner, still a colleague, and frequently still hoping to come back. That combination is what makes vague drafting so expensive here. Death is unambiguous. Disability is a judgment call, and a partnership that has not made the call in advance will end up making it about each other.
Start with the definition, and take it from the insurer rather than from the retreat. The best definition of disability is not the one the partners compose over lunch; it is the one already printed in the long-term disability policies those partners carry, borrowed word for word. Policies distinguish own-occupation coverage, which pays when a physician cannot perform the material duties of her own specialty, from any-occupation coverage, which pays only when she cannot work at all. A pediatrician who can no longer manage a full clinic day but can supervise, teach, and read charts is disabled under one definition and not under the other. An agreement that invents its own wording manufactures a gap in one direction or the other: a partner disabled under the document and uninsured under the policy, or insured under the policy and still fully vested in every governance right the document gives a working partner. Match the two documents, and match them again at the annual audit, because carriers change and definitions change with them.
Then measure it in days. The trigger is commonly drafted at 90 to 180 consecutive days of inability to perform, with a cumulative alternative running alongside it—so many days within a rolling 12 months—so that an intermittent condition is captured rather than reset every time the partner manages a good week. Distinguish total from partial disability explicitly, and state what a partial disability does to the schedule, the compensation formula, and the call rotation while it lasts.
Now the money in the gap. Long-term policies do not pay from the first day of an absence; they carry an elimination period, commonly 90 to 180 days, and something has to carry the partner across it. That something is the salary continuation bridge: the practice pays the disabled partner’s base compensation, guaranteed, for a stated period, and a coordination clause ends the continuation on the day long-term benefits begin. The arithmetic behind the design is what makes it attractive. Short-term disability insurance is expensive per dollar of benefit precisely because short absences are common. A practice carrying the reserves it should already carry can absorb a continuation period for one partner out of operating cash flow, at a cost it controls, and every premium dollar the partners stop spending on short-term coverage can be redirected into a richer long-term policy—higher monthly benefit, own-occupation definition, cost-of-living riders. That is the coverage that answers the catastrophic version of the risk.
One agreement in PMI’s files handled it with a piece of design still worth copying. A partner unable to work kept his full salary for 60 days, and it stopped on day 61—the exact day the practice’s long-term policies began to pay. When he had bypass surgery, there was no conversation about his pay, because the document had already had it. He recovered, returned, and never spent one awkward minute discussing money while his chest healed. The elegance was in what those partners declined to buy.
Two dependencies keep the design honest. Salary continuation works only where a guaranteed base exists, because a pure-productivity formula has nothing to continue. And the practice’s benefits advisor and accountant confirm the tax treatment, and the interaction with any existing group coverage, before anyone cancels a policy. Add a recurrence limit so the provision insures events rather than patterns, and state what the remaining partners owe in call coverage while it runs.
Coverage itself belongs in the agreement as a condition of partnership, not a suggestion. Each partner maintains individual disability coverage at a stated minimum monthly benefit and delivers proof annually. The provision that most practices skip is the one for the partner who cannot get it. Coverage is sometimes declined, sometimes issued at a rating, and sometimes issued with an exclusion for the condition most likely to disable that particular physician. Decide in advance what the practice does in each case: accept a rated policy at the partner’s cost, use group coverage where guaranteed issue is available, fund a reserve against the exposure, or modify the redemption structure for that partner. Requiring coverage without addressing uninsurability produces a clause that fails on exactly the day it is tested. Verify insurability during the admission process, before the buy-in closes.
Permanence is the last trigger, and it needs its own clock. Where a partner cannot return to full-time practice after a stated period—12 to 18 months is the common band—the equity redeems at formula value, on the same terms any good-leaver receives. Nothing about this is punitive; the practice simply cannot carry an ownership stake that generates no clinical coverage indefinitely, and the disabled partner should not have to negotiate for the value of what she built while managing a rehabilitation schedule. Fund it. Disability buyout insurance is a separate product from the individual income coverage each partner carries, and it exists so that the practice is never choosing between its cash reserves and its disabled partner. A practice without it pays for locum coverage and a redemption in the same year, out of the same account.
Return to work deserves the same specificity. Require documentation of fitness for duty, and state who may request an independent examination and at whose expense. Define the ramp in FTE terms rather than in adjectives, with compensation restored on the reduced-schedule rules the agreement already carries. And be clear about equity: if the redemption has already run, a returning partner buys back in at the current formula, which is an argument for setting the redemption trigger far enough out that it fires only on permanence.
Red flags. Disability defined nowhere, or defined in words that appear in no insurance policy anyone holds. No salary continuation, so the first 90 days of a colleague’s illness become a negotiation. No coverage requirement, or a requirement with no answer for the partner who is declined. No redemption trigger, leaving a permanently disabled partner in full ownership indefinitely and the practice unable to recruit into a seat that is occupied. Return-to-work conditions undefined, so the hardest conversation in the practice’s history happens without a script. And a continuation period that ends in the middle of an elimination period, which is a bridge built to stop over the water.
Disability is the life event physicians prepare for least and meet most. A practice that priced it in advance never has to decide, in the worst month of a colleague’s life, what that colleague is worth.
Salary continuation runs for a stated period and ends on the day long-term disability benefits begin, so the bridge spans the policy’s elimination period rather than stopping over the water. Elimination periods commonly run 90 to 180 days. One agreement in PMI’s files paid a partner’s full salary for 60 days and stopped on day 61, the exact day the long-term policies attached.
The agreement decides in advance. Coverage is sometimes declined, sometimes rated, and sometimes issued with an exclusion for the condition most likely to disable that physician. The options include accepting a rated policy at the partner’s cost, using group coverage where guaranteed issue is available, funding a reserve against the exposure, or modifying the redemption structure. Insurability is verified during admission, before the buy-in closes.
Where a partner cannot return to full-time practice after a stated period, commonly 12 to 18 months, the equity redeems at formula value on the same terms any good leaver receives. Disability buyout insurance, a separate product from the individual income coverage each partner carries, funds the redemption so the practice is not paying for locum coverage and a buyout out of the same account.
The Partnership Agreement Analyzer scores an existing agreement against the framework this series is built on — or schedule a discovery call to work through it with PMI. The full framework, with the arithmetic, lives in the textbook Pediatric Practice Management: The Fundamentals.