My PE backed group offers equity in the offer letter. How do I value it?

At zero, in your comparison spreadsheet, until it survives five questions. Equity in a private equity backed staffing group is a promise about a future transaction you do not control: units or options in an entity whose value depends on a sale, a recapitalization, or distributions that the sponsor schedules, paid only if you are still there and vested when it happens. Some of those promises pay life changing money. Many pay nothing, and the offer letter is written so you cannot tell which kind you are holding. So the discipline is simple: price the job on its cash first, against the market, and let the equity be upside you might collect rather than salary you already spent. A group whose cash offer needs the equity to reach the market median is asking you to fund the gap with your own risk.

Part of the internal medicine hub.

Price the cash first, because the survey already did

The Today's Hospitalist compensation survey cuts hospitalist pay by employer type, and the national companies do not lead it: multispecialty and primary care groups averaged $359,994, local hospitalist groups $354,927, hospital and hospital corporation employers $336,621, and national management companies $334,828, with university employers at $290,773. Against the Marit Health internist median of $312,760, a national company's cash offer near its survey average is respectable but not premium, which means the equity story is usually being asked to close a gap the cash leaves open. That is legitimate only if the equity is real. Your first job is to find out whether it is, and the offer letter alone will not tell you.

The five questions

Ask them in writing, and treat evasive answers as answers. First: what exactly am I getting, units, options, or a profits interest, and in which entity, the local group or a holding company several layers up? Value lives at a specific layer, and layers above yours can be paid before yours sees a dollar. Second: what is the vesting schedule, and what happens to unvested and vested equity when I leave, am terminated, or the group loses the hospital contract? Forfeiture on departure is the clause that converts equity into a retention device, which may be fine, as long as you count it as one. Third: what has this equity actually paid? Ask for the distribution and exit history for physicians at your level, in dollars, over the sponsor's holding period. A platform with a real record will show it. Fourth: what triggers payment, a sale of the whole platform, a recapitalization, annual distributions, and who decides? Fifth: what is the equity worth if none of that happens, which is the honest base case, and usually the answer is nothing.

Then do the ownership math you can check: if you are offered a stated percentage, ask what total equity value that percentage was priced against at the last transaction, and what revenue and earnings the platform reports. You are not entitled to audited financials, but a group recruiting physicians as partners can share the shape of the capitalization. Refusal to share any of it tells you the equity is a recruiting word, not an asset.

How to count it in the decision

Compare offers in two columns. Column one is cash and benefits only: salary, production terms, differentials, sign on, and the benefits stack, priced the way the internal medicine contracts page lays out. Column two adds the equity at a steep discount that reflects the five answers: fully documented equity with a payment history might count at a fraction of its stated value; undocumented equity counts at zero. If column one already matches or clears the alternatives, the equity is a free option and the group has earned its story. If only column two wins, you are being asked to take a below market cash job plus a lottery ticket, and the honest name for the difference is a pay cut with a narrative. Physicians who do well in these platforms exist, and they share a trait: they negotiated the cash to market first, and the equity was the second reason they signed, never the first. The group versus hospital question in this bank compares the employer types on cash alone, which is the right order of operations.