Practice Stability and Consistency are Vital to Success
By Thomas Ferkovic, R.Ph., MS
Managing Director
Medic Management Group LLC
Original Publish Date: September 10, 2019
The most significant characteristic of a practice is its unique culture and history. Whether your practice consists of a solo practitioner, group, health system, it is important to remember that the practice attracted its patients based on the personalities and styles of its physicians and staff-known as your Brand. These attributes translate into a practice culture that must continue if the practice expects to retain its patients during times of change.
A medical practice goes through periods of instability many times during its life cycle, such as if a partner suddenly dies or becomes disabled, a key employee joins or leaves, cash flow becomes a problem, the practice moves, is part of a ‘roll up’ or an acquisition. It is at these times that strong and consistent leadership is vital. A physician partner must rise to the occasion and guide the organization through the changes providing clear direction, making sound decisions, and relying on facts not emotion. A leader steps back and sees the Forest from the trees, decisions are made.
Many physician partnerships consist of one partner who becomes the principal of the practice. In many practices, this individual assumes the role of practice administrator, responsible for many of the practice’s day to day issues. Consequently, the other partners take a more passive role, as they are not interested in dealing with the everyday issues. Problems arise when passive partners become interested in issues that affect only them and not those of the practice as a whole. As such, leadership must be thought through by the group and not left to chance. For instance, you would never consider investing in a multi-million-dollar corporation that did not have effective leadership. The same should be true of a four to ten physician practice easily generates $3 million to $6 million dollars in gross annual revenue, yet, regards leadership as non-important.
It is very important for partners to communicate the vision of and expectations for the practice. Addressing concerns, issues and setting measurable goals. The vision for the practice is extremely important for even the most mature practice. Effective leadership begins with the group defining job responsibilities and selecting the right individual to fill each role. Some practices define two jobs -- president and chief financial officer, with the CFO established as a training position to eventually assume the role of president, also providing a succession plan. Large groups have added a third role, COO, usually a lay administrator working with the physician CEO. Having a qualified leader helps to maintain stability in the practice and deal with opportunities and issues in a timely manner.
All businesses must be prepared to evolve and change over the life of the business. If the business stagnates it can die. Physician practices (regardless of ownership) are not different. Physician partners must agree on the change in vision of the practice as it evolves for the partnership to stay viable. Operational changes to the practice have the ability to alter the vision of the practice, without all the partners understanding of the change in the vision, problems can occur. Major changes need to be communicated to all partners. Changes in practice vision include practice expansion or the addition of services or procedures. Other changes that can affect the vision of the practice include the opening of new offices or the addition of new staff physicians.
Planned change is much better than unexpected, forced change. No matter how much planning occurs, crises are inevitable. Objective financial and procedural benchmark data is fundamental to determining if the practice is ready to invest in growth or needs to step back to reassess its basic business operations. Expanding and innovating without a performing practice infrastructure is a recipe for disaster. Too many practices hope to succeed by starting some new service or opening an additional office without assessing the talent available to make it successful. Unfortunately, the odds of success are about the same as those of winning the lottery. Expansion and innovation must only be attempted if the practice is successfully operating. If your rationale for the expansion or innovation is to fix a current problem, it is not a good reason to proceed. In this instance the practice should evaluate its operations critically and hold on expansion.
Once the practice has determined that the business is in good shape it is time to look at the profile of the partners. Determine for each partner what his or her future plans are. How much longer will each be practicing, does a partner want to work less, will a partner(s) be decreasing his call coverage? The practice must decide if it has enough physicians to sustain the added costs of growth. Deciding to add a new physician is done through financial analysis of the impact to the practice, both expense and cash flow impact should be studied.
As a practice evolves, so do its partnership issues and strategies. Practice advisors should review all partner agreements, compensation models, non-compete clause(s), and share valuation models to be sure that the documents reflect the current thinking of the partners. Remember that partnership documents are written for those times when things turn sour. They must reflect the current thinking of the partners or the practice could suffer irreparable harm.
In 1999 Tom had the opportunity to start Medic Management Group LLC. formerly known as (SS&G Healthcare Services LLC.). Medic Management Group is a Consulting and Management Services Organization specializing in physician practices and healthcare issues. Medic Management Group LLC. is the leading provider of management, billing and consulting services to physicians. Medic Management Group LLC works with clients in 26 states and manages over 3,000 physicians. Medic Management Group LLC consists of 150 of the best physician practice specialists. Visit the Medic Management Group LLC web site at www.medicmgmt.com