How Much to Grow
Determining the ideal size of your
practice—
and how to increase or control growth—isn’t an easy task.
Here are some tips to keep you on track.
and how to increase or control growth—isn’t an easy task.
Here are some tips to keep you on track.
In a medical practice, one size does not
fit all. The question, “How large should you grow your
practice?” is a personal one.
To get the answer, ask
more questions, says Anette Mnabhi, DO, a family physician in
Montgomery, Illinois, who began a small practice with her
husband, a chiropractor, in 2001. What services do you want to
offer? Does administrative work interest you? Do you want to
supervise employees? Or is a practice with minimal staff, less
overhead, and contained growth more your speed? How many hours
per week can you effectively provide direct care? What are your
and your family’s needs and requirements?
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“We sent letters
to patients explaining our activities and they were excited for
us,” Mnabhi says. “They said they wanted us to take
care of ourselves so we could be there to take care of them.
With a smaller practice, I can see extra patients before and
after trips.”
The Mnabhis developed a
sound business plan they refer to when making decisions
regarding growth. It calls for growing at a slow, controlled
pace. “We do not want to overextend ourselves,”
says Mnabhi, who notes that a year after opening their
practice, they
generated enough revenue to begin paying
debts. “We want to have a stable financial base before
adding staff.”
|
Anette Mnabhi, DO, began a
small practice with her husband in Montgomery,
Illinois in 2001 with the goal of increasing their
income as well as maintaining a personal life. They
wanted time away from the office for vacations,
medical mission trips, and seminars. “We sent
letters to patients explaining our activities and
they were excited for us. They said they wanted us
to take care of ourselves so we could be there to
take care of them.”
photo ©2005 / andrea
mandel
| ||
Because Mnabhi handles
most of the administrative work, she prefers to maintain a
part-time patient load while her husband increases his patient
time. They plan to add a part-time osteopathic family physician
and grow from 400 patients to approximately 1,000 patients per
practitioner. This will cap clinical patient contact hours at
30 hours per week per practitioner and allow adequate time for
paperwork and phone calls.
The dangers of too little growth...
A practice’s growth is ultimately
measured by its net income, not by the number of patients it
has or how busy a physician is. “Generally, a successful
practice will plateau and then have another growth
spurt,” says Jeffrey D. Logan, a financial adviser with
Jeffrey D. Logan and Company in Columbus, Ohio. Logan’s
company assists physicians transitioning from training into
practices.
An investment of
$500,000 into a practice for equipment, supplies, marketing,
start-up expenses, and working capital must yield at least what
an investment account would return on the same amount or it
isn’t worthwhile to operate. “Therefore, a double
digit return on investment is the barometer for a business that
is succeeding,” according to Logan.
Growing a practice at the
appropriate rate will not only enable you to live your desired
lifestyle, it’s essential to your practice’s
survival. Without enough growth, sufficient revenue won’t
be generated, says Robert J. Reby, a certified financial
planner and the president of the Danbury, Connecticut-based Robert
J. Reby and Company. If a
practice doesn’t generate enough revenue, it can’t
sustain itself. Ultimately service will suffer and patients
will leave.
Another serious
problem associated with too little growth is the inability to
keep pace with inflation. If a business does not continue to
increase revenue, then it cannot maintain employee and owner
income as well as meet other expenses. If this occurs,
employees will be forced to find better paying positions.
The demands of growth and
the reality of natural patient attrition are ongoing factors,
says John Reddish, the president of Advent
Management International, Ltd.
of Drexel Hill, Pennsylvania. If a practice grows too little or
too slowly, then patients who are dying, moving, or leaving the
practice can deplete the economic base. Practices that fail to
keep pace with an annual marginal increase face smaller profits
and thinner reserves.
...and too much growth
On the other hand, too much growth is the
inability to maintain the service model you established when
you set up your practice. In medical practices, like many other
businesses, if professionals are stretched too thin, service
suffers and the business loses paying customers.
Although the intimate
nature of the doctor/patient relationship prevents physicians
from losing patients as easily as other businesses for basic
service lapses, Reby points out that there is always a breaking
point.
Signs that a practice
is saturated and growth should be controlled include patients
waiting weeks for an appointment or the average office wait
time exceeding 30 minutes. If your practice is showing these
warning signs, Reby advises hiring additional staff or
temporarily closing to new patients.
Action may also be
necessary if a business is growing too quickly. Physicians not
keeping up with paperwork, working longer hours than desired,
or taking longer than 24 hours to return patient phone calls
are all signs. Other indicators include employees expressing
increased stress or negative patient feedback.
Regardless of the
reason for saturation, adding another physician may be
unnecessary. Decide whether a physician’s assistant (PA)
or nurse practitioner could perform some of your services, Reby
says. Also examine physicians’ non-medical duties to
determine if an office manager or assistant could handle these
tasks.
When PAs and office
personnel are maxed out, complain about feeling overwhelmed, or
office efficiency decreases, then it’s time to consider
hiring another physician, says Gary Gerber, OD, founder of The
Power Practice in Franklin
Lakes, New Jersey. You may also want to expand the current
office to add more space or open an additional location.
Another way to control
growth is to drop the least profitable managed care plans
before refusing patients. Prioritize and balance access and
availability.
Remember to continue
referring to your personal and business goals. If you do not
want to become involved in a group situation or adopt
additional management roles, Gerber advises limiting new
patients. If you are ready to adopt supervisory relationships
and additional responsibilities or want to form a larger
practice, consider increasing the number of physicians.
In a group practice,
make sure that each physician is using his skills the most
effective way, Logan says. This could be according to medical
specialty, procedure, or personality. Similar to a football
team, have your best players on the field at all times doing
what they do best.
Logan advises using patient
and referral source satisfaction surveys at regular intervals
to determine how patients and other physicians perceive your
practice’s growth. It’s simple to see growth by
dollars on a balance sheet, but measuring sustained growth
according to how you rate
with customers or referral sources is
crucial.
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Starting out
Keep in mind the dangers of too little or
too much growth, particularly in the early stages of your
practice. Begin with modest patient goals, says James Hubbard,
MD, MPH, a family physician in Colorado Springs, Colorado, and
the publisher of My Family Doctor: The Magazine That
Makes Housecalls. Hubbard, who started an outpatient family
practice and occupational care clinic in northern Mississippi
in the 1990s, moved to Colorado in 2002 for the climate, and
now works part-time at area clinics.
Examine your strong
points and interests. Ask yourself whether you want to focus on
medically complicated patients who require extensive histories,
physicals, work-ups, and follow-ups or would you prefer
acute-care type patients who are less time-consuming? Will you
have a hospital practice? Does a particular procedure pique
your interest?
Hubbard suggests
hiring at least one highly qualified, experienced, motivated
individual—usually an office manager—who will help
your practice grow from the onset. This employee may cost a
little more, but she will contribute to your practice’s
success by providing professional contacts, training, and
running the practice smoothly.
“I’ve had
it both ways—trying to hire and train all new,
inexperienced employees myself and having an employee whom I
could depend on to help me,” Hubbard says, “and by
far I received greater efficiency and provided better quality
of care by doing it the latter way.”
Growing your practice
In addition to evaluating your goals and
developing a business plan, educate yourself on how to achieve
your aspirations. Physicians as entrepreneurs should seek
advice from qualified financial planners, accountants, and
attorneys. Consult a trusted mentor who has been successful at
his own practice, says Reby.
At www.cfp-board.org, you can find a
certified financial planner (CFP) and check his background. For
a record of complaints or disciplinary action against a CFP,
visit the National Association of Securities Dealers’ Web
site at www.nasd.com.
Additional ways to
locate professionals are:
• Network
locally through chambers of commerce, civic associations, and
community service groups. Many organizations list members on
their Web sites.
• Check with
your local SCORE chapter, where professional volunteers advise
start-up and existing businesses. Visit www.score.org for more
information.
• Visit www.aafp.org, the Web site for
The American Academy of Family Physicians, which posts
information for starting and growing a practice.
• Ask a local
banker for data from the Risk Management Association (a bank
trade association). Knowing how similar practices have
performed financially can provide insight on how much you
should spend in certain categories.
Consultants are
another option. Gerber’s clients sign a three-year
agreement with The Power Practice, and in exchange, Gerber and
his associates visit the client’s practice for two days,
observing the physicians with both patients and staff. Then
they compose an extensive growth plan for clients, based on the
physicians’ goals, with specific steps and timeframes.
The team helps to identify a niche for the practice and works
with a client to develop it. Other services include monthly
conference calls with Gerber and other experts, the opportunity
to e-mail or call any time, and access to an on-line chatroom
to speak with other clients.
