How Much to Grow (cont.)
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Is Bigger Better?
Advantages of a small practice:
> Fewer staffing
headaches
> Ability to make
decisions quickly and implement new strategies and
modalities almost immediately
> More personal
relationships with patients can result in fewer
mistakes
> Ability to limit
hours
> Controlled growth
and quality
> Fewer
administrative errors
> Greater control
> More flexibility
due to less bureaucracy
> Personal freedoms
> Ability to recover
faster if collections become problematic
Advantages of a large practice:
> Greater potential
income
> More experience
gained with a variety of patients
> Economies of scale
(full use of personnel)
> Ability to add
another physician or physician extender who is
available to cover during vacations
> Per doctor salary
is higher than a solo physician, resulting in more
time off with less cut in pay
> Ability to serve
more patients and generate more revenue
> More support so
critical decisions (and work) don’t rest
solely on you
> More revenue to
purchase advanced testing equipment, computerized
systems and marketing programs
> More clout with
suppliers
> Easier to sell the
business
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It may be a cliché, but it’s
true: A practice’s location will play a huge role
in its growth, even its very survival. If your practice is
located in a rural area or small town, for instance, geography
may limit your growth potential as much as your genetics limit
your height.
Hubbard located his
practice close to an industrial area and a comfortable distance
from competition. “Consider how much competition an area
has and where patients are concentrated,” he says.
“I located as close to patients as possible to make it
convenient for them.”
Hubbard targeted the
industrial workers’ compensation business, an underserved
area. “I went to companies and talked to the people in
charge of workers’ compensation,” he says. “I
asked how I could serve their needs and communicated with them
often. Later, as I became busier, I hired someone to do this,
but I still tried to communicate by phone.” It was also a
good marketing move, because those same patients returned for
private care.
In Mnabhi’s
experience, if you share a building with other practitioners,
the reputation of those other physicians can affect you, even
if you are not affiliated. Assess the traffic of a site at
various times, and look up practitioners on the Web site of
your state’s agency that regulates licensed and
registered professionals (which should be listed on your state
government’s Web pages) to see if they have been fined or
disciplined. Call their offices and note how staff members
answer the phone. Do they project an image you would want
associated with you?
Because they wanted to
practice independently, the Mnabhis required a growing area so
new arrivals could be potential patients. To determine this,
they asked real estate agents how many houses were on the
market and if new developments and schools were under
construction. They called similar practices and asked how long
it would take to schedule an appointment. If the answer was
weeks or months, then they decided room for a new practice
existed.
“In our case,
Montgomery’s population was about 9,500 and only one
other primary care office was there,” Mnabhi says.
“We knew there was room to grow because housing
developments were springing up within several miles.”
The bottom line
Ultimately, a practice’s growth is
measured by its revenue. Managed care and third-party payers
control most of the revenue in today’s medical practices.
The trend is to reduce, or at least level reimbursements
compared to past years. Logan advises maximizing contract
benefits with an outside payer. Determine which procedures can
be performed in the office and which ones should be outsourced
to maintain efficiency and profitability. For this reason
alone, a single payer can be risky for a practice if that
organization or plan’s rules change. Growing with the
main players in a given market and not becoming dependent on
any single provider is essential.
Any form of a third
party payee situation will affect cash flow and growth. If your
“cash to cash,” (i.e., the time between when you
spend to when you get paid), is a long period, it limits growth
and can force borrowing. Location in a litigious state can also
play havoc with models, as contingent liabilities can be
enormous, Reddish says.
In addition to
considering income in relation to business growth, expect to
make decisions regarding expenses. Invest in your business by
buying new technology, upgrading your facility, training and
educating staff, and marketing your practice. Otherwise, it
will stagnate and become less competitive.
However, Reddish
cautions, “Unless you want to borrow or seek investors,
limit growth to what you can finance from operational profits
and cash flows. If you borrow, leverage only amounts you are
prepared to lose and target borrowings to conservative
projections.”
Deciding the size of your
practice can be difficult. Determine what you can handle in
terms of patent care and management of staff and the hours you
wish to work, then consult professionals for advice on how to
accomplish your dreams. Growth will inevitably fluctuate, but
stick to your plans and enjoy the ride. g
Karen Appold is a free-lance writer and
editor and lives near Philadelphia.
Contact her at karenappold@comcast.net.
Contact her at karenappold@comcast.net.
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