SCALING A MEDICAL PRACTICE
May 16, 2016
Over the last two decades or so in private practice and being part of the leadership of a practice that could scale from a couple of providers to a couple of hundred, I have often been asked by interesting providers and businessmen how we did it. This is often followed by the question how they can do it too.
I prefer to take the negative position at least initially. How not to do it? Or perhaps I should call it ‘Lessons Unlearnt in the Art of Scaling’. These are the suggestions I would make using the ancient Indian principle of ‘neti neti’, i.e., ‘not this, not this’:
Three Concepts of Scaling
Do not scale after others: Just because others did it or are trying to do it, you do not have to do it. Scaling is a hard decision and is not meant for everyone. Many (most) physicians are not inclined or trained to be good managers or leaders. Often scaling means leaving medicine and moving to administration or management. This may not be a good fit. A lot of what is taught in management schools is only theory, imparted by arm-chair professors, with no relevance to the real world of management, leave aside, medicine. It is often difficult for a physician to let go of a respected position as the leader in the office and suddenly become a student under someone else. It is also extremely difficult for a physician to be both a practitioner and manager at the same time. The key point here is the ancient Socratic injunction, “Know thyself.” Scaling may be for others and not for you. Do not ape blindly. Know your own heart and your own passion. Some physicians or specialties do very well as solo practitioners and are best left alone. You might be one.
Become dispensable but not too soon: I have seen this all too often in my career. Smart physicians, far smarter than I, failed to scale even from one practice to two. Realizing early that they need to hire another physician or partner to free themselves up to be able to manage the growth, they start giving up their patients to the new provider in their practice. This makes them vulnerable to the vagaries of the new doctor in the practice who may not share their abilities or understanding, or may have other ideas about his or her future rather than being part of the growth model. The key is to not compromise the core.
Measure scaling by the growth in the business: Success in scaling must be measured by the sanctity and strength of the core operations, infrastructure and the integrity of the original entity in face of growth. Any other measure misses the point of scaling. Quantity is not relevant, quality is. It is quality and the core one should wish to scale.
- Loss leaders are acceptable as long as there is growth: Warren Buffet’s first axiom comes to mind: “Lose no money.” Growth with profit is always preferable and a clear plan for return on investment should be nailed.
Great managers would be great health care leaders:
Great managers would be great health care leaders: The laws of health care are complex and can be a minefield for the unwary. It is not that Health Care does not need great management. The difference is in the specifics which could be fatal to a medical corporation if missed. For example, the rules of compliance including Stark Law or Anti-Kickback Statutes are unlike other businesses. Even marketing or promotion could be misconstrued as inducement if not appropriately monitored and addressed. Often the safe and constant review by a wise and experienced counsel is needed.
- Great doctors would be great health care leaders: There is much in the training and practice of medicine that may prepare a doctor to be an excellent manager. There is much that is not. The doctor has to develop a new skill set to succeed. How to begin to think strategically and how to see the business as separate from one are important in the beginning. Collaboration and team building are an essential part of good organizations for which much time is needed. In the beginning, considerable time and resources for this are needed and the doctor has to manage the fine balance between doctoring and managing.
Risk goes down with bigger size: Sometimes the opposite may happen. As the organization becomes larger, it may become an easier target for audits or reviews by federal agencies if quality control systems are not in place. There has to be a surveillance in place constantly for the constantly moving parts and people.
- A good compliance manual ensures protection: A good compliance manual that is not rigorously adhered to may in fact be of greater risk to the practice/s. Once one documents the policies and procedures and puts them in place, there is no excuse for flawed execution of the same.
Free is good:
The only free cheese is in a mousetrap. One needs to be very careful of the relationship of the organization with vendors, suppliers, pharmaceuticals or neutraceuticals. If you are getting paid for a patient you did not see, please ensure that it does not look suspicious to an auditor. One needs to be extremely skeptical of any lab that wishes to rent your office space, or a drug company that promises to pay you for case reports masquerading as research, or anyone wanting to pay you. Consider them your enemies unless proven otherwise.
Physicians’ huge salaries are the biggest overhead and drawback:
Physicians are the bottom-line. They are not the overhead. A doctor’s practice is a great platform to scale from as long as one is aware of the legal constraints, business and financial regulations and is able to create a model where people become paramount but systems are not secondary.
There are three essential concepts to growth that seems to describe to me the essence of what it means to scale. After all these years of errors and learning, perhaps this is what true growth really means. For blind and erratic growth is deleterious, even calamitous, for an organization. But this growth, if made to happen with the soul and integrity of the seed organization intact, can be wholesome and beneficial to all: the entrepreneur, the employees, the customer and all business affiliates.
This is what I have learnt:
The Ultimate Platform
Height is scale: I recently read of the concept of ‘phase conversion’ in physics. The way I understand it is this: when a liquid is heated, the molecules get more energized, move more freely and intensely. This energy as it keeps increasing with greater heat brings them to a ‘boil’ (literally) until the molecules can no longer bear the intensity kinetically. At this point, a sudden transformation in the very state or nature of the liquid happens and it turns to gas. This is the point of breakthrough, the radical shift. I find this physical description very apt to the state of an organization. The other way to look at this is the concept of evolution, a brilliant concept if one truly understands it. If one would discard the spurious controversy between the creationists and the evolutionists, what one comes across is the increase in specialization and organizational complexity of the entity or physical organism until it is transformed into a new species, an organism that moves in an entirely new set of conditions, rules and principles. This is when the true shift happens into an entirely different mode of being. Whether one agrees with Darwin or not, this principle is real and must be understood clearly. The only and best way for an organization to scale, to my mind, is to take a saltatory ascent into a transformative level, a quantum leap where one transcends the usual competition and struggles and is able to see new horizons. That is when one has ‘scaled’.
Core is scale: The concept of core is dear to my heart. The whole idea of scaling is moot if the core is lost or sacrificed (unless one transforms it to a new core). In the ancient Indian concept of svadharma, this is elaborately described. One’s svadharma is one’s way of being, one’s central being as it were, one’s nature and potentiality, or as modern management might call, the core competence. Svadharma is more than core competence. It is the very essence of one’s existence (with all due apologies to Sartre since to him existence was the opposite of essence). This is a principle we often forget. In human development and upskilling, we find that an individual is most successful when he or she does what is most dear or central to his heart or core passion. Jim Collins describes it beautifully in his book ‘Great by Choice’ as one of the three circles of an organization. Just like the three circles of an organization, there are three circles of an individual: what the individual has greatest passion or love for, what he or she does best and what he or she does for a living. If these three circles coincide and become one, not only is the individual happy and fulfilled all the time, the results of the work speak for themselves. This is when utmost potential becomes utmost manifestation and utmost realization. When each individual in the leadership finds these three circles overlapping more or less completely, they are in a mode of constant reward, creativity, fun and learning. This is the moment the pupa sheds the chrysalis and becomes a butterfly. An organization needs to stay true to its core, constantly, through all the upheavals, transformations, shifts and mutations. The core cannot be sacrificed, at all costs. As one grows, if it is the central function, value or practice that must be protected, nurtured and preserved, that is what one needs to do. That will ensure the survival of the entity. If the core is lost, with its financial strength or value basis, the organization is lost. This core must be reviewed constantly with the leadership and they must be reminded of it, whether in the framing of the organization’s vision and mission statements, credo or policy and procedure manual, down to the most granular and earthy level. This core is the soul of who one is. It cannot be reiterated or revisited too often.
Depth is scale: I recently came upon the concept of a T organization, one that grows deep into the mastery of some function or specialty or expertise and also grows wide in reach. In this day and age, when knowledge travels faster than thought, and competition is fiercer than ever, the time between disruption of business models and the explosive success of organizations is shorter than ever. The business cycle between boom and bust has shrunk dramatically. In these challenging times, where none can rest on their laurels and the very manner of doing business is changed rapidly with the advent of digital technology, mastery is the sole protection. And as one looks further, this is the only way to distinguish an organization, adapt quickly and disrupt the business one is in. Without mastery of facts, data, systems, processes, technology or knowhow, survival is extremely difficult and well-nigh impossible. But if one pursues excellence as one’s way of being, one’s dharma, the very core in whatever one does, then depth is scaling. If these three concepts are understood and implemented, the organization stays lean and alive, vital and intense. It is able to weather all storms and is able to shift strategies and implementation on a dime. If these three concepts are integrated as one in an organization, that entity becomes unassailable in my opinion. Then, no matter what happens, it will arise again and again and vanquish all opposition.
We talk about various platforms today, whether in hardware or software. And the term has gained new significance in the economies of scope we can evince by adding new lines of business or ‘verticals’ to existing businesses. Thus, Walmart is a platform for various manufacturers and producers bringing consumers at one place for the inexpensive shopping experience. It is easy to add a new vertical to its platform such as grocery or walk-in clinics to add to its locations. Similarly, the smartphone is another platform as are social media such as Facebook and Twitter.
When we look at medical centers and think of platform, recently, we have seen attempts to create electronic medical record platforms or analytics platforms such as IBM’s Watson. While these attempts are interesting, to me, the final and perhaps the seed of all of it yet remains the physician’s office. The health care center is still the beginning of all platforms or the platform of platforms. Some commentators have felt recently that the physician’s office is outdated and will be replaced by new models of health care. Yes, tele-medicine is in. Virtual offices can be created. But the physician-patient engagement, the physical examination and the intimacy of the healing experience cannot be supplanted by gadgetry or cyber applications. As retail medicine grows aggressively, this only proves my point.
When Walt Disney was asked once about the secret of his success, he noted that he never forgot that the whole enterprise, the theme parks, the movies, the cartoon strips and the merchandise, the selling of dreams and the enticement of family entertainment started with one thing: the mouse. Today, he might have used the modern management lingo and noted that his realization of his central platform as the mouse kept his business adhering to his vision, values and mission.
It may behoove us to reflect on the simplicity and clarity of his observation. For a provider or any health care administrator or manager, it begins with one thing: the patient. The patient-provider relationship and interaction is where it all begins and ends. If we forget this, we forget everything.
We talk about end-use or graphical-user interface. And that is where the rubber meets the road, or shall I say, the needle meets the skin. It is at the end all about patient experience. And also, about provider experience. If we can manage these two and create a platform that can keep both happy and fulfilled, the platform will succeed. We see this happening more and more even in quality ratings of various organizations: thus, CMS has weighted CAHPS and HOS as 30% of the overall Star Ratings. In fact, the patient experience is now as important as HEDIS in quality scores. I believe the same will happen with the ratings for hospitals, nursing homes and providers.
A physician office is the ultimate platform in health care. The huge corporations including big pharma, hospitals and HMOs depend on it, as also the pharmacies, vendors for DME, HHC, specialty testing and supplies. If this platform can be turned into a strong, safe, active and healing patient- and provider-oriented center, then further scaling or addition of various verticals is possible. If this is missed, scaling would fail. We often see this with big organizations or IPAs that have grown so large that physician services or relationships are forgotten and physician dissatisfaction and failure increases ‘vertically’. This leads to higher turnover and disruption of the central tenet of health care: thou shalt not hamper the patient-physician relationship.
Scaling of offices is all about managing physician relationships with clarity, transparency, openness, credibility and integrity. More and more tools need to be created to make this platform successful and the physician, and by extension, the staff happy. Then, if the foundation is strong, any skyscraper can be created on it safely, compliantly, and successfully.
Tools to Scale
By Pariksith Singh, MD
What are the challenges that confront a provider who has just come out of residency and started a practice? Or for a provider who has been in practice for years? Uniformly, one of the most important concern or point of action is getting good contracts and getting credentialed with insurances. Without good contracts in place, it is difficult to market oneself for most physicians and difficult to grow the practice, leave aside making it profitable.
At present, credentialing for most practices is mostly manual, subject to significant errors of omission which can be catastrophic for the physician. We have seen physicians not renewing their licenses because they did not realize the time was up and then, being asked to stay at home by their employers until the licenses could be renewed. In the old days the state medical boards were more sympathetic allowing for a margin of error. But the new systems adopted by the state boards which are automated do not allow such consideration. Once the license has lapsed, it remains lapsed until properly renewed. The hand-written forms and hand-holding staff at the boards are unable to help the ‘lapsed’ providers.
Thus, it becomes more and more incumbent on practice administrators to create fool-proof systems that will avoid disasters such as non-renewal of state licenses or inability to write controlled substances or not completing required CMEs or lapsing of insurance contracts. Contracting and credentialing have traditionally been ignored surprisingly due to their need for systems, processes, check-lists, grids, reminders and communication protocols. If one wishes to scale a practice, this is the first problem one needs to tackle.
At present, there are no great software modules that make it affordable or easy for a physician to keep their credentialing current and track the terms of contracts so that they can be renegotiated or re-leveraged as needed. The present modules in the market are designed specifically for non-physicians, are cumbersome, non user-friendly and are disengaged from the providers. The difficulty arises when a practice hires new providers and lets them see patients and realizes months later that many of those visits would not be imbursed by the payers due to lack of proper credentialing. When a provider joins a practice at least a dozen credentialing packets are shoved in their face to be filled diligently duplicating the same information mind-numbingly, one by one, to be mailed by a harangued employee to be followed up later with the insurance to be confirmed to be shared with the billing company to be tracked for renewals and updates to be often mislaid to the consternation of the provider, administrator and owner.
A system that allows the provider to fill only one form only once a lifetime, that automates the function of sharing the information with the plans and notifies the physician of upcoming renewals and pending lapses in important one is critically needed. The system should be updatable by the provider easily, requiring updates only once a year for any changes in their resume. The provider should be able to carry their credentialing bio wherever they travel, whichever employer they choose, whichever state they move to or country for that matter.
If this credentialing quagmire can be addressed scaling is simple. The provider’s life is simplified. The administrator has an important tool in hand to ensure the flow of revenues and to track the status of each provider on a simple dashboard. This can be shared with plans or hospitals making their job easier. Eventually, this may well lead to a Health Provider Exchange.
The tools to succeed are the tools to scale. Contracting and credentialing are only such tool but an important one. For as soon as one has mastered credentialing, one is able to master provider education, and thereafter, provider marketing. The bios of a provider with their specialty can help with identify relevant educational searches and appropriate training and upskilling. Their CV’s can be linked to web sites or social media such as LinkedIn to create a marketing parallel.
Thus, a proper credentialing platform, to my mind, would be an essential. It needs to be inexpensive, user-friendly, secure, upgradable, nimble, well-connected to plans and various hospitals electronically and with notification systems and reminders. Without it, no practice can truly scale.