5 Ways to Improve Strategy Execution

Oftentimes physicians approach me because they don’t think their practice has a winning strategy.  Moreover, they tell me that they do not believe their practice has the right capabilities to execute the current strategy they were following.  Having capabilities is all well and good, but just because you are capable of doing something, does not mean you are going to be successful.  “Winning” practices often don’t follow prevailing trends, but rather they follow five habits that contradict conventional wisdom to out-execute and out-compete their rivals.  Here is my personal take on the five strategy execution practices used by thriving practices:

1. Commit to an identity

Thriving practices focus on a clear target market and focus on what makes them unique with that patient demographic. They avoid chasing growth by pursuing multiple markets in areas where they have no clear point of differentiation. They get very clear about their strategic position and build capabilities that will help to support that position over the long term.

2. Do not get carried away with benchmarking

Practices that dominate the market keep an eye on what competitors are doing, of course, but they do not blindly follow the herd. In fact, they know that using the same technologies, following the same methodologies, and benchmarking the same key performance indicators as your competitors is just a recipe for mediocrity. The leading practices develop a winning strategy that will set them apart in their community (and perhaps in their specialty), and translate their long-term strategic moves into their current projects and performance metrics.

3. Prune what doesn’t matter to invest more in what does

There is a saying: “You have to keep pruning the rosebush if you want to create beautiful blooms”. It’s easy to keep adding new features (e.g. services, technologies) to your practice, and adding new projects for your practice to work on. What’s more powerful is to trim away the bloat and excess, and only focus your resources on the small number of things that really matter in pursuit of your strategy.  The key to effective strategic leadership is to figure out what is truly “core”, vs what is “context” and “non-core” in terms of your activities and service/technology offerings.

4. Stop constantly reorganizing

I’ve seen many practices try to re-strategize by constantly reworking their organization chart and rethinking incentives. This very rarely (if ever) is a viable solution. Successful practices resist disruptive reorganizations and instead put their core values and culture to work. They use culture, not structure, to drive change.

5. It is not about agility

Practices that dominate the market are not “agile” in the sense that they respond to external change as rapidly as possible. Rather, they are “smart agile”. Physician leadership needs to be agile enough to address threats, or pursue promising opportunities that support your plan, but remain disciplined and focused enough so that you do not end up “chasing squirrels”, lurching from one idea to the next while you lose sight of your original strategic intentions. Successful physicians shape their future by creating the change they want to see.

Testing your strategic choices

Many of the practices I work with think they have strategy, but a test shows they haven’t made any strategic choices at all.  Consider these steps to quickly determine whether your practice understands what a real strategy is and whether or not they actually have a strategy that can be successful.

Step 1: Identify your long-term strategic moves

I often challenge physicians by asking, “Do you have a real strategy for long-term success?”  Strategy requires disciplined analysis and a deep understanding of how not only the healthcare industry but also how your specialty is likely to play out in the coming years. Then you need to get very clear on the few, key strategic moves your practice needs to make in order to position yourself for future success.

Strategy requires tradeoffs. You cannot be everything to everybody; you cannot just blindly copy the moves of your competitors and hope to win. You have to figure out what to say “YES” to, and what to say “NO” to. You make clear cut choices about how you will compete in the future, and then allocate your time and resources accordingly.  Keep in mind that less is more when it comes to strategy execution. I recommend that you whittle your wish list down to only a few strategic moves that will have the greatest impact, and say “No” to everything else.

Step 2: Question the validity

Take a look at each strategic move in isolation, and ask yourself, “Could we do the exact opposite, and would that also be a valid strategy?” If doing the opposite of your stated strategic move would be stupid or nonsensical, then it is not really a strategic move at all. It is simply a table stakes requirement for doing business in your specialty. It is likely to be something that many of your competitors will also be doing.

Your strategic move should be something that will help you to establish a competitive advantage. A strategic move should help you to create a category or a niche in your catchment area (and perhaps more broadly in your specialty) where you can genuinely claim a position of leadership or a meaningful point of difference. A strategic move should make it very clear what are going to say “YES” to, and by association what you are saying “NO” to, and what you are NOT going to do.

This is where I have seen many practices fail. Their stated strategies often include generic fluff like, “provide a world-class patient experience.” Well duh, really? So the opposite of that would be to provide lousy patient experience, and that would also be a valid strategy? I don’t think so. You haven’t actually made a strategic choice at all.

Take a look at your long-term strategic moves now, and question viability of those courses of action.  I’m betting a few of you will realize there’s still quite a lot of work to be done.

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Contact ABISA for healthcare consultancy support or speaking engagements.

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Does Due Diligence Matter?

Mergers and acquisitions can be an exciting part of physician practice transformations, especially if you’re a physician owner who’s received an attractive offer from a prospective buyer. Similarly, you may be the buyer of a physician practice who is eager to get the transaction behind you.  However, while the future is without a doubt filled with promise, it’s important not to get too ahead of yourself, as the next step in the process can be a lengthy one – due diligence.

I have assisted many entities (including physicians themselves, private equity firms, and management services organizations) with due diligence of physician practices, and can attest to the highly structured process of due diligence.  There are myriad of items to review and question, which go beyond having a mere rough idea of what equipment is in the practice and whether there are any malpractice claims.

What is Due Diligence?

Due diligence is an important part of the acquisition process and represents the orderly investigation of any matter pertaining to business dealings. Essentially, it’s about understanding how a business really works. Since no two medical practices are the same, it’s important that a diligent effort is made in order to obtain any information that would be relevant in the sale or purchase of a physician practice and its assets. A key aspect of due diligence is to examine the strategic positioning of the “target” medical practice.  In mergers and acquisitions, due diligence helps clients recognize any financial, legal, or operational risks that may not be noticeable from outside perspectives.

Why Should Due Diligence Matter to You?

While due diligence may seem like it only benefits one party, the fact is that due diligence helps both the buyer and the seller in the acquisition of a physician practice. It is the seller’s responsibility to provide buyers, investors, and potential business partners with the information needed to make an informed decision. Yes, it means turning over extremely sensitive corporate documents such as profit and loss statements, business plans, payroll records, payer contracts, lease agreements, and so on.

From a buyer’s perspective, due diligence gives them peace of mind that they’re making the right deal and have all the information they need to make a good purchasing decision. This information can include learning more about the practice’s existing patient base and referral relationships and either validates positive assumptions or alerts them about potential irregularities.

From a seller’s perspective, due diligence helps physician owners take a deeper dive into the financial integrity of their business and can also help them uncover the fair market value of their practice. As valuations and acquisition prices are intertwined, it’s essential that physician owners, private equity firms, and management services organizations invest in quality due diligence reporting and services.

What is Included in Due Diligence Reporting?

First of all, it is important to note that non-disclosure agreements (NDAs) are standard.  If you are a potential seller and you are not offered an NDA by the potential buyer (this includes with a broker if you have chosen to hire one), then a red flag should be alerted right from the start.

Every detail matters, from patient volumes and catchment areas, to existing relationships with referring physicians, to the workforce itself and what the competitive environment for that medical practice looks like. Good due diligence may validate your assumptions, but maybe more importantly, it can help alert you to any irregularities or possible issues in a business (or any aspect that may bring the value of a “target” medical practice down). Ideally, any issues would be surfaced before the due diligence stage, but sometimes things slip through the cracks, or may not be fully considered in the right context.

Here are a few key categories of due diligence reporting:

  • Financial Information – Most buyers spend the majority of their due diligence looking at and confirming financial reporting. All documentation and accounting information should be up to date and accurately portray numbers that were disclosed during the deal-making stage.
  • Legal – Understanding if the business being acquired has any potential liabilities is another important consideration in due diligence. This includes looking into current partnerships and contracts in place to ensure there are no irregularities before moving forward.
  • Business Sustainability – Cash flow management and long-term business sustainability are important aspects to due diligence. Careful analysis and previous years of data (e.g. patient volumes, procedures, billings and collections, etc.) will help potential buyers diagnose trends and decide if their investment is worthwhile.
  • Assets – Buyers will want to ensure what assets are in place and if they are in good working order, because if not, they will have to make investments after closing.  Service agreements will be reviewed as well as any lease arrangements.  Additionally, real estate (owned or leased) will need to be evaluated and discussed strategically with the seller.
  • Human Resources – Contracts on physicians and any other employees may need to be redone and thus the buyer will often have sensitive discussions with the seller during due diligence as it relates to those.  All other employee-related items (e.g. benefits plans, 401(k), COBRA continuations, etc.) should be readily accessible as these can take time to review and make determinations on post-transaction changes.

Having said all that, it is important to note that not all due diligence investigations are the same, and surprises are to be expected.  This can greatly impact the length of the due diligence process as well as the time invested by all parties.  And, if due diligence drags on for too long, one or both parties can lose interest in the potential transaction at stake.

The due diligence process is a must, but it’s inherently filled with conflict.  This conflict usually arises with a first-time seller who is hesitant to turn over sensitive information and who may be untrusting of the buyer, especially if the buyer is a competitor or if the transaction was unsolicited by the potential seller.  These are keen reasons why it may be of interest for the seller to engage the services of an independent consultant.

Due diligence will always be an important part of mergers and acquisitions, especially as deal stages come to a close. By knowing what to expect when preparing for a successful business transition, you’ll be able to provide accurate and timely reporting that increases the value of your medical practice while helping you address irregularities if and when they arise.

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Contact ABISA for healthcare consultancy support or speaking engagements.

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Planning Your 2021 Strategy

As you sit down with your physician partners, practice manager, and perhaps consultant over the coming weeks contemplating direction for 2021, I thought it may be beneficial to offer a few pointers to help you along the way.  For starters, you should pause to reflect upon new competitors in your catchment area, as well as current competitors and new initiatives they are taking on.  For physician practices, a competitive analysis is a means to assess who your competitors are, what value they provide, understanding their (and your) strengths and weaknesses, and where your practice fits in. A good competitive analysis is a scouting report of the actual market terrain that your practice must navigate in order to be successful. While analyzing the competition is an essential component of your strategy, most medical practices don’t conduct this type of analysis systematically enough. However, a thorough competitive analysis is indispensable.

Gather a list of your practice’s competitors. Most of the time, such a list is comprised of who your practice considers to be its chief competitors. However, there may be other healthcare organizations that indirectly compete with yours, perhaps ones outside of your catchment area that offer services such as telemedicine or niche treatment modalities that are aiming for the same patients. You will also want to include information on healthcare entities that may be entering your market in the coming year. Once you have compiled the list, you can highlight those practices that will be the greatest challenge.

Analyze the competition’s services in terms of features, value, and target patients. How do they market them? How do patients see your competition? How do referring physicians view your competition? Take an honest look at their offerings. Is your quality commensurate? Do you have similar offerings? What is the unique value you provide that competitors don’t or can’t? Emphasize these benefits in your marketing.

Compile a list of competitor strengths and weaknesses and remember to be objective. You’ll do your practice no good if you allow bias toward your own physicians, staff, and services to cloud your judgment. Try to see the competition’s practice as though you were them. What makes their practice so great? If they are growing rapidly, what is it about their practice that’s promoting that growth?

Observe how your competitors market themselves through advertising, collateral material, and perhaps the use of physician liaisons. You will have to go to many different sources to get a complete picture. It takes practice and a little shrewdness on your part to piece together a complete picture of strategies and objectives, so the use of a qualified consultant may be to your benefit. Focus on the facts, be persistent, and trust your intuition to help you.

Determine the current market demographics for your practice.  If the market is flat, then the competition for patients is likely to be fierce. Your practice will find itself scrambling to win market share. The outlook portion of your analysis may seem like forecasting, but it’s really a measure of trends. By the time you’ve done most of your research, you’ll have enough information to determine what the outlook really is.

By evaluating yourself against your competition, you’ll likely find new ideas for your practice. While compiling a competitive analysis is an interesting piece of work, it can indeed be challenging. Consequently, you may want to seek the help of a healthcare consultant to guide you through this process. You’ll learn a lot about your market and in the process become a more valuable resource for your patients and referring physicians.

Next Steps

From there, you will want to get into an abbreviated strategic planning process.  That is, development of a plan (with timelines and objectives!) for what you plan to accomplish for 2021.  Strategic planning is an essential business activity. However, several common mistakes must be understood so that physician owners can guard against them. Pointing out these mistakes is not a criticism of the process but acknowledgement of improper implementation. Medical practice leaders must recognize both the benefits and the potential pitfalls of strategic planning, because it is their responsibility to ensure that strategic planning is conducted properly to achieve the desired goals. Here are four of the most-common planning mistakes we find:

1. Attempting to forecast and dictate events too far into the future.

In part, this may result from the natural desire to believe we can control the future. It is a natural tendency to plan on the assumption that the future will merely be a linear continuation of present conditions, and we often underestimate the scope of changes in direction that may occur. Because we cannot anticipate the unexpected, we tend to believe it will not occur. In fact, most strategic plans are overcome by events much sooner than anticipated by practice leaders.

2. Trying to plan in too much detail.

This is not a criticism of detailed strategic planning but of planning in more detail than the conditions warrant. This pitfall often stems from the natural desire to leave as little as possible to chance. In general, the less certain the situation, the less detail in which we can plan. However, the natural response to the anxiety of uncertainty is to plan in greater detail, to try to cover every possibility. This effort to plan in greater detail under conditions of uncertainty can generate even more detail. The result can be an extremely detailed strategic plan that does not survive the friction of the situation and that constricts effective action.

3. Tendency to use planning as a scripting process that tries to prescribe actions with precision.

When practice leaders fail to recognize the limits of foresight and control, the strategic plan can become a coercive and overly regulatory mechanism that restricts initiative and flexibility. The focus for staff members becomes meeting the requirements of the strategic plan rather than deciding and acting effectively.

4. Tendency for rigid planning methods to lead to inflexible thinking.

While strategic planning provides a disciplined framework for approaching problems, the danger is in taking that discipline to the extreme. It is natural to develop planning routines to streamline the strategic planning effort. In situations where planning activities must be performed repeatedly with little variation, it helps to have a well-rehearsed procedure already in place. However, there are two dangers. The first is in trying to reduce those aspects of strategic planning that require intuition and creativity to simple processes and procedures. Not only can these skills not be captured in procedures, but attempts to do so will necessarily restrict intuition and creativity. The second danger is that even where procedures are appropriate, they naturally tend to become rigid over time. This directly undermines the objective of strategic planning — enabling the organization to become more adaptable. This tendency toward rigidity is one of the gravest negative characteristics of strategic planning and of strategic plans.

Strategic planning is one of the principal tools used to exercise operational control because it will help you to decide and act more effectively. Remember though, that strategic planning involves elements of both art and science, combining analysis and calculation with intuition, inspiration, and creativity. To plan well is to demonstrate imagination and not merely to apply mechanical procedures. Done well, strategic planning is an extremely valuable activity that greatly improves practice performance and is an effective use of time. Done poorly, it can be worse than irrelevant and a waste of valuable time. The fundamental challenge of strategic planning is to reconcile the tension between the desire for preparation and the need for flexibility in recognition of the uncertainty of the healthcare industry.

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Contact ABISA for healthcare consultancy support or speaking engagements.

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