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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4 Ways To Make Your Healthcare Strategy Succeed

Many physician practices I have worked with have found that the clarity they achieve with a brief, focused strategic plan can actually do much more than align management and physician owners; it also makes it possible to drive revenue by making staff.  Some medical practices indeed face a real problem when it comes to making the most of the fine people they hired.

Since there are so few ways to bring a strategic plan to life, most practices got into a rut where theirs didn’t “strategize” much at all. Rather, it rubber-stamped the status quo, and maybe put a few budget figures to it as well.  I advise physician groups to cut their strategic plan down to one or two pages at most.  This makes is much easier to understand and execute.  Furthermore, getting it that brief, inspires confidence that leadership knows what they are doing.

Enlightening Technology

Healthcare today is changing rapidly. Technology has made new types of practice management possible, and leaders who use these tools will be able to engage their people in ways never before possible. That’s because people need to contribute. They want to do well. It makes them happy when they can. Work environments built on those innate desires will be the ones that control the future. The leaders creating them will own their markets. This is a structural change in the way leading medical practices are run. Here are four ways in which you can succeed with your medical practice strategy:

  1. Make the Plan Digital and Alive

Leadership teams are smart, there’s no doubt about that. We run semi-annual strategic reviews with our physician clients, and so we know. Everyone brings something worthwhile to the process. Success comes down to one thing and one thing only: your ability to implement the strategy you create. It’s great when your leaders are inspired and engaged. But they have to get the rest of the practice to move. That means your strategy can’t be abstract. Even when it’s on one page and is easy to understand, for it to have an impact it has to be connected to everyone’s job. Literally each person in your practice needs to know how their day-to-day tasks contribute to the entire practice’s overall success. Ideally, they can prove that they’re making a strategic contribution by hitting their goals and moving their metrics.

  1. Find the Right Transparency

If you want to let your staff make their best contribution, then you have to let them know what’s going on. That’s how you get people to take ownership. A lot of physicians get anxious around the idea of “transparency.” It’s not nearly as big a shift as it seems. Since we coach our clients on how to create metrics, we’ve had this conversation countless times with physicians all over the country. Once they understand how to create the perfect metric for a team or an employee, they’re almost always relieved. They wish they had “revealed” that information sooner. From the employee’s point of view, metrics and goals solidify their understanding of the strategic plan. If they understand how they contribute, and if they get credit for it, your practice performs at its best.

  1. Measure Everything Objectively

If people can’t prove, objectively, that they’re contributing, they will conclude that the only thing that matters is their manager’s opinion. Parts of your practice will have that “top-down” feeling which quickly drives away your most talented people. It is entirely possible to give clear, strategically aligned metrics and goals to every person in your practice. People love to make an honest measure move. If they can control it and if they know what it means to the practice, they’ll apply themselves creatively and happily. Why? Because people want to say that they did a good day’s work. Sure their manager is happy, but better than that, they know for a fact that they contributed in a real way. That feels much better.

  1. Hold Effective Meetings

A person’s desire to contribute skyrockets when they can expect to be acknowledged for a job well done. One of the most effective paths to a high-performance culture is to direct meetings that highlight exactly that. Objective measures help a great deal. That way, physicians and managers don’t have to worry about hurting someone’s feelings or appearing to play favorites. Relationships go a lot smoother, and communications are far more constructive, because the standard for a “job well done” is objectively defined.

Carefully crafted meeting agendas get this positive feedback loop started and keep it on track. Meetings that are short, rooted in strategy and focused on success drive performance. If you have a way to collaborate on goals and metrics outside of meetings, that keeps the loop in play all the time while empowering supervisors to prevent problems and duplicate successes.

Get Started Today

Medical practices that push strategy forward in these ways will continue to lead. They’ll have the most engaged employees, they will get the most value out of every dollar they spend, and they’ll attract the most patients.  With the enormous pressure on the physicians today, there’s never been a more important time to do it. Cycles have never moved faster, change has never happened quicker, and employees have never been as fickle. But if you let them, they will become your greatest asset, your ultimate competitive advantage, and your strategic partners.

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Contact ABISA for healthcare consultancy support or speaking engagements.

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Understanding Structures of Medical Practice Transactions

Medical practice acquisitions represent a challenging and risky strategic decision. In its most simplest form, there are three main legal structures for acquiring a medical practice: asset purchase, stock purchase, or merger. All three of these structures are essentially different types of acquisitions. A merger is a type of acquisition that has a particular legal meaning.

The decision to buy, sell, or merge a medical practice is more complicated than ever, and physician owners must have a clear understanding of the legal structure of the potential transaction. Here are some of the advantages, disadvantages, and considerations for these legal structures.

Asset purchase

In an asset purchase, the buyer purchases specific assets of the target practice that are listed within the transaction documents. Buyers may prefer an asset purchase because they can avoid buying unneeded or unwanted assets and liabilities. Generally, no liabilities are assumed unless specifically transferred under the transaction documents. Because the liabilities remain within the selling practice, buyers can eliminate or reduce the risk of assuming unknown liabilities. Further, buyers typically receive better tax treatment when purchasing assets as opposed to stock. Buyers may also be able to reduce their taxable gain or increase their loss when they later sell or dispose of the assets.

The main risk to buyers in an asset purchase transaction is that a buyer may fail to purchase all of the assets it needs to effectively run the practice. There are also various aspects of an asset sale that can be time-consuming and drive up transaction costs, such as listing specific assets and determining their value. For some assets, third-party consent may be required before the assets can be transferred to the buyer. The manner in which title of an asset is passed to the buyer will vary depending on each kind of asset. Finally, there is always the risk that the seller could retain sufficient assets to continue as a competing going concern. This risk is usually mitigated by requiring that the seller enters into a covenant not to compete with the buyer.

Sellers generally disfavor asset transactions because the seller is left with potential liabilities without significant assets it could otherwise use to satisfy those liabilities. Also, the tax treatment of an asset sale is generally less favorable to sellers than a stock sale. The practice and its shareholders can each potentially incur taxable income, which could result in double-taxation of the sale proceeds. Entities that have pass-through taxation such as partnerships, LLCs and S corporations can avoid the problem of double taxation and thus may be more likely to accept an asset purchase structure. Of course, you should definitely speak with an accountant on your particular situation.

Stock purchase

In a stock purchase, the buyer purchases the stock of the target practice directly from the target’s shareholders. The practice remains an existing going concern after the purchase, and its business, assets, and liabilities are all unaffected by the transaction. A stock purchase may be preferred if the buyer wishes to continue operating the target practice after the purchase. Further, absent unusual circumstances, consent from third parties is not needed to approve the transaction. However, the buyer may be exposed to unknown risks by buying the entire practice, assets, and liabilities. Buyers can reduce their risk by holding back some of the purchase price in escrow to satisfy any liabilities that arise after closing.

Obtaining approval for a stock purchase can be problematic if the target has a large number of shareholders. Unless there are agreements in place before finalizing a deal, buyers cannot force shareholders to sell. Thus, a holdout shareholder could refuse to sell to the buyer. This result can be very undesirable for buyers and could ultimately cause the deal to fall apart.

Buyers may have less preferential tax treatment in a stock purchase. However, in certain circumstances, buyers can elect to treat the stock purchase as an asset purchase, thus securing a desirable tax treatment.

Merger

In a merger, two separate legal entities become one surviving entity. Under state law, the assets and liabilities of each are then owned by the new surviving legal entity. There are several structures that mergers can take. The simplest is a forward merger, whereby the selling practice merges into the purchasing practice, and the purchasing practice survives the merger. Sometimes, buyers will wish to keep the target practice as a separate legal entity for liability reasons, so the buyer will instead merge the target into a wholly-owned subsidiary corporation of the buyer, called a forward triangular merger. When complete, the subsidiary survives the merger, holding all of the assets and liabilities of the target practice. Both a forward and a forward triangular merger generally require consent from third parties, as the target practice ceases to exist after the merger and all of its assets are owned by the surviving entity. A reverse triangular merger is similar to a forward triangular merger, except that the target practice is the surviving entity, instead of the wholly-owned subsidiary of the buyer. A healthcare transactional attorney will advise the best approach based on your particular situation.

How a merger is taxed depends on its structure. Generally, forward and forward triangle mergers are taxed as asset purchases while reverse triangular mergers are taxed as stock purchases.

In terms of required corporate approvals, mergers generally require approval only of the seller’s board of directors and a majority of its shareholders (absent other requirements in its charter documents). This lower threshold is particularly appealing when a target practice has multiple shareholders. However, shareholders who vote against the merger will generally have appraisal rights under state law. Appraisal rights, or Dissenters’ Rights, enable dissenting shareholders to petition a court to obtain the fair market value of their shares. This can complicate transactions and increase the buyer’s costs.

Clearly, medical practice transactions can be complicated. Consequently, it is imperative that physicians have an experienced and competent team consisting of a consultant, accountant, and attorney who help you review all of your options and choose the one that ensures your practice’s continued success.

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Contact ABISA for healthcare consultancy support or speaking engagements.

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Benefits of Strategic Planning Today

The COVID-19 pandemic has undoubtedly hit practices hard.  I have many physician clients that have either closed their practices temporarily to non-urgent patients or have gone the route of putting most of their patients on telemedicine visits.  But the business of medicine is not taking a break, and as the world gets a better grasp on the virus, your clinic will once again be busy as you gear back up with treating your patients.  Consequently, physicians are taking this opportunity of decreased patient load and less clinic hours to focus on strategic business initiatives they have been putting aside.  Along those lines includes strategic planning, and if you have not done strategic planning in the past two years, then your practice is long overdue. The strategic plan, to be of long-term value, must be treated as an ongoing business process.  It must evolve and change to reflect changing market and industry conditions.

As a physician owner, you are busy.  You have an endless to-do list, a full calendar, and many people to talk to, making you wonder how you are going to get it all done. However, as the practice grows and the healthcare environment becomes more complex, the need for strategic planning becomes greater. Creating a strategic plan and thinking strategically are not about doing more.  They are about focusing how you spend your time so that you are more effective in reaching your goals and getting to where you want to go. That said, no physician practice has an unlimited amount of time, money, or people resources.  Strategic planning can help you make the most of the resources you have, allowing you to have more enjoyment in your work while you are doing it.

Here are eight reasons for getting your team together for a strategic planning session.

  1. Vision. You will create a clear vision for what success looks like in the future.  If you don’t know where you’re going, how are you going to get there?
  2. Priorities. You’ll identify priorities for the short and medium term.  You can’t do everything at the same time, so focus on what needs to be done now and then do it well.
  3. Alignment. You’ll get alignment and buy-in around direction and strategy.  Having these conversations will move your team from implicitly being on the same page to explicitly being on the same page.  The clarity will energize the whole team.
  4. Identify Challenges. You’ll create an opportunity to talk about key issues facing the business (competition, changing trends, etc.).  You want to ride the waves, not get smashed by them.  Being reactive throws off your plans, and takes your eye off your goals.
  5. Direction. You’ll create a clear roadmap for the rest of the organization.  Your staff wants to know where the practice is going and how they can contribute.  An engaged staff is 20% more productive than one that is neutral (or, worse, disengaged).  Your staff wants to win and this is how you can help them.
  6. Open Communication. You’ll create space for people to share what’s going on with them and what they want to see as the future of the organization.  It will open lines of communication and improve teamwork.
  7. Empowerment. You’ll empower others to take on tasks that will move the practice forward.  As a physician owner, that means less firefighting and more focusing on what you do best: patient care, leading, and executing.
  8. Values and Culture. You’ll create the culture, values, and behaviors that you want to foster within your practice.  When your values are clearly articulated, your team will understand what you expect from them on a day-to-day basis.  Culture and values are the glue that keeps a strategic plan together.

Strategic planning doesn’t need to take a lot of time away from the practice.  The focus and the results will speak from themselves.  Before the COVID-19 outbreak, we conducted a lot of strategy discussions with physicians onsite.  Recently, we have shifted to doing these discussions virtually.  They key is to have an outsider facilitate the meetings to avoid confirmation bias.  Furthermore, the facilitator will be able to ensure your meetings stay focused, allow everyone time to share their thoughts, and ultimately leaving you with a clear plan on how to move forward.

Medical practices which consistently apply a disciplined approach to strategic planning are better prepared to evolve as the local market changes and as the healthcare industry undergoes reform.  The benefit of the discipline that develops from the process of strategic planning, leads to improved communication.  It facilitates effective decision-making, better selection of tactical options, and leads to a higher probability of achieving the physician owners’ goals and objectives.

Strategic planning can be a challenging process, particularly the first time it is undertaken in a medical practice.  With patience and perseverance, as well as a strong team effort, the strategic plan can be the beginning of improved and predictable results for the business.  At times when the practice gets off track, a strategic plan can help direct the recovery process.  When strategic planning is treated as an ongoing process, it becomes a competitive advantage and an offensive assurance of improved day to day execution of the business practices.

Use of a consultant can help in the process and in the development of a strategic plan.  As an outsider, the consultant can provide objectivity and serve as the “devil’s advocate,” as well as a sounding board.  In the end, however, the plan must have the authorship and ownership of the physicians and managers who must execute and follow the strategic plan.  It must be their plan.

Strategic planning, when treated as a work in progress, rather than as a binder on a shelf, or a file in a computer, provides a medical practice with a real and lasting competitive advantage.  A living strategic planning process will help direct the business to where you desire it to be.  Strategic planning is your medical practice’s road map to your vision.

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Projected New Cancer Cases — U.S.

Today is World Cancer Day, a day that aims to save millions of preventable deaths each year by raising awareness and education about cancer, and pressing governments and individuals across the world to take action against the disease. On this day, I thought I would share some U.S. data from the Centers for Disease Control and Prevention’s (CDC’s) Division of Cancer Prevention and Control.

  • 50% is the expected increase in new cases of liver cancer, which is likely the result of the increase in hepatitis infections, particularly among people born between 1945 and 1965.
  • 40% is the expected increase for 2020 in weight-related cancers (except for breast and colorectal cancers); this is up from 30%.
  • 30% is the expected increase in oral cancers for white men, which is likely the result of more human papillomavirus (HPV) infections.
  • 24% is the expected rate of new cancer cases for men in the U.S. between 2010 and 2020; this is equal to more than one million cases per year.
  • 21% is the expected rate of new cancer cases for women in the U.S. between 2010 and 2020; this is equal to more than 900,000 cases per year.
  • 15.2% is the expected rate of deaths for men between 2007 and 2020.
  • 8.1% is the expected rate of deaths for women between 2007 and 2020.
  • 18 million cancer survivors are expected by 2020, up from 11.7 million survivors in 2007, because cancer patients overall are living longer.
  • 10,000 new lung cancer cases are expected to be found in women each year by 2020.

Source: www.cdc.gov

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Physician Practice Acquisition Paths

When working with physician groups on strategic decisions, potential acquisitions has been a common topic, and many find it beneficial to start from the beginning with the potential acquisition paths. In particular, why would physician owners and the acquiring entity choose one type of structure over another? Of course, laws vary somewhat by state, but this article will give physicians a general overview on this decision-making process.

Asset Purchase

Asset purchases generally work best when the buyers are interested in select assets of the target practice, such as CT scanners in radiology or linear accelerators in radiation oncology. If the buyer is not concerned about the practice continuing as a going concern, an asset purchase is likely the best approach. The seller in an asset purchase transaction must be careful to ensure it receives sufficient consideration to cover any future liabilities. Further, the taxable income the corporation receives may be subject to double taxation in a C-corporation, both at the company level and then at the shareholder level when the proceeds from the sale are distributed. It is because of these tax implications, that physicians would be wise to discuss the proposed approach with their accountant. Generally, when pieces of a business are sold, the price will be lower than when the entire business is sold as a going concern. However, buyers sometimes choose an asset purchase structure even when wanting to continue the practice as a going concern, but are particularly concerned about acquiring unknown or contingent liabilities. Also, an asset purchase can be more difficult where there are a large number of contracts with third parties whose consent would be required to transfer those contracts to the buyer.

Stock Purchase

A stock purchase generally works best when the buyer wants to acquire the target practice as a going concern, and there are few shareholders. Negotiations are more straightforward when there are fewer parties involved, and holdouts are less likely. Thus, large practices with many physician owners may take longer to consummate this time of acquisition. Buyers will prefer to obtain all of the outstanding stock of the target practice if possible. When there are minority shareholders who do not agree to sell, they buyer can approve a merger after the acquisition, although this can trigger appraisal rights. Sellers will generally prefer the tax treatment of a stock purchase, while buyers will prefer the transaction be taxed as an asset purchase. After consultation with your accountant, it might be possible to classify a stock purchase as an asset purchase for tax purposes by filing a special tax election, thereby affording the seller and the buyer the best of both worlds.

Merger

A merger generally works well when there are multiple shareholders in a target practice that a buyer wishes to acquire as a going concern. Instead of having to negotiate with multiple shareholders, once a majority of the shareholders consent to the transaction, the buyer can be assured of having control of the business going forward. In a “reverse triangular merger”, buyers can retain limited liability by separating the target practice in a wholly-owned subsidiary, obtain all of the assets by operation of law, and generally avoid having to obtain third-party consents.

Laws

Mergers and acquisitions are largely a creature of the laws of the state in which the practice is incorporated/formed. However, tax laws impact the analysis significantly as well. The business and legal terms of an acquisition will be negotiated and agreed among the parties, but the underlying state law provides a framework for, and the basic requirements of, how each of those transactions must be conducted. The essential features of each deal type are a function of state law as well. Federal tax laws also weigh on the determination of whether the parties choose to enter into an asset sale, stock sale or merger, as discussed above.

Reasons for Selling

The reasons physician owners decide to sell a practice are as varied as the reasons for starting a practice in the first place. Some practices are sold because no one in the younger generations wants to continue in the business as an owner. In some instances, practice owners may not be actively considering selling when they are approached by an interested party (e.g. hospital, physician practice, or private equity-backed MSO). Because of their fiducial duty to act in the best interest of the practice, shareholders must carefully consider even unsolicited offers.

A buyer’s reason for targeting a practice for acquisition can be equally varied. The target may have developed a market into which the buyer wishes to expand, whether a geographic expansion, patient base, or referral base. The target may have a medical specialty that the buyer believes would be valuable to its business operations. Often larger companies (such as hospital systems or private equity-backed MSOs) can maximize the efficiency of a smaller practice or create other synergies by bringing in-house various administrative functions that otherwise eat away at profits of smaller practices. A buyer may also attempt to literally buy market share by purchasing a competing practice.

Regardless of the motivations from the buyer or seller’s side, the ultimate driver for an acquisition is price. A seller wants to realize a return on investment (as that term is used in the broadest sense), and a buyer wants to realize value in the long term through the target’s business or assets. It is for all these reasons outlined above, that physician owners would be wise to engage experienced professionals to help them first navigate the strategic aspects and then to wade through the transaction details.

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Contact ABISA for healthcare consultancy support or speaking engagements.

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Getting Your Practice Back

As the owner of a physician practice, you work hard and sacrifice a great deal of time to make your business successful. As the practice grows, so does your workload. You start on the front lines driving clinical treatments and referrals, then move to the back office supervising daily operational tasks, often obligatory, just to keep the practice afloat. You know you’re needed to keep the business running, but you want to make sure it continues to operate efficiently if you aren’t around. Here are four things you can do replace yourself in your practice and bring back some time to yourself:

Delegate Responsibilities

Responsibilities can really weigh you down as they become more detailed and more time consuming. When responsibilities start to detract from the things you love, it’s probably time to consider delegating some of those responsibilities. Being a successful leader means learning to prioritize your duties and assign those tasks to someone who you can trust to perform well. Be aware that finding the right individuals to delegate responsibilities to can be time consuming. You need to be sure whoever is assuming those duties can perform at your own level of expertise. If you have a management team in place, reach out to your best employees and teach them how to do the tasks that take up a lot of your time. Alternatively, or in addition to training staff, considering finding a partner who can complement your business.

Outsource Help

Some tasks may be better completed by outsourcing rather than hiring and training new employees. Back office assignments, such as billing and collections, can be sourced out if you aren’t in need of full-time help. It is more important to free up your time for those heavyweight projects. If your time is spent on resubmitting denied claims rather than long-term planning, you could miss out on taking your practice to the next level of its potential. Keep in mind if you choose this route that it can get costly, especially if a lot of duties are being replaced by outsourcing. Additionally, quality is a concern to consider as well if you choose this route. Will the quality be to your standard and will your practice be a priority for the vendor like it is for you?

Consider Bringing on a Partner

Perhaps you want to take a bigger step back than just simply passing off some tasks to someone else. You want to grow your practice, but you don’t want to do it alone. You can see the bigger picture, and you know a partner is necessary. A physician partner can help you get to the next level by bringing a complimentary skill set to the table. Having a physician partner will allow you to spend more time doing the things you love outside the practice and focus on the things you have a passion for within the practice. A good physician partner will want to see the practice succeed because of the synergistic elements you two bring to the practice. If you do decide to add a physician partner, there are many things to consider, which I have addressed in previous articles.

Consider a Gradual Complete Exit

Maybe your aim is to retire completely from your practice. Maybe you love your practice, but you’re drained and need to get out or move on. Maybe your priorities in life have shifted but you don’t have a way to step back. This is the road to succession planning. A new owner could be your best bet. Whether that’s a physician partner or another acquiring entity, you can work to create a transitional period after the sale. Your practice is a financial investment for some buyers, so you if you can illustrate the value your employees bring to your business, you can advocate for their continued employment. After all, if you are going to leave your practice, you want to make sure you leave your employees in a good atmosphere. When it’s time to replace yourself, it’s important that you provide a secure environment for those you leave behind. Additionally, a gradual transition out of your practice will give everyone who works with you a chance to get used to the changes, and it will retain their respect for you.

Planning ahead allows you to focus on the best fit for the practice, first and foremost. Once you find the best fit that will respect the legacy of the practice and your employees, then it is very likely you will also find the greatest value.

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Contact ABISA for healthcare consultancy support or speaking engagements.

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10 Ways to Strengthen your Strategy

A strategic plan is not just a document written by physicians and managers and then filed away for safekeeping. It is a vision for the practice, owned by the practice. For the practice to succeed, everyone must engage with and live and breathe the plan. Strategy should inform your operations, your structure, and how you go about practicing medicine. Your strategic plan should be the pillar against which you assess your priorities, your actions and performance. As such, it’s mission critical that your plan is comprehensive and up-to-date. Here are 10 questions to assess your strategic plan:

1. Will your strategy beat the market?

Each year, perform a thorough analysis to get a clear picture of how the competing practices’ forces in your specialty are likely to play out. To grow at an accelerated pace, you will need a meaningful point of difference that can’t be easily copied or nullified. Mindlessly copying another practice’s business model is not a strategy — it is a recipe for mediocrity. Do you really have a winning strategy?

2. Do you have a sustainable competitive advantage?

How will you make money in the future? Do you have a unique strategic position, a concept that you “own” in the minds of your target patients? Do you have special capabilities that can’t be easily copied? Remember that nothing lasts forever, so you need to focus on both today and tomorrow.

3. Are you focused on a clearly defined target market patient or referring physician?

Push for the narrowest possible segmentation of your target market. You need to aim for the bull’s eye to hit the target. Clearly defining and understanding your target market patient or referring physician is one of the most powerful things a physician practice can do to improve its strategy.

4. Does your strategy put you ahead of the trends?

Many strategies place too much weight on current trends. But as the founder of modern management Peter Drucker said, it is not the trends, but “the changes in the trends” that leaders must stay current with. These changes creep up so slowly that most practices fail to act until it is too late to mount an effective response, let alone take advantage of it. They are held back by sunk costs, an unwillingness to cannibalize a legacy business or an attachment to yesterday’s formula for success. Instead, you should always look to the edges. How are your patients shopping for healthcare? What are the innovative new entrant competitors doing? What innovations could change your entire specialty?

5. Does your data give you privileged insights?

It is easy to be overwhelmed with data. The key is to make sense of it all and obtain actionable insights. Do you really understand your patients? Your referring physicians? Your competition? Practices that go out of their way to experience the world from their patients’ perspective will develop better strategies. The same exercise in perspective applies to your referring physicians and competitors, too.

6. Does your strategy embrace uncertainty?

Prioritize all your current threats, things that could derail your strategy, as part of your annual SWOT analysis (Strengths, Weaknesses, Opportunities, Threats). Consider what action you would take if these worst-case scenarios came to fruition. Could you handle it? Do you have a contingency plan ready to implement?

7. Does your strategy require commitment and tradeoffs?

Hedging your bets is not a strategy. A full commitment to a defined course of action is the only path to a sustainable competitive advantage. This requires tradeoffs, as you can’t be all things to all people. Remember to consider what you are NOT going to do, and accept those self-imposed limitations to stay focused on long-term success.

8. Is your strategy contaminated by bias?

Confirmation bias refers to a tendency to cherry-pick information that confirms existing beliefs or ideas. The best way to avoid this is to ask an outside consultant to facilitate your strategy discussions. That individual has no emotional ties to your practice and will instead lead a rational discussion on your strategic plan’s viability.

9. Is your leadership team fully committed?

Many good strategies and change initiatives fail to be executed because of a lack of commitment among the owners and practice administrators. Just one or two non-believers can strangle a strategic change at birth. Sell leadership on the plan early on so they can help sell the mission to other employees.

10. Have you translated your strategy into a one- or two-page summary?

Capture your key decisions on a very short document so that everyone in the practice can clearly see where your practice is going, how you plan to get there and what specific actions they need to take to play their part.

Strategic planning provides a physician practice with a real and lasting competitive advantage when treated as a work in progress rather than as a binder on a shelf or a file in a computer. A living strategic plan will help direct the business to where you and your partners or advisers desire it to go. Spending time to invest in the future will result in a clear focus, a sense of joint purpose and agreed-upon priorities, consensus among stakeholders, and a basis for measuring progress and impact. Strategic planning is your practice’s road map to that shared vision. Are you ready to prepare a strategic plan?

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Contact ABISA for healthcare consultancy support or speaking engagements.

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