Is any of this relevant if physician fees are cut?

You try to do the right things to sustain your business. You set high standards for delivery of quality care, follow the basic tenets of marketing, align your organization so that everyone in your firm "gets it", avoid unnecessary expenses but identify important growth opportunities and prudently invest so that you remain competitive and serve your patients well. But can you afford investing in the assets you require to become or remain successful in this new era of health care reform? For example, can you afford an electronic health record system? Even absent a Meaningful Use bonus, the penalty looming in 2015 for those who fail to adopt EHR-Meaningful Use creates a financial disincentive for failing to make the leap. Even those who have recently purchased or intend to purchase an electronic system face significant (and expensive) implementation challenges in order to convert to e-charting, let alone use such a system "meaningfully". Can you afford not to invest in an EHR system?

And what of the SGR-mandated cuts to the Medicare Fee Schedule due to take effect on December 1, 2010 and again on January 1, 2011, etc? What many lay folks fail to understand is that this would, unless Congress acts now, not only quite negatively impact Medicare fees, but that our commercial insurance contracts are also at risk as these are typically tied to this very same Medicare fee schedule, albeit a couple of years behind the current year's rates.

Furthermore, while Paul Revere's warnings were inarguably of more dire significance, it's nevertheless true that "The ACOs are coming!" (January 1, 2012), with an attendant, inevitable, continued shift to a pay-for-performance, "captitated" payment system (both government and private) rather than the likely unsustainable pay-per-encounter methodology currently used to compensate physician and hospital services.

Is all of this (and more) enough to make doctors eschew private practice for salaried positions with hospitals or large multi specialty group practices? Or a career as a physician altogether? Over half of physicians in the US are now employed by hospitals/group practices, the first time since such statistics have been recorded that those employed this way exceeded those in private practice. And with the "individual mandate" to have health insurance on the horizon, it's likely that the shortage of physicians, especially primary care, will be exacerbated in a few years. This, despite the fact that many medical schools have recently expanded their incoming class sizes, and new US medical schools are being added. Even with 4 years of college, another 4 years of medical school, and several years of post-medical school residency training in a prospective doctor's future, and with mounds of resulting debt, being a physician and taking care of patients obviously remain highly valued by those who covet entry into the medical profession, and to be sure, those who are from time to time in need of medical care.

Spencer Johnson's "Who Moved My Cheese?" provides some common sense consultation that is applicable today, even though it was written in 1998. Not specific "how to" advice per se, his story is about change that is scary and potentially life-altering - recognizing when it happens or is about to happen and making adjustments as needed. If the cheese you've become accustomed to enjoying is no longer to be found, go forth and find new cheese.

What does this mean for medical practices?
Here's a present day example. Last week I attended a lecture by Dr. Patricia Gabow, CEO of Denver Health and Hospitals, a largely indigent demographic health care system in Denver, CO. It was quite remarkable to learn that despite almost half of their patients being uninsured, they found a way to become profitable and sustain this profitability year after year while simultaneously improving the care of their patients. In fact, an obvious conclusion to draw from their experience is that healthier patients utilize fewer costly resources. Thus, their focus is on prevention, reducing hospital admissions and lengths of stay, arranging follow up care to prevent costly readmissions, etc. They implemented a system wide EHR. They employ a large staff of physicians, many of whom are engaged in leading the way toward more efficient and effective care. Their organization is aligned with a common purpose.

Maybe the "handwriting on the wall" is not that we will lose our autonomy or that the physician-patient relationship will suffer, or that the positive aspects of health care in the US will vanish under excessive regulation and fee cuts, but that we can refocus our efforts to create and expand health care systems in a way that is professionally satisfying, provides better care for more of our citizenry while continuing to provide high quality care to those already able to get it, and provides reasonable physician compensation that is in line with the many years devoted to becoming a physician, as well as the costs of this education.

Perhaps this evolutionary process will create systems that will in effect become the new cheese. Are you prepared to go forth and find it?

What is Your "Elevator Speech?"

Can you succinctly state what your company does, where it’s headed and how you plan for it to get there? In the April 2008 edition of Harvard Business Review, Collis and Rukstad ask an important question: “Can you say what your strategy is?” Of course, they ask this because their research found that many firms’ CEOs cannot succinctly summarize their organization’s strategy. And if the CEO cannot do this, then it’s a logical assumption, which they found to be true, that the firm’s employees cannot either. As they state, “it is a dirty little secret that most executives don’t actually know what all the elements of a strategy statement are, which makes it impossible for them to develop one”. They offer a straightforward solution: define what the elements of strategy are so that its formulation becomes easier, with subsequent implementation becoming much simpler because the strategy can now be easily communicated and understood by everyone in the company.

The value of this clarity to a medical practice, as in any organization, is alignment (as eloquently stated by Harvard’s Michael Porter and noted in one of my previous posts on this blog). Here’s an example. Your front office employee receives a call from a concerned referring physician who wants one of her patients seen by your specialist practice within the next day or 2. Your employee knows that you and your partners are booked solid for the next 3 weeks. She has some options. She can tell the referring doctor that you’re booked and the next available office slot is in 3 weeks, and if this doctor says in response that never mind, she’ll call your competitor because they’ll make room, she responds with something like “that’s just the way it is if you want to see Dr. ___, good luck”, you will understand one reason why your market share is being eroded over time. If your goal is to maintain and/or grow your practice, and you plan to do this via a strategy of superior customer service, it will be critical for your front-line staff to understand this so they can help prevent situations like in this example. Perhaps they now will say to the referring doctor something like, “I don’t see an opening on Dr ___’s schedule this week, but we know how important it is to all concerned to get urgent patients like this one in ASAP. Please provide the patient’s phone number to me – I’ll let Dr. ___ know what the problem is and see if he can squeeze this patient in tomorrow, and then I’ll call the patient and see if we can work out a time that’s convenient for him. Should I have Dr. ___ call you?” Imagine what market share might look like over time if this was the essence of the conversation.

Here’s a pearl of wisdom attributed to Yogi Berra. “If you don’t know where you’re going, you may not get there.” Rukstad (see above) identified objective, scope and advantage as critical components of a good strategy statement, a road map to getting where you want to go. What do you want to achieve and in what time frame? What products/services will you provide, and in what kind of setting? What will you do differently that will give you an advantage over your competitors?

Food for thought.

What/Who Constitutes Your Market?

The obvious answer is "patients". We provide services and in some instances products for patients. We receive compensation for doing this. It's instructive to ponder the source of these patients. How do they get to us? What other people and institutions play a role in this process. Existing satisfied customers? Other physicians? Hospitals? Health plans? Other institutions? Tracing the sources is a critical exercise if we are to become and remain successful, i.e. enjoy a continuous flow of business in our direction.

So part of maintaining this flow is keeping existing patients and acquiring new ones. Remember that quality alone rarely provides a signifcant competitive differential advantage, usually because your competitors are typically equally qualified. Cost factors are potentially relevant for specialized areas such as cosmetic procedures, but most often for the majority of physicians is removed from the marketing equation by the egalitarian nature of insurance contracts. Yes, it's service that comes to the forefront. In some cases that's relationships with referring colleagues, in others it's prompt and courteous attention to patients, patient access to their records electronically, etc.

How do we know if we're employing and delivering a successful strategy for at least maintaining, if not gaining market share? How do we know if our efforts are working? As with most questions like this, it requires data. We need to define the quantity of purchasers available to us, identify the market's potential for use of our services/products, and then we can assess what share of that our business is doing.

Is it true that "if you are not growing your business's market share, you are shrinking"? Certainly in a growing market, that's mathematically correct. If there is demand for the service or product you provide but you fail to meet that demand, others will step in to fill the void.

This evaluative process informs our expansion decisions. When to hire a new partner, add a nurse or nurse practitioner, look for additive revenue sources. It truly is difficult to manage what you have not measured.

Marketing

Levitt's classic paper, "Marketing Myopia" (Harvard Business Review), opens our eyes to the critical importance of knowing the business we're in, and who our customers are. His example of an incorrect approach is so often quoted that it's become part of the marketing lexicon like Kleenex became for tissues. He cites the railroad companies as failing to see that they were in the transportation business, not the railroad business, in the mid 20th century. Think about that for a few minutes. They made their living transporting people and products via rail. Did it not occur to them that other modes of transport could supplant or reduce their business's prosperity?

Levitt implores the reader to understand the business they are in, and who their customers are, what those customers want, and for us to think about how to find and satisfy those customers and make a positive impact to our bottom lines. This has become classic marketing wisdom - provide what the customer is asking for either more cheaply, with better quality and/or with better service. It's clear that marketing is pretty closely tied to strategy. Do what you do, do it uniquely to gain a competitive advantage, and do it in a way that customers will want to buy from you.

In The Innovator's Dilemma, Clayton Christenesn raises a somewhat different approach. Perhaps one way to effectively engage your customer base is to create something that they didn't know they wanted or needed. An example might be Apple's products, such as the iPhone and iPad.

OK, we have a mission, a vision, core values, a product/service to provide, a pretty good idea of how we want to do business and gain competitive advantage, lots of potential customers/patients. How do we put this all together, make our organizations run properly to support our vision? More on that next time.

What is a Business Strategy?

Harvard's Michael Porter says that the purpose of strategy is "alignment within the organization". Theodore Levitt's teachings on marketing are clear about the link between marketing and strategy. And Peter Drucker offers that we should "know the future that has already happened" as we reflect on the correctness or folly of our previous assumptions about what we thought was right, thus possibly requiring a shift in our thinking, especially as a lesson for preparing for what lies ahead. Preparation does not require clairvoyance.

So, what is strategy, and why/how is it relevant to business owners, including those of medical practices? Strategy is what one uses to differentiate oneself from one's competitors. It is the thinking that formalizes the style and tools we will use to gain an advantage in the marketplace. It is both thinking and execution. It requires an understanding of the market, our customers, what products and/or services we are selling, how we plan to deliver them, and how we can become the preferred provider of those goods and services. Once a strategy is well-articulated, it becomes a guide for all who work for a company/practice to best deliver the desired product/service. This is the alignment referred to by Porter. If everyone knows why the company exists (mission), and how the company will differentiate itself from it's competitors (strategy), by also incorporating the firm's values into their day to day behavior, they can help deliver the product/service in a manner consistent with the firm's goals. Managers are free to use their resourcefulness for the benefit of the organization. Physican partners can more confidently interact with potential referring physicians and their patients. This is who we are and this is how we aim to work with you.

The usual ways to differentiate are based upon quality, service and/or price. In medical practices, while each of us thinks of ourselves as being of higher quality than our competitors, that goes largely unsupported. And as price tends to be something out of our control (see the Medicare Fee Schedule), this leaves service as the available differentiator.

We thus most often need to focus on the service we provide, to many if not all of our stakeholders, including referring physicians, patients, hospitals, insurance companies, etc. How this ties to the concept of marketing is quite interesting.


More on Levitt and marketing next time.

Define yourself

All companies have a mission, a reason for existing. So too, medical practices benefit when their mission is clearly identified, well-defined and enunciated in a mission statement. Thus the answer to the question, "why do we exist?" as an organization, is clarified for all who work within and all who interact from outside the practice. Yes, it's fairly straightforward and simple for most of us -- "our mission is to take really good care of patients". In what manner? What subgroup of patients (e.g. Pediatric, Obstetric, etc.)? Putting some effort into this relatively simple exercise forces deeper thought about what the practice wants to accomplish and how it wants to do it.

This naturally leads to the next step in forming a successful organization, identifying the firm's goals, vision for the future, core values and ultimately its strategy for accomplishing those goals.

More on that later...

Thrive or just survive - we didn't learn about this in Med school

It's about more than just taking care of patients, isn't it? Our chosen profession. We devote many years after college to obtaining the requisite knowledge and skills so that our patients can be assured of our competency and that we will provide the very best care on their behalf. Yet we want the same things that most people want. Professional and personal satisfaction, security, a reasonable standard of living, and the ability to save a few dollars for retirement, our kids' education, outside interests, travel, philanthropy - whatever. No different from others persuing "the American Dream".

Most physicians provide care in a private practice setting, their own businesses. Entrapreneurs. Really just the vehicle for providing care to patients in need. Here are my office hours, I'm good at what I do. I have all of these credentials, the initials after my name mean something special. Look: academic honors in college and maybe in Med School too, years at a top-notch hospital training program or 2 for post-grad training. My partners are just like me. We're here 24/7/365.

And then the reality of running an office, signing contracts with insurers so we can get paid for our work, billing and collecting, meeting payroll, establishing a line of credit with the bank, getting on the medical staff of the local hospital(s), learning and following the local, state and federal rules and regs - the business side of what we do, hits home.

This blog will be devoted to the business of medical practice. Management. Navigating the challenging terrain, the uncertainties of our healthcare delivery system.

Let me know your thoughts. I'll be sharing mine here about how to successfully manage our medical practices.