Buying a problem practice

July 23, 2010

Decide whether to buy into a practice that has issues.

Q: Should I buy into this problematic family practice? It's on the best side of town where I want to live, in a clean and decent-but small-medical office complex, has three exam rooms, and is directly next to an older hospital. On my visit, the practice was jammed with waiting patients, all the phone lines were busy, charts were piled everywhere and every desk was buried in paper. Collections are just average, but A/R is equal to almost six months of the practice's collections in a year, appointments are booked out over a month, but the owner's income is less than average even though the owner's wife is the office manager. I overheard some staff being brusque with patients and some patients complaining about long waits. The furniture and carpet are worn and it badly needs a paint job. The physician isn't as productive as he used to be and the charts are almost illegible. Is this too much to take on? Should I just start an office from scratch instead?

There is no such thing as the "perfect" practice to acquire. It does not exist. Many physicians are afraid of practices like this, either in purchasing them or joining them, even though most practices are fixable. Many practices like the one you describe end up closing due to lack of a buyer that can't see past the blemishes, even though the problems you describe are easily fixable.

The problem with just joining a practice like this is that the existing physician and spouse have created the current culture and operational systems, and you will unlikely be able to change the staff behavior or systems while the owner and spouse remain. To make the needed changes, you would need full control.

I'd suggest buying the practice and phasing the owner and spouse out over two to three months, during which you learn everything about the practice, including what they are doing right. Once they are gone, begin housecleaning.

A practice like this could be a great opportunity to remodel, modernize, add a midlevel provider, expand the hours, correct the coding and billing and A/R, and significantly increase profits and patient satisfaction. You could end up with a diamond-quality practice in just a few months.

Answers to readers' questions were provided by Medical Economics consultant Keith C. Borglum, CHBC, Professional Management and Marketing, Santa Rosa, California. Send your practice management questions to medec@advanstar.com