What makes a group practice thrive

A retiree looks back on his small medical group. It ran pretty well, thanks to a string of sound, unselfish management decisions.

By Kenneth S. Woodman, MD
Retired General Surgeon/Richmond, IN

Nightmarish tales abound in our profession—alcoholic partners, embezzling receptionists, lazy recruits, defective computer systems. Practices self-destruct on a regular basis. In most cases, you can trace the problem to poor decisions by well-meaning physicians.

I sympathize with younger colleagues who've encountered pitfalls, but I can't swap many horror stories with them. If they were to ask me, "Are all medical practices this messed up?" I'd reply, "No, they can run a lot better."

I retired from medicine not long ago after 28 years in the same surgical group. Nobody who joined our practice during that time ever left because he was dissatisfied. Sure, we stumbled now and then, but on the whole, we thrived, thanks to a string of sound, unselfish decisions over the years. Let me give you some tips based on what some doctors did right, for a change.

Shorten the probation period. After medical school, residency training, and a tour in Vietnam, I was recruited by two surgeons to Richmond, which then had a population of around 42,000 people. They told me I could expect to be a partner in five years. We sealed the agreement with a handshake.

My partners had the wisdom to revise my employment terms after I proceeded to gross two and half times my salary. They generously waived the five-year stipulation and made me a full partner after just one. This fast-track arrangement became a permanent policy, which served as an enticement when we recruited new doctors. After all, who wants to be the equivalent of an indentured servant year after year?

Recruit before you need to. We came to master other aspects of recruiting, too. For one thing, we learned to sign up new surgeons before the need was critical. We preferred being overstaffed than understaffed, even if we weren't as busy for a stretch. By getting off to a head start, we had enough time to select individuals who had the training, talent, and temperament to mesh with our group.

Recruit the spouse. When you're recruiting a married doctor, you also need to recruit the spouse. As an all-male surgical practice, we relied heavily on our wives to sell a recruit's wife on our town and its attractions. But those socials involved a lot more than coffee and doughnuts. Our wives also evaluated the new couple. Would they click with the group? The community? Our wives were never wrong.

Screen for like-minded doctors. It's easy to dwell on compensation when you're courting a new doctor, but we screened for practitioners who exhibited the kind of altruism that characterized our group. For one thing, our doctors traditionally assumed leadership roles in the medical community, serving as chief of surgery and chief of staff at the hospital and heading up the state chapter of the American College of Surgeons. We also welcomed all patients, paying or not. We provided care first and worried about the money later. We made sure prospective doctors understood this commitment to service and bought into it.

Get them busy fast. Some groups recruit great doctors only to lose them a year later. So we took pains to get the relationship off to a roaring good start. New surgeons naturally want to be busy and prove they can earn their way. Accordingly, we gave them plenty of the new referrals. Fortunately, their full schedules didn't significantly impinge on the productivity of the old-timers, because there were enough patients to go around.

Don't make some partners pay rent. In the late 1970s, the members of our surgical practice formed a separate corporation to buy the medical building we occupied, right across from our city's only hospital. We gave new partners the option to buy in right away. That way, we avoided the irritation and divisiveness that occur when some partners pay rent to others. Instead, the surgical corporation paid rent to the building corporation.

We reappraised and refinanced the building whenever a new partner came aboard. A minimum down payment of $1,000 and a bank loan made it easy for the newcomer to become an owner. Not only did this arrangement unify the practice, but it garnered extra revenue, because we could rent unneeded space to unaffiliated doctors. Every new partner recognized what a good deal this was, and got in on the action.

Trust business pros. We may have displayed horse sense about our building, but we learned not to overestimate our business savvy. Shortly after our group formed in 1969, we hired an out-of-town consulting firm for management and accounting services. However, we were disappointed by how it handled our books and staffers, so we eventually discharged this outfit. We figured that if we rolled up our sleeves, we could do better. We were badly mistaken. For three years, we wasted a lot of time and effort struggling with subjects that we knew little about—fees, insurance contracts, and computerization, to name a few.

I finally had enough­after spending six hours one Saturday puzzling through our employees' health insurance policy searching for the answer to a question and not being any closer to a solution by day's end. We eventually rehired our old consulting firm, which addressed our earlier complaints and performed admirably on the second go-round. We also hired a crackerjack office manager and told her, "You oversee the business side of the practice; we won't get in your way." Under her, the office became a well-oiled machine.

Hire top-drawer staffers. It's a dilemma. If you hire mediocre people, they seem to stay around forever. Hire smart, energetic folks, and you may lose them eventually as they try to improve their position in life.

Our group chose to hire the best we could find, despite the risk of turnover, and we never regretted it. Those employees will give you first-rate performance while they're with you, and a good staff makes all the difference between an efficient, prosperous practice and one that's nothing but headaches. Plus, your staffers represent you in innumerable patient contacts. They can make you look either good or bad.

Think retainment. Given that good employees were in demand elsewhere, our surgical group strove to keep staffers happy. Not only did we offer competitive salaries and generous health care benefits, but we included the staff in the same profit-sharing and pension plans that the doctors enjoyed. We sent them to seminars and conferences to develop their skills. And we paid them up to $500 a year for classes at the local college.

It's true—many of the stars we hired went on to better-paying jobs. But guess what? Those who stayed in the community became some of our best referral sources.

Plow profits back into the practice. First-rate personnel belong in a first-rate working environment. So we made the necessary investments. We remodeled our building, expanding the waiting room and business areas. We also kept current with technology. The group is on its fourth-generation computer system now.

Experiment, even if you fail sometimes. Every business—a medical practice included—is in a state of flux. Laws and regulations change, new technologies emerge, opportunities as well as obstacles arise. You can't stand still. You've got to respond to change. And you may not always succeed.

We experienced our share of failures, although none was crippling. We tried evening office hours, but never saw the volume of patients we'd expected. An experiment with satellite offices met the same fate. And we were rebuffed when we tried to get privileges at a community hospital 30 miles away.

Strikeouts notwithstanding, our batting average on business decisions was high. And one thing is sure: If you do nothing in the face of a changing marketplace, failure is guaranteed.

Put the group before individuals. Take any six people, and they're bound to disagree about something. Our group, however, tried to minimize our areas of disagreement while maximizing our areas of agreement. We simply didn't want to jeopardize the health of the group.

Take the issue of income. We used to base 50 percent of compensation on productivity, with the rest consisting of equal shares for partners. But that formula became increasingly unfair as the gap between high and low producers widened over the years. Doctors who had branched out into niches such as bariatric and vascular surgery, for example, were grossing twice as much as their colleagues.

After several months of discussions, we arrived at a formula that based a higher percentage of compensation on production. Some of us took a financial hit, but we could live with that. In the long run, a stable, cohesive group was of greater benefit to everyone.

As I look back on my 28 years with the group, I'm impressed with the selflessness that characterized our dealings with one another. We rarely voted on anything. Instead, we relied on consensus. While other groups succumbed to an adversarial spirit, we made a virtue of trust. While others merely argued, we also listened.

The strong organization that emerged continues to benefit patients and doctors alike. What we built made me feel proud, which was just as much of a reward as monetary gain. When it came to the decisions that shaped our group, my colleagues and I usually made the right calls.

 

Kenneth Woodman. What makes a group practice thrive. Medical Economics 2002;4:65.