Something wasn’t adding up for David Norris. An anesthesiologist, Norris was being groomed for a leadership position of his independent 85-physician practice in Wichita, Kansas.
He remembers being handed financial reports, balance sheets, and productivity reports. He realized the practice’s leaders and board were making a lot of financial decisions based on those numbers, but no one was really digging into what those numbers represented. “They really only focused on the bottom-line or big-ticket items like total income and total expenses,” Norris says. “That didn’t sit right with me.”
Norris knew a bit about finances, but he was still intimidated by an income statement that was three pages long. Norris decided to get his MBA and fill in his knowledge gaps.
“I know some physicians, more than enough, too many probably, who live paycheck to paycheck because they never learn how to manage money,” Norris says. “In residency or med school, you’re so used to living from paycheck to paycheck. If you’re not wise, you don’t really change that when that paycheck grows.”
After Norris graduated and completed his tenure as president, he began to focus on the biggest areas physicians were struggling with: finances and accounting. He started working with local residency programs, developed educational and training materials, and wrote a book. He continues spreading his message to physicians, including his recent session at the Medical Group Management Association’s annual conference in Boston.
Physicians Practice caught up with Norris, who is also an editorial board member, about the importance of having financial know-how.
Do you think talking about finances is more important than it was five or 10 years ago?
It’s probably more important now because margins are thinning out as costs rise to run a practice. It was taboo when I was a med student and resident. I was looked at, I think, as being a greedy person and that I went into medicine or healthcare for the wrong reasons. That’s not true. I just had a different perspective. I recognized that you have to maintain a profit if you want to stay in business. I think more and more medical schools are warming up to the fact that maybe they aren’t doing their residents a very good service by not trying to teach them about finances. It’s not as fast as I would like, but it’s slowly shifting.
Why are you espousing the importance of financial intelligence for physicians?
I really want to help physicians who want to maintain their private practices or run their own businesses. They can do that. I think it’s still possible, but you have to have the financial tools and the knowledge so that you can actually manage to do that. I think financial intelligence will help you run your practice better.
If you don’t know how to manage the financial reports, if you don’t know how to make the financial decisions, you are going to lose out. You have to plan for the future with that capital investment. Otherwise, you eventually are probably going have to shut your doors. And then you won’t help anybody. You won’t help your patients. They’ll have to find someplace else to go. I think it behooves you as a physician owner that you really sit down, spend some time, and try to get some understanding on how to be profitable. Then I think you can actually have a long, thriving practice.
It also protects you from fraud. If you understand what your costs are, what your costs should be, the line items on your income statement and balance sheet, why they’re there, and how they trend, you’re going to be better armed and able to discover and identify fraud if it occurs.
It will help you personally, too. I mean, look at Bernie Madoff. He took billions of dollars because a lot of people were just too happy with the bottom line. They didn’t really dig into the numbers. If you don’t learn some fundamental basics of finance, you are going to have a hard time investing.