3. Market positioning
- What are the practice’s strengths and weaknesses?
- Is it a market leader?
- What is the practice’s market share compared to its competitors?
- What are its competitive advantages?
- Are the business and clinical processes effective and efficient?
- Are there any issues in the physician governance?
- Are there concerns with any of the offered services?
- Is the practice growing through acquisitions or organically?
- Are the marketing plans effective?
- Are the operational strategies effective?
6. Practice management
- In a small practice, the effectiveness of the management team can be evaluated more readily than in a large practice. Understanding the culture and effectiveness, as well as any shortfalls, of the management team is critical.
- As the economic and market factors change, how does management react to the changes? For instance, a decline in revenues may occur because of market or economic conditions. Does management react in a way that helps the practice remain profitable and still postured for future growth? Cutting expenses is a great short-term solution that can have detrimental long-term consequences if not done properly.
- Is management being rewarded only on short-term results or are there long-term incentives in place?
- Does the practice’s culture contribute to growth and value maximization?
- Do they respond to patient needs effectively?
When evaluating your practice, go beyond the historical growth rates. You need to see how changes in the market and business environment will affect the practice. As a result, you will be evaluating a number of internal and external factors that affect the entire physician practice. Look at how the practice responds to changes in patient needs, market trends, and technology. Determine if your practice is agile and able to change its course when necessary. If not, ask yourself if this is a red flag with regards to physician governance.
Valuations can be done at any time and are a useful way to see the bigger picture. It’s always a good idea to assess your practice, look at the competition, attract new talent, and improve patient care. At the end of the day, employees and investors want to know if your practice is a winner both now and in the future.
Nick Hernandez, MBA, FACHE, is the CEO and founder of ABISA, a consultancy specializing in strategic healthcare initiatives for physician practices. His firm helps devise and implement strategies that will allow practices to remain competitive and solvent. E-mail him here.