Nick Hernandez, MBA, FACHE

After working for years to build a successful medical practice, are you ready to move on to retirement or something new? To maximize the value of your practice and properly sell or pass it along to the next generation, a succession plan should be in place.

Succession planning can be a slow-moving and difficult process. While many physician owners claim they look forward to days when they can retire, they often fail to create a transition plan. Daily clinical duties and caring for patients take precedent over long-term planning concerns and this pushes succession planning to the back burner often for long periods of time.

It can be more comforting for the physician owner if the succession planning process starts years before their actual transition. It’s also important because the more time spent shifting the core business responsibilities of the practice away from the current owner, the better.

To facilitate this process, it’s necessary to document the core areas of responsibility. This will help segregate various aspects of the owner’s responsibilities and create a clear vision for which tasks can be allocated to others as potential backups. It also provides clarity when searching for a successor on key tasks they will need to be able to perform. The more that is known about the role, the easier it will be to find a match.

Effective succession planning doesn’t happen overnight. It can take many years to understand organizational challenges, identify solutions, and then get all the puzzle pieces to fit. The key is to establish a goal retirement date and then work backwards from there. Since things often change in the healthcare arena, it’s not essential for the date to be an absolute. However, a rather flexible goal date that can change as needed is best.

Planning at least four years in advance will allow for maximum planning time and efficiency. Working with the end in mind is the best way to approach succession planning and allows for the complex process to be broken into smaller pieces. Your succession plan should include a detailed list of circumstances and, if applicable, dates for all major steps in the succession plan. Depending on the situation, your timeline may stretch across many years.

A critical component to successful succession planning is determining a successor. Although every situation is unique, there are three primary methods of ownership transfer:

: If you are a co-owner, you could sell your interests back to the practice. If you are the sole owner of a medical practice, you may sell your practice to an outside party (e.g., another physician group, MSO, or hospital).

Rather than selling ownership interests back to the practice, you may sell your share or interests directly to an existing partner.

 You may choose to pass ownership interests along to a physician currently employed within your practice.

Once you have determined which transfer option is best for your specific situation, a succession plan can be crafted.

Although you may have a single successor in mind, it is best to list multiple options organized by order of consideration. If you are not planning to transition soon and do not have a set successor list in mind, begin by listing qualifications, skills, and/or personality traits you would like to find in a future successor.

It’s important to identify a successor as early in the planning process as possible. Without an identified successor, much of the work of succession planning is quite limited. Beyond this, the job of most physician owners is so complex that it may require a great deal of time to conduct training, introduce them into relationships, and coach them through transition. Start the training processes as soon as reasonably possible. This will ensure a maximum amount of time to transfer organizational and business knowledge.

Once a successor has been identified, there will be opportunity to share tasks or responsibilities. It’s not uncommon to see a successor approach a task or tackle a challenge in a way the current owner may not. Don’t be alarmed, it’s important to be open to the new ideas, processes, and ways of doing business that a successor can bring to the table. Open the door for them by allowing them to manage some existing responsibilities and make them part of the decision-making process quickly.

If you plan to sell your medical practice to an outside party, determine how appealing your practice may be:

Does your practice have a history of profitability? 

Of course, a financially stable medical practice with a history of consistent profitability will be more attractive to potential buyers than a struggling practice.

Where is your practice located? Is it in a highly desirable area based on the type of specialty you are in? Do you have a consistent patient base and loyal referring physicians? 

Positive answers to these questions point towards long-term profitability and higher medical practice value.

 Assets with market value and remaining useful life assist in increasing practice value and potential buyer attraction.

Medical practices that appear worth purchasing usually have good retained earnings, great net worth, and low or nonexistent debt.

 If you had a valuation performed on your practice more than one year ago, it is definitely outdated.

Planning for succession well in advance of a transition is extraordinarily helpful for increasing the practice’s marketability. Succession planning offers peace of mind for any physician owner, regardless of retirement timetable, but it is no small task. These are emotional decisions which require structured thought and time to contemplate. You may want to consider consulting professional advisors to assist in the tasks outlined in this article and to work with you to develop a comprehensive strategy.

, 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

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Maximize the value of your practice and property by putting a proper plan in place.

How to build a succession plan for your practice

There are many different models and action steps for strategic planning. Attempting to "jump right in," however, is ill-advised. Undertaking some basic pre-work will help to ensure better success for the strategic planning process. Here are three perquisites for strategic planning:

Prerequisites for Strategic Planning

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There are many different models for strategic planning. Attempting to "jump right in," however, is ill-advised. Here are three steps to consider.

Are you imaginative and big-picture oriented? Are you focused and open-minded? Many physician leaders of private practice indeed have these traits, but it’s imperative to make the time to take a step back and look to the future. A good vision can have strategic implications for your practice. To effectively think about the future of your practice requires structure in thought so that you may develop a vision and then amplify it.

, one of the key items that I ensure we address is vision. It is imperative to develop a shared vision for the physician practice. In some strategic planning efforts, a vision for the practice is developed after a vision for the patients has been discussed. This is with the assumption that a shared organizational vision may be dependent upon a shared vision of how the patient population should be treated.

Whenever this is done, it is important to agree on where the practice wants to be in three-to-five years. It is often helpful to focus on where you want to be at the end of the period covered by the strategic plan, so this time period may be shorter, but certainly no longer, than five years. This three-to-five year vision might describe the practicebroadly in terms of its mix of programs, reputation or status inside and outside its primary target community, key accomplishments, and relationships with referring physicians. Specific descriptions might be included in relation to service/target area, program scope and depth, funding, governance, staffing, relationships with other groups, visibility, etc. This form of "visioning" can be done in many ways. For example:

Groups can physically draw their vision of the future, then work to identify common elements and use them to establish a joint vision.

Groups can role play what they would want to be able to say about the practice's major accomplishments and reputation to a newspaper reporter five years from now, then use this as a basis for developing a shared vision.

Groups can play the role of various supportive stakeholders (i.e. patients, referring physicians, etc.) and each develop a series of statements describing the practice as they would like to see it in a specified number of years. Then these visions can be shared and meshed.

Physicians may also want to devise a formal worksheet indicating where they see the practice in either broad or specific terms. For example:

 – Describe the practice in five years, in terms of categories such as program, resources, status, relationships, organizational development, and governance.

 – Describe the practice in five years, in terms of categories such as target area, target populations, budget, staff size and composition, staff/component structure, program areas, offices/locations, board size and composition, and the relationship with local hospitals.

Physicians would then share the information from these worksheets and discuss. The full group must reach consensus on a shared vision. The physicians may opt to take turns describing the practice in terms of specified categories or topics (e.g., missions, program scope, resources, relationships), then consensus can be reached on major statements and categories.

Amplifying Your Vision to Grow Practice Revenue

People who buy into the "butterfly effect" believe that small actions can result in large effects. Just like the flap of a butterfly's wings may cause a tsunami on the other side of the world, the messages that organizations share publicly can force sizeable change in the mindset and behaviors of their customers, shareholders, industry and even the world at large.

Amplifying a practice's vision should be a key goal when developing any messaging strategy, yet many physicians struggle to decide if and when their practice brand should speak up and why. When it comes to amplifying your vision, practice leaders need to control the conversation. Medical practices need to communicate early and proactively address the "why" of their vision. In my experience, innovative practices tend to share their point of view early on to take control of the conversation. Whether that conversation is positive or negative, there are three important times to speak up.

1. When you expect changes in your specialty

Successful physicians carefully monitor where their specialty is headed and seek out opportunities for growth. Super innovative physicians can even drive change on a large scale, allowing their practices to grow market share while competitors scramble to catch up. When you see change coming, get ahead of the game with messages that address the change and explain how your practice is prepared to capitalize on it.

2. In anticipation of a new service launch

It's also important to be proactive in the way you're telling your story, especially when anticipating a new service launch. Start promoting your vision—not your service—prior to launch. People buy visions, they buy purpose, and they buy solutions. They don't buy products. If you know your practice will be launching a better mousetrap in two years, now is the time to communicate why you have a vision for a better mousetrap.

Rather than reacting to ongoing patient complaints or a class action lawsuit, 

proactively seek out and listen to patient feedback

 to find out what your practice can do better. As you resolve those internal problems, openly communicate about what you're fixing and why.

You may ask, "But why spill the beans if you don't have to?" Some physicians fear transparency when troubles are brewing in their practice. They believe there is no need to expose something that doesn't need to be exposed and assume people (patients, referring physicians, etc.) won't find out about it. Why not just try to fix things and tell everyone, "We're great!" 

 doesn't work that way today. Truth sells. And with today's 24-hour news cycle and all of the review sites that are out there, people are going to find out.

The more honestly and authentically a practice operates, the more reliable that practice will be perceived. Make no mistake, transparency and authenticity beat positioning all day long.

We've all seen healthcare organizations react too late to a crisis and end up dealing with huge public relations issues. Practices would be better off sharing a confident mantra along with ongoing examples of positive patient experiences with the public before a negative crisis arises. By reinforcing this mantra with your staff, you can significantly reduce highly publicized patient incidents because employees will think twice before acting inappropriately toward patients.

Regardless of the approach and tactics used, it is imperative that all physician owners share a common vision and that all staff members are aware of desired future direction of the practice. Vision is the thing inside of us that guides us. It creates a desire to grow and improve. Vision embodies our hopes and ideals. It gives us a sense of purpose. Vision brings us flashes or glimpses of what is possible.

A shared vision for your practice’s three-to-five-year horizon can amplify your practice to grow revenue and weather internal and external crises.

Why a vision for your practice is a critical component of success

Are you a solo physician practice contemplating bringing on a physician partner? Or perhaps you already have an employed physician and are looking into making that physician a partner? Maybe you have had a partner in the past and things didn’t work out, but you are thinking about giving it another shot with someone else. You may even be looking at acquiring another practice and as part of that transaction making the other practice’s physician a partner in your new entity.

If any of these scenarios fit your circumstance, then keep reading on.

Innovation should mitigate rising burnout

Bringing in a physician partner has many advantages. A partner may help your practice grow and become more successful; allow you to share the workload and combine skills with another provider; and enrich your practice with a solid teammate. However, business partners can become your greatest asset or worst liability. Deciding whether or not to share your practice with someone else may be one of the most important business decisions you ever make. Deciding who you go into business with can be just as important.

There is no way to guarantee a potential partnership will work. Consequently, weighing the advantages and disadvantages of having a physician partner, and carefully analyzing the reasons for choosing a partner, can help ensure that you find the right person to entrust with your practice. Identify what you really need from a physician partner before you start looking for one. Once you have completed this essential first step, you can begin the process of choosing a partner.

For starters, a physician partner should bring something different to the table than you do. If you're creative, maybe you need a more detail-oriented partner; if you're introverted, you might need an extrovert to balance the social equation. If they're similar to you, it might be more comfortable, but it may not be what you need—you need someone who complements your skills and personality, not duplicates them.

Discuss your vision with your potential partner.

 Evaluating a potential partner can be like trading life stories to understand if your business principles, company goals, and personalities are compatible. Take as much time as you need to make a well-informed assessment of whether your business partner is actually a suitable one. You should share a sense of vision and values, but not have overlapping skills.

Assess the potential partner's expectations on the time involved.

 Partners don't have to spend the same amount of time, but it is important that they are on the same page as to each other's expected time commitments. How many hours a day does your partner expect to put into the practice, and do his expectations meet yours? Your partner's commitment has to equal yours. A partnership—especially one between friends—can start off with fun and excitement, but within a short time, the slog of the everyday routine catches up with you. If they're not as committed to the business as you, they may lose their enthusiasm and may actually be damaging the brand every time you open your doors.

Try to evaluate potential partners without regard to emotional ties or friendship.

 Draw up a set of criteria that you're looking for and simply judge how well a potential partner lives up to it. Your potential partner should also have questions for you and should want to know about your character, reliability, and expectations.

Of course you will want to weigh their standing in the referring physician community. A business partner who is adept at cultivating relationships with your referring physicians adds value to the practice. Also consider how they interact with employees and patients.

Two things every standout healthcare manager does

Seven Reasons to Create Physician Partnerships

Physician partnerships are often a great idea providing you give thought to how you will structure one and why you wish to create a partnership. Sometimes physician partnerships aren't so successful, so it is crucial to choose your partner well. This will somebody who you're going to spend a lot of time with and who, like your spouse and your family, will probably see all sides of you, in full Technicolor glory! This person is going to get into your head and there will be arguments and misunderstandings.

Here are seven reasons for creating a partnership:

1. Your partner has strengths that you lack, and vice versa.

 Great partners band together to compensate for each other's weaknesses, so that individually they can focus on using their strengths. Not only are you able to get more done, but tasks are done more efficiently because people have different skills and areas of expertise.

2. Partnerships promote greater creativity and can spur innovation.

 It's hard to brainstorm alone. Most people's creative juices flow more freely if they can bounce ideas off others. And things get really interesting when you have partners who bring their own ideas and perspectives to the party—that's often when the biggest leaps of innovation occur. A physician partner means more ideas coming from a different background.

3. A partner's perspective can help you break free of your old way of doing things.

 Sometimes it takes another physician's perspective to shake a successful practice out of complacency and see an old practice in a new way. A physician partner can help you narrow down the list by offering unique perspectives and opinions that you yourself may not have been able to think of. This is a good thing and can save you time and money later on.

4. Partners can help you take greater risks.

 A good partner can challenge you to take the kinds of risks that will help your practice grow. Partners also can encourage each other to be more daring simply because each partner figures the other will be there to pick up the pieces if the risk doesn't pan out. Great partners help you attempt big things and pull you out when things go wrong.

5. Partners also can serve as a restraint in keeping you from risking too much.

 A good partner will tell you when an idea is misguided and keep you from taking on too much risk.

6. Working together for a common goal is a lot more fun than working alone.

 The business side of practicing medicine is a lot more fun when you can share it with someone else. There's something exciting and exhilarating in facing challenges together, and if you're blessed with a partner with a sense of humor that meshes with yours, work becomes like play.

7. Try playing good cop/bad cop when it's just you.

 Managing employees and a practice is exhausting. On the days when you just need a break, your partner is there to pick up the slack. A physician partner provides motivation and support. Not only can you ask each other questions and bounce ideas, but you can encourage one another and pick each other up in difficult times. Also, by having a partner, you will most likely work harder because there is pressure to perform and to not let the other person down.

Don’t be afraid to ask for help. Speak with your physician colleagues or a transactional consultant with requisite experience in this area. And remember, even if you're not looking for leverage now, think about what a physician partner might do for you. A partner may shore up areas where you have a weakness, and a partner may open up a whole host of opportunities for your practice. Rugged individualism has its limits.

Nick Hernandez, MBA, FACHE

Founder & CEO at ABISA, LLC

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