Nick Hernandez, MBA, FACHE

Oftentimes physicians and administrators discuss strategies and may even devise a strategic plan, only to see nothing come of it. The most common reason for strategy failure is that they failed to build execution into their strategic planning process. We often see that budgets are not linked to strategy, staff incentives are not linked to strategy, and a very small number of employees understand the practice strategy. There are three reasons strategy fails to execute:

Practice initiatives don’t aligned with strategy

Practice processes don’t align with strategy

To ensure that your strategies are successfully implemented, you must build the execution into and across the strategy and the strategy planning process. Below are the 5 steps to successful strategy implementation.

A key road to failed implementation is when we create a new strategy but then continue to do the same things of old. A new strategy means new priorities and new activities across the practice. Every activity (other than the most functional) must be reviewed against its relevance to the new strategy.A good way of doing this is to create a strategic value measurement tool for existing and new initiatives. Initiatives should be analyzed against their strategic value and the impact to the practice. Measuring your initiatives as such will help highlight the priorities and ensure the right initiatives are adopted for delivery.

Ideally your budgets are structured in such a manner as to protect strategic expenditure from being re-allocated to short-term requirements of operating expenditures while subjecting strategic initiatives to a rigorous review (e.g. forecasted revenue growth and productivity) much like is done for capital expenditures.

The practice’s business performance should be closely aligned to strategy. Performance measures should be placed against strategic goals across the practice and each physician and staff member. All staff members will have job functions that will impact on strategy. Most staff members will have impacts across a series of strategic goals (e.g. financial, patient experience, operational, etc.). Ensure employees are aware of their role and influence on strategy delivery and performance. 

Likewise performance incentives should be directly linked to performance against strategy. They should include a combination of individual, team and practice performance measures that ensure staff recognize their direct and indirect impact on strategy performance.

A transformational strategy may require a transformation to structure. Does the structure of your practice allow strategy to cascade across and down the organization in a way that meaningfully and efficiently delivers the strategy?Practices that try and force a new strategy into an outdated structure will find their strategy implementation eventually reaches a deadlock.

The key reason strategy execution fails is because the practice doesn’t get behind it. If you’re physicians and staff members don’t understand the strategy and fail to engage, then the strategy has failed.So, how is this accomplished?

 Strategy involves change. Change is difficult and human tendency is to resist it. So not matter how enlightened and inspiring your new strategic vision, it will come up against hurdles (cognitive, resource, motivation and political). It is important to understand each of these hurdles and develop strategies to overcome them.

Bring influential employees, not just managers into the planning process. Not only will they contribute meaningfully to strategy, they will also be critical in ensuring the practice engages with the strategy. Furthermore, listen across the practice during strategy formulation. Some of your best ideas will come from within your practice, not the management team.

Ensure every staff member understands the strategic vision, the strategic themes and what their role will be in delivering the strategic vision. And enrich the communication experience. Communicate the strategy through a combination of presentations, meetings, emails, and updates. Continue strategy and performance updates throughout the year.And engage staff members emotionally in the vision. The vision needs to give people goose bumps – a vision they believe in, that they want to invest and engage with.

 It is important that all employees are aware of expectations. How are they expected to change? What and how are they expected to deliver? Each individual must understand their functions within the strategy, the expected outcomes and how they will be measured. As mentioned above performance measures and incentives should be aligned with performance against strategic key performance indicators (“KPIs”).

A strategy must be a living, breathing document. As we all know: if there’s one constant in healthcare these days it’s change. So our strategies must be adaptable and flexible so they can respond to changes in both our internal and external environments. Strategy meetings should be held regularly throughout the year, where initiatives and direction are assessed for performance and strategic relevance. At least once a year we should put our strategy under full review to check it against changes in our external and competitive environments as well as our internal environments. 

Strategy is not just a document written by physicians and managers and then filed away. It is a vision for the practice, owned by the practice. And to succeed the whole practice must engage with it and live and breathe it. Strategy should inform our operations, our structure, and how we go about doing what we do. It should be the pillar against which we assess our priorities, our actions and performance.When execution is brought into strategic planning you will find that your strategy is weaved throughout the practice, and it’s from here that great leaps in growth and productivity can be achieved.

Nick Hernandez, MBA, FACHE, is founder & CEO at ABISA, LLC.

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The most common reason for strategy failure is that they failed to build execution into their strategic planning process.

5 Keys to successfully implementing strategy 

Many physicians consider selling their practice at some point, whether that be to another physician, another medical practice, a hospital, or a private equity-backed management company. Regardless of the reason for selling, there are numerous complex issues a medical practice must consider when its owners decide to sell. Both the preparation for the sale and the actual transaction present issues.For those reasons, you should plan at least a year ahead if possible.Here are seven key considerations.

The more profitable your practice, the easier it usually is to sell, and the more it is worth to a buyer.Consequently, you should maintain business as usual and not slow down your practice in advance of a sale. Growing practices are more attractive than stagnating ones.

You may want to develop a financial forecast sheet for a buyer. Physicians offering potential buyers documented proof of strong and consistent financial results will encounter buyers inclined to pay more than expected. Financial forecasts also show how a physician’s practice takes advantage of opportunities and addresses threats that have been described in the internal practice assessment.

Dissatisfied employed physicians re-entering private practice, and physicians relocating to be nearer to their or their spouse’s family are the primary candidates for buying a practice. They have a choice of joining another group, starting their own practice, or buying your practice. You therefore are not competing just with other practices for sale but also with employment in groups and start-ups.

Your most likely buyers are already practicing in your area, since they don’t have to move or re-license, and they have a strong reason to be there. In many cases, the most likely buyer might be your competition so don’t rule out a merger either.Consider merging your practice with a local group in lieu of a sale to an unknown single buyer, with a higher compensation for one to three years in lieu of a sale price.

Delays due to ill-prepared sellers can have adverse consequences as time kills deals.The quicker you can respond to due diligence questions from a prospective buyer, the better off you are. Remember that due diligence is a two-way street.To avoid a financially troubled buyer, physician owners considering a sale need to have a strong team in place to help them. Due diligence is critically important to ensure that the medical group that you are selling into is financially sound. Engage a transactional consultant and accountant to assist you with this endeavor.

The buy-sell agreement that is drafted will include pre-closing and post-closing responsibilities of all involved parties. If the selling physician is remaining in the geographic area and will not have a continuing professional relationship with the purchasing physician, restrictive covenants will most likely be included in the buy-sell agreement. (Currently, these restrictions are enforceable if reasonable in length, duration and geographic area in all states except California.)The agreement will also have indemnification provisions.These clauses protect the purchaser in the event the selling physician breaches any representations or warranties of the buy-sell agreement. A selling physician will most likely be expected to indemnify and hold harmless the purchaser from losses that arise for any misrepresentations of the selling physician.

Prior to closing on the sale of a practice, it is important for both the seller and buyer to agree on the role and involvement of the selling physician post-closing. If the selling physician is leaving the geographic area and will no longer be practicing medicine, a formal written agreement regarding employment or consulting is likely not needed. However, if the selling physician is staying in the area and the purchasing physician wants to continue working with the selling physician during the transition, the physicians should consider executing an employment or consulting agreement outlining the roles and responsibilities of the selling physician and term of such agreement.

You may also want to provide transitional marketing services.Consider that you are selling the practice to a new owner, who may have to introduce herself to her new patients and to other members of the medical community. As part of the sale, you add value to the sale if you stay on for a couple of months.During this brief period of time, you may stay at the practice and introduce the new physician to the patients, and go with the new physician to visit practices of referring physicians and other important members of the medical community.

Many buyers often seek to have a valuation performed.There is nothing wrong with that and it can certainly give you an idea of the practice’s value.Just know that the valuation may not equal the purchase price.

As you are considering a sale, remember to make a good first impression.This may entail cleaning up your practice’s website and/or Facebook presence with new pictures.Keep in mind that those are the first things a potential buyer will look at.Eventually a buyer will visit the practice, so make sure to clean up the office so that it appears modern and attractive. Fresh paint, carpet, and furnishings are inexpensive and create quality “staging.”

Nick Hernandez, MBA, FACHE, is founder & CEO at ABISA, LLC

Regardless of the reason for selling, there are numerous complex issues a medical practice must consider when its owners decide to sell.

Want to sell your medical practice?

A strategic plan is not just a document written by physicians and managers and then filed away for safekeeping. It is a vision for the practice, owned by the practice. For the practice to succeed, everyone must engage with and live and breathe the plan. Strategy should inform your operations, your structure, and how you go about practicing medicine. Your strategic plan should be the pillar against which you assess your priorities, your actions and performance. As such, it’s mission critical that your plan is comprehensive and up-to-date. Here are eight assessments for your strategic plan:

Each year, perform a thorough analysis to get a clear picture of how the competing practices’ forces in your specialty are likely to play out. To grow at an accelerated pace, you will need a meaningful point of difference that can’t be easily copied or nullified. Mindlessly copying another practice’s business model is not a strategy — it is a recipe for mediocrity. Do you really have a winning strategy?

How will you make money in the future? Do you have a unique strategic position, a concept that you “own” in the minds of your target patients? Do you have special capabilities that can’t be easily copied? Remember that nothing lasts forever, so you need to focus on both today and tomorrow.

3. Focus on a clearly defined target market patient or referring physician

Push for the narrowest possible segmentation of your target market. You need to aim for the bull's eye to hit the target. Clearly defining and understanding your target market patient or referring physician is one of the most powerful things a physician practice can do to improve its strategy.

4. Develop a strategy that puts you ahead of the trends

Many strategies place too much weight on current trends. But as the founder of modern management Peter Drucker said, it is not the trends, but “the changes in the trends” that leaders must stay current with. These changes creep up so slowly that most practices fail to act until it is too late to mount an effective response, let alone take advantage of it. They are held back by sunk costs, an unwillingness to cannibalize a legacy business or an attachment to yesterday’s formula for success. Instead, you should always look to the edges. How are your patients shopping for healthcare? What are the innovative new entrant competitors doing? What innovations could change your entire specialty?

Prioritize all your current threats, things that could derail your strategy, as part of your annual SWOT analysis (Strengths, Weaknesses, Opportunities, Threats). Consider what action you would take if these worst-case scenarios came to fruition. Could you handle it? Do you have a contingency plan ready to implement?

Hedging your bets is not a strategy. A full commitment to a defined course of action is the only path to a sustainable competitive advantage. This requires tradeoffs, as you can’t be all things to all people. Remember to consider what you are NOT going to do, and accept those self-imposed limitations to stay focused on long-term success.

Confirmation bias refers to a tendency to cherry-pick information that confirms existing beliefs or ideas. The best way to avoid this is to ask an outside consultant to facilitate your strategy discussions. That individual has no emotional ties to your practice and will instead lead a rational discussion on your strategic plan’s viability.

8. Translate into a one- or two-page summary

Capture your key decisions on a very short document so that everyone in the practice can clearly see where your practice is going, how you plan to get there and what specific actions they need to take to play their part.

Strategic planning should be an ongoing process - not a rare event. Effective medical practices update their strategic plan at least annually to ensure relevance with the competitive environment and to re-align all their staff to the most important priorities each quarter. Strategic planning provides a physician practice with a real and lasting competitive advantage when treated as a work in progress rather than as a binder on a shelf or a file in a computer.A living strategic plan will help direct the business to where you and your partners or advisers desire it to go.

Creating a winning strategy is just the beginning. Spending time to invest in the future will result in a clear focus, a sense of joint purpose and agreed-upon priorities, consensus among stakeholders, and a basis for measuring progress and impact. Strategic planning is your practice’s road map to that shared vision. The real leadership challenge then becomes the successful execution of your strategy. But of course, you must start with a "real" strategy – if you want to have any chance of winning at the game of business. Are you ready to prepare a strategic plan?

Strategic planning is your practice’s road map to a shared vision.

Private practice strategy:  A road map to success

Succession planning is essential for private practice owners, especially since ownership transition can be necessary at a moment’s notice due to unforeseen events such as illness, death or retirement. Unfortunately, many physicians have not contemplated succession planning or do not have a comprehensive succession plan in place. This widespread lack of succession planning can lead to major obstacles for both private practice owners and the continuity of care for patients. An increasing number of physician owners are expected to retire within the next decade, which will create an extremely competitive market for medical practices looking to sell to new owners. Private practice owners who want to secure the future of their medical practice need a solid succession plan in place to ensure a smooth transition from ownership to retirement. There are several options available if you are a private practice owner looking for advice on how to establish a succession plan. Here are four tips on getting started:

The first step to medical practice succession planning is deciding who will inherit your business. You can select an individual physician, a group of physicians, hospital, another practice, or a private equity-backed management company (“MSO”).The intent, of course, is to have someone who will continue to care for your patients and also maintain good relationships with referring physicians and the community as a whole. Many of your patients and referring physicians may come to your practice because of their relationship with you. Choosing the wrong successor can lead these patients and physicians to seek care elsewhere. As an aside, if you decide to select a family member as your successor, be it a relative or child, make sure they want to run your medical practice and have a passion for the business side of private practice.

Once you have decided your successor, you need to ensure your private practice succession plan is legally protected. There are several legal arrangements you can make to plan for succession, and one of the most popular is creating a buy-sell agreement. A buy-sell agreement allows you to make provisions that govern what will happen when you decide to leave your practice. You can state who will own your practice, how shares will be allocated if there are multiple owners and at what price to sell shares. Even if your retirement is more than 10 years away, creating a buy-sell agreement is a good idea. Buy-sell agreements can determine what will happen if unforeseen circumstances, such as bankruptcy or personal injury, force you to leave the practice of medicine earlier than expected. This will ensure your chosen successor (or successors) are legally able to transition into ownership when you step down.

3. Prepare your successor (and yourself) for success

Once you have finished your private practice succession planning, chosen a successor and taken care of the legal arrangements, you will need to train your successor to successfully run your medical practice. I cannot stress enough the importance of this step and yet it so often is overlooked after the attorneys have drafted the legal documents and departed the practice.Even if your successor is passionate about your practice, you should set up a training plan that exposes them to every area of your medical practice so they can learn the critical management tasks that you may take for granted. In addition to training your successor, you should also plan your own exit strategy. Give your successor room to learn and grow while you are still in a place to offer advice, but be prepared to start giving them more control as you approach retirement. This can prove to be difficult for passionate private practice owners, but it’s essential to gradually let go and allow your successor to take ownership when you’re ready to depart.

The last thing you want to happen as you create your succession planning is for rumors to spread about your departure. Rumors can become misunderstandings if you are not clear about who will be running your medical practice and when the transition will take place. You risk patients leaving and referring physicians sending patients elsewhere if they are concerned about the stability of your practice. Once your plan is in place and the time is right, make sure to tell your patients and referring physicians and assure them that your successor will provide the same level of service they have come to expect while working with you. Communication is also essential with the person you are eyeing to be your successor. Don’t let them jump ship for another job without communicating that you are considering them as the eventual head of your medical practice.

Private practice succession planning can take years, so it is essential to get an early start. Make sure to involve an experienced consultant at the outset as they can walk you through the strategy and also can coordinate the other needed professionals such as an attorney, accountant, and financial advisor.The earlier you get started, the better chance you have at ensuring the transition to your successor is as smooth as possible.

Don't wait until it's too late to start planning for practice succession.

4 Tips on physician practice succession planning

There are numerous reasons you may want to merge your medical practice with another. Perhaps you want to expand your practice to new geographic markets or maybe it is a financial necessity, or you simply believe that the practically instantaneous growth produced by a merger or acquisition will help your medical practice achieve new heights and fulfill your goals. Whatever your motivation, you cannot simply pick any random practice out of a hat and try to make it work—you have to find the right match. Mergers or acquisitions are no easy task, and the larger your medical practice the more complex it will be.

The mergers and acquisitions (M&A) life cycle is broken down into three phases: Strategy, Execution, and Integration.For the purposes of this article, I am only going to address the strategy phase.

Strategic planning helps protect you from M&A failures. Just because you want to buy a medical practice doesn’t mean you should buy that practice. There are several questions you should ask yourself when researching target physician practices.

Why do you want to acquire, or merge with, another practice?

Do the target practice’s clinical services fit with your objectives?

What is the value of the target practice?

Does the culture of the other medical practice fit with yours?

These types of questions can help you narrow your choices as you screen the medical practice you are interested in, determine target practice valuations, structure deals, and analyze how your business decisions will give you an advantage in the current market.

Synergy is a combined action or operation. Many medical practices decide to merge with or acquire another practice based on potential synergies that can come from combining similar clinical services and technologies. The following are some benefits that synergy can bring when physician practices merge:

Combine workforces—Identify and eliminate redundancies and restructure workflows to increase efficiency and to accommodate increased business volume.

Combine technologies—Combining similar technologies can help a practice to achieve strategic advantages in your market.

Reduce costs—Consolidation can improve your purchasing power and decrease costs as you negotiate better terms with vendors based on the need for more materials because of increased output.

Market expansion—There is potential that combining medical practices will create an advantage in a particular market, or enter into a market that was not previously available to you.

Here are five key components required for a strong and effective merger.

As in most aspects of business, communication is a vital key to ensuring your merger or acquisition goes smoothly and is the right move for both medical practices. You need to have completely open and direct lines of communication with the key players from the practice with which you want to merge. This is one situation where you absolutely cannot afford to have lines get crossed or have a misunderstanding about each other’s expectations. Be clear and forthright about what you want and expect, and build your new relationship on a foundation of complete honesty.

The merger or acquisition needs to be a win-win for both medical practices. For your merger to be effective, both sides of the transaction need to be improving their situation in some way. One-sided M&As will leave at least one of the critical parties unhappy with the outcome, which does not bode well for your future together. Think of your merger as a relationship—both sides need to bring something to the table that makes the other party better.

Early in the process you need to establish with your counterparts in the “target” medical practice what your soon-to-be combined practice’s new identity will be. You might not be able to practically maintain the identities of both practices. Likewise, it may be practically difficult to completely integrate one group’s identity into the other. What will your vision be for your new medical practice? If you and your counterparts do not agree on a vision for the practice’s future, then the merger/acquisition may not be successful post-closing. Your vision and new identity should be very clearly defined and planned before moving forward.

Speaking of planning, this is another vital component of any merger or acquisition. You cannot just leap into the merger and expect things to work themselves out. Quite frankly, you need to clearly plan out many of the critical details of the transition. Whether you are the buyer, seller, or another major player in the transaction, an experienced transaction consultant can help you plan and execute every step of your transaction.

You may need to establish an integration team entirely dedicated to executing and implementing the merger. There will be many major changes for the employees from both practices, and you need a strong and well-executed integration plan to ensure the transition goes smoothly. There is a great deal to think about with regard to how you will integrate your new identity and culture and you need managers who can focus on this while others focus on continuing the normal focus of your business.Do not execute any closing documents until you have first prepared an integration plan.

When properly planned and executed, a strong merger and acquisition can take the involved companies to heights they never dreamed of. But the M&A process doesn’t happen overnight or even in a couple of weeks. It is a long, complex, and detailed process that requires patience, diplomacy, compassion, and compromise. The ideas and best practices outlined above can help you to remain focused, pay attention to detail, and get the deal done right.

Thinking of merging? Don't overlook these components of an effective one.

5 Key components for effective physician practice mergers

Oftentimes private practice physicians make drastic mistakes when selling their medical practice and lose thousands of dollars in the process. All their hard work and long-term investment goes down the drain. These mistakes though are often easily avoidable. As small business owners, these physicians had once dreamed of owning their own medical practice and building it to success.As times goes on, they hope to reap the rewards in the form of a successful business sale. Sounds like a great plan! But making the sale is not as easy as it may appear.

Proper planning can mean thousands of dollars in your pocket. Here are four tips to help you avoid medical practice sale pitfalls, disappointment, and lost money.

4 Things to avoid when selling your practice

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Avoid these pitfalls when selling your medical practice.



Nick Hernandez, MBA, FACHE

Founder & CEO at ABISA, LLC

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