Taking control, even mentally, of the medical business you run or own is no longer a luxury and is required for your survival.
There is heated discussion in many online forums about doctors, economics, and business skill right now. From right here at Physicians Practice to forums like LinkedIn, Twitter, and literally hundreds of practice management websites the comments and laments carry a common theme:
• Doctors are going broke
• They lack essential business training that medical school failed to provide
• Their financial world has been turned upside down
• Everyone takes advantage of them, they are over-sold and under-served
In our previous discussions we’ve provided specific guidance on some of these issues by providing a checklist of some essential business and legal planning issues that every doctor and practice manager must review. That list was merely and introductory checklist and must be supported by some other basic business skills and knowledge and while I have a clear understanding of the time constraints and workload many physicians operate under I’ll be clear on this issue: Taking control, even mentally, of the medical business you run or own is no longer a luxury and is required for your survival.
You must understand and have a basic business plan including cash flow and budgets.
I am regularly surprised by how many successful doctors we talk to that don’t have a business plan. In these cases I’d suggest they prospered in spite of not having that plan in place, based largely on old economic models that don’t exist anymore.
Even among professionals that regularly examine these issues for doctors, finding a credible business plan that meets generally acceptable business standards is rare. “We rarely see a real, functioning business plan outside two specific scenarios, when they want loans or start-up capital”, says Chris Amato, CEO of Triton Business Advisors in Phoenix, Ariz., a business planning group that works with medical professionals. “The business plan is a key first step when we work with a practice and must be based on performance and actual benchmarks established by the practice in the past, as opposed to vague ‘industry standards’. We really need to have good grip on what this practice has achieved, where the changes have occurred and what the opportunity costs of making the changes to stop that financial hemorrhaging are.”
When I bring a business plan up, especially with established, older doctors they often comment that they thought that was only something for a new business; that’s not correct. Given the changes in reimbursement and medical economics in general, a specific plan as to what your mission statement is, how your practice remains profitable, what patient volume it’s going to take to generate business to support that income level at current reimbursement rates, and how you are going to achieve those goals is important. You can’t just be a good at practicing medicine you have to be good at the business of practice medicine and this takes a specific treatment plan.
Some kind of cash flow crisis is at the core of most of the practice failures we have studied. Practices simply aren’t adjusting to new revenue models and changing to account for new reimbursement rates and increasing costs while they still have time to do something about it, now. If you wait until you are in a crisis situation to make adjustments to your business plan and overhead or personal cash flow it is usually too late.
Merely knowing how much you need or are short every month is only half the battle; your business, like your family, must live within its means. If you can’t support the office or staff you have in place right now comfortably it’s time to look at alternatives and options. If layoffs are going to be required, make sure that you have employment manuals and policies in place that protect the practice and start looking at ways to decrease your overhead that are both direct, like trying to downsize, sublet, or renegotiate your lease and passive and delegated to experts; such as energy studies, cost-segregation studies and property tax appeals. (If your building is worth less than it was five years ago why are you paying the same tax?).
A business plan is just that, a plan, but it does provide specific goals to work toward and can be a really simple way for doctors, even those with limited business knowledge, to take control of these issues and reduce them to manageable tasks and ideas. Whether you need a first plan or a new one that accounts for current realities, today is the day to act.
Find out more about Ike Devji and our other Practice Notes bloggers.