Uncertainty, volatility don’t have to spell disaster
Get control through strategic planning
(Editor’s note: Many physician practice managers and readers we talk with refer to the environment of constant change and challenges facing practice administrators today. This kind of environment makes having a strategic blueprint and mission for your group more important than ever. We have prepared a package that provides a comprehensive view of strategic planning, covering everything from how to get started, a specific meeting agenda, and real-life examples of practices that have used strategic planning to their advantage.)
Maybe you thought running or owning a medical practice was different from running another business. Maybe you survived for years without having to strategically plan for the future. But in today’s market, those practices that don’t act like other successful companies are not destined to thrive, says Marilyn Happold-Latham, MBA, a health care consultant for the accounting firm Yergen & Meyer in Portland, OR.
"Without a plan, you are not forced to know where you are going," she says. "To succeed, you have to know if you want to grow and whether that growth will be achieved by merger, by opening new offices, by expanding your geographic coverage, or by taking on more managed care contracts. You have to undergo a process in strategic planning that will help you become more of a cohesive group and will give direction to the administrator and other supervisory staff so that they know the practice goals."
Happold-Latham says virtually every practice even a solo operation needs to have a business plan. Why? For larger practices, having a written plan helps keep various departments and managers moving toward the same goals.
In smaller operations, there is more consideration given to merging or allying with other practices. "It is important that they have an idea of whether they want to pursue joining another group or bringing in another partner. If you plan your future and know your environment, you can make more intelligent decisions."
For the smallest of practices and solo operations, there is an even more compelling reason why you need a business plan, says Happold-Latham. "If you rely heavily on one or two employees, there is greater opportunity for embezzlement, and having a plan will enable you to put in adequate checks and balances."
Smaller practices can have less formal plans, she adds, since "the process is as important as the product. But if you have 20 or more physicians, then you need to have something formal on paper."
What’s in a plan?
What to put in a plan depends on your size and your goals, but according to Ted MacDonald, CPA, CMPE, CFP, executive director of Page Campbell Cardiology in Nashville, TN, they all should have a market assessment, an internal assessment, and goals and objectives. How detailed that information is will determine whether your plan is 10 pages or 100 pages long.
1. Market assessment.
This includes all the information you can gather about the market in which you operate, says Happold-Latham. Who is your competition? How much has managed care penetrated the market? What health plans operate in your market? How many and which practices are merging?
Happold-Latham says getting comparative data for other markets can also help. "When you are writing a plan, it helps to know where you stand compared to other areas of the country, too."
This type of competitive intelligence is often available in local and national professional publications. Another resource, she says, is hospitals on which your physicians are on staff.
Vendors are another good source of information, says MacDonald, and there are places where you can buy the information for relatively little money. Your accountant, lawyer, consultant, or local medical society can help direct you to such companies.
2. Internal assessment.
MacDonald thinks that a practice should go outside for this part of the plan. "You need to get an objective view," he says. His practice used a practice administrator from another institution. "Academic practices that don’t compete directly with you are a good resource for this," he says.
There are also consulting firms that might help, or your own accountant or lawyer may be a resource. The Medical Group Management Association (MGMA) in Englewood, CO has a list of consultants they can refer to your practice, or you may belong to a specialty group or society.
Happold-Latham believes that the internal assessment can be done by a good practice administrator. Most of it is your own financial and operational data. Among the items to include:
accounts receivable days outstanding and how you compare to a benchmark, such as one done by the MGMA;
staffing levels and how you compare to a benchmark;
revenue;
production;
payer mix information;
employment policies;
patient satisfaction data;
facility and equipment needs already identified;
any information on patient care which are already known.
"It’s all the kind of stuff a bank wants to know if you need a loan and some more subjective data," she says.
3. Goals and objectives.
Once you have this information, you need to have a list of goals and objectives. That may be harder to put together, says Happold-Latham, and probably requires some sort of meeting among the shareholders to determine what those goals are. She says that a business plan retreat (see related story, p. 135) may be an option that will help your practice not only determine its goals but also write the plan needed to make them a reality.
The list of goals should be short and manageable, she says. If you have too many, none will be accomplished. But even more important than stating the goals is to have a strategy for achieving them.
"You have to know if the goals you write down are feasible financially, politically in your practice, and practically considering your practice’s human and capital resources," says MacDonald. If they meet that test, you need to write a step-by-step action plan for each.
"Have a time line and a responsible party," says Happold-Latham. "This is where the rubber meets the road. If you don’t have accountability, then you won’t achieve your goals."
Writing a business plan can be very time consuming for an administrator who has to gather all the data together. It is something MacDonald says should be repeated at least every two years. But there are reasons to do it.
"This is a changing industry," he says. "Without it, you can get tossed and turned with every change. This way, you have a road map to see your goals through."
Happold-Latham says another benefit is the team building which occurs when a group of physicians hunkers down to determine who they are and where they want to be in the future.
That feeling increases as the group sees its goals met. For instance, if your days outstanding for accounts receivable averages 120, you can build a plan that will bring that down to 70 within a year, she says. "You set concrete objectives and see them come to fruition."
Bringing in outside help
There is help for people who want to write plans, says Happold-Latham. Your own accountant or lawyer is a good place to start, as is your local medical society. These resources can help you find a consultant or meeting facilitator if you feel you need it.
If you choose to have someone else run your planning meeting and write the plan up, you can expect to spend from $1,000 for a facilitator for a day to $10,000 for someone who will gather your internal and external information for you, says Happold-Latham.
If you do hire someone to do your business plan, she says it can take four to eight weeks from when the information is asked for to when you have a finished plan in your hands. This includes revision time after a draft has been seen by your physicians or board of directors. "It is a big project and people don’t always have a concept of how detailed that planning process will be."
There is also software available which can help you write your own plan. One such program is BizPlan Builder. For $50 to $100, you can load a program into your computer which will walk you through a business plan and ask you to insert specific information from your practice into it. "Any time you can find something that will give you an outline, it can help you with the process," she says.
CPA firms such as Yergen & Meyer, medical societies and even local community colleges also offer classes and seminars on writing business plans.
"Don’t be afraid to seek outside help," advises MacDonald. "Don’t let egos get in the way. And if you object to the cost of having someone do the whole plan, at least spring for a facilitator who will help you identify your goals."
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