Does the world need another start-up physician practice?

Does the world need another start-up physician practice?Daniel James Scott, MS, MBACTBC, CBA, CRC, CGBP, CMQ/OE, CQPA

Sandy Lutz, Woodrin Grossman & John BigalkeFrom Med Inc.“America has twice as many physicians as it needs.”

Dr. Elliott FisherCenter of Evaluative Clinical SciencesDartmouth Medical School“If we sent 30 percent of the doctors in this country to Africa, we might raise the level of health on both continents.”

PCP ConcentrationFL = #4 in US for PopulationFL = #4 in US for PhysiciansPCP's = 36% of doctors in USPCP's = 37% of doctors in FL

PCP Concentration6.1% of US population located in FL5.6% of US PCP's are located in FLFL Population = 17,922,260FL PCP's = 21,269Assumed PCP Shortage = 1,708

PCP ConcentrationExcess specialist physicians in FL?215Real Current PCP Shortage< 1,500What are Florida’s population forecasts based primarily on?

PCP Concentration1:780US1:1,1765 miles from USF Health South Tampa1:843FL1:7495 miles from USFMain Campus

Market FocusFind potential locationsAnalyze competitive practices (within a three-to-five-mile radius)Survey demographic (especially income) information on the area to be servedNote population projections for the areaInclude any other factors pertinent to the location

Wilfred PetersonAuthor, The Art of Living“Big thinking precedes great achievement.”

Warren G. BennisFounding Chairman, The Leadership Institute at USC“Leadership is the capacity to translate vision into reality.”

Russell Robertson, M.D., Chair Council on Graduate Medical EducationLori Heim, M.D., President American Academy of Family Physicians“When you look at other nations with comprehensive policies with regard to universal access to health, the ratio of generalists to (sub)specialists is about 50/50. But the U.S. physician profile is only 31% primary care and 69% (sub)specialty care.”

Don BerwickHarvard Medical School“We’re in the Internet age, and the average patient can’t email their doctor.”

How Will I…Compete to harness specific word of mouth or internal marketing strategiesMaximize the benefit of my locationBuild referral sources (schools, local merchants, other health care providers)Reach potential new patients (including leveraging PR, joining and speaking to community organizations, etc.)Plan for advertising and direct mail

Competitive AdvantageOver the past decade, the key driving force has been specialization, both in facilities and practitioner offerings.Companies have sought to maximize revenues from what they do best, while outsourcing standardized and nontechnical services in order to lower costs.So what are you best at?

Specialist? Concierge? Corporate Services? Preventative? Immediate Care? Technology? Breadth of Practice or Payer Base? Quality Assurance? Alternative Medicine? Customer Service? Green/Carbon-Neutral Policies?

What is the firm’s value above and beyond you?AdvertisingAverage 0.93% Advertising BudgetDon’t look at it this way……Look at it as $15,000 per firmNon-hospital advertising expenditures: ~$4.5B US, ~$250MM FL

Everything you can do I can do betterSome Marketing AdviceHave a mission (tell once) and a story (tell every day)There is the world’s largest line between a bad decision and an ill-equipped decisionPeople buy emotionally (want) and justify logically (need) – even in healthcare!

Unknown“If you fail to plan, you plan to fail.”

George Van HornSenior Analyst, IBISWorld“Healthcare practices who thrive and prosper will be noteworthy for their heightened focus on competitive marketplace positioning and for superior cost containment.”

Quick AnalysisTarget Sales = Overhead + Target IncomeSpecialty? Third-party payer mix? Collections via each payer? Average Collections per source?

Quick Analysis (cont’d)Divide Target Sales by average collections to determine rough # of patient volumeDivide Target Sales by $162,000 to determine rough # of employeesDivide Target Sales by 2.3 to determine rough $ of payroll

TrendingSome UpsideHigher spending levels!Larger profits!Bigger cash reserves!Still a fragmented industry!Demographic shifts!Some IssuesGreater competition!Larger offices!Increased effectiveness!Concentrated payers!Internal concerns!

Financial Benchmarks100% sales45.23% payroll23.8% owner compensation4.54% rent0.93% advertising12.1% operating profit9.5% net profitSimple Valuation Techniques0.45 x Net Sales (0.45 x $1.6MM = $720,000)5.04 x Operating Profit (5.04 x $193,600 = $975,744)5.28 x Net Profit (5.28 x $152,000 = $802,560)

Cash FlowCollection rate – current collections divided by current charges (60-120 days)Realization rate – current collections divided by the sum of current collections plus current write-offsPresence of “outside income” – any income not from direct patient care, such as stipends from hospitals, nursing homes, etc.Staff salaries as a percent of collectionsOccupancy costs as a percent of collectionsCollection of patient co-pays (should be in the vicinity of 95% or better)

Loan RequestsCategorized loan request (equipment, leasehold improvements, working capital, etc.)Medical equipment and suppliesOffice equipment and suppliesFurniture and furnishingsLeasehold improvementsInsurance needsOperating and personal expenses (aka working capital) – some allowance, possibly 10-20%, should be considered for expense coverage or income shortfallsThe advancing loan should have an initial six-month term without scheduled payments of principal, which would be due at maturity. Such terms are typically extended for another six months, allowing time for positive cash flow.Ultimate repayment of three to seven years.

Peter DruckerAuthor & Management Guru“Plans are only good intentions unless they immediately degenerate into hard work.”

A (non-exhaustive) To Do ListConduct a feasibility analysisRetain advisorsPrepare a business planObtain financingIdentify a locationNegotiate the leaseChoose and order furniture, equipment, billing systemHire employeesDevelop employment policiesDevelop a filing systemDevelop marketing materialsAdvertise for patientsPrepare patient chartsDevelop coding and compliance policiesDevelop an encounter formDevelop a general ledger systemDevelop a compensation system in a group practiceEstablish professional relationshipsRecruit patientsRegister patients in the billing system (database)

RecapOpportunities are defined by geographic ‘pockets’ – not US or state averagesKnow what you want, and build structure around those goalsGrowth potential exists for well-run, flexible and innovative physician practicesWorking capital is always a concern in healthcare, but no bigger or worse than most other industries – focus on success

Does the world need another start-up physician practice?

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Does the world need another start-up physician practice?

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