Most physicians would agree that they thinkof their medical practice as a business, yetfew actually run it that way. Like any business,though, a medical practice must measureand manage its performance across the fourbusiness components—financial, customers, employees,and business processes—that are basic to allenterprises. In striving to achieve its vision andfinancial goals, too often, a medical practice doesnot execute the basics, i.e., explicit and visible managementfunctions; methods to measure and reportperformance; and processes for thinking and planningahead.
“Peer Review”...for Your Practice
Lack of financial acumen is all too common in medicalpractices. While most physicians review thefinancial statements with their accountants at yearend,budgets and other common performance managementmethods are rarely used. In the run-up tothe recent “Great Recession,” for example, manypractices realized too late in the year what was happening.It followed, then, that many took littleaction to affect the revenue and expense equationmeaningfully. The reality is that many physicianowners were caught off guard. In contrast werethose medical practices/physician owners who routinelyevaluated practice revenues, expenses, andoperating margins, and tended to carry out moreimpactful business decisions in light of the changingconditions.
The notion of “peer review” is familiar ground tophysicians and it can apply equally to the financialperformance of the medical practice. AllerganPractice Consulting Group (the APC Group), workingclosely with BSM Consulting, regularly analyzesthe financial performance of plastic surgery and cosmeticdermatology businesses and, in turn, accruessuch findings into its national Medical AestheticsDatabase. Benchmarking the financial performanceof a practice can be powerful in two fundamentalways: first, learning where the practice actuallystands in relation to like-kind businesses in terms oftrending, productivity and efficiency measures; andsecond, understanding what is possible, i.e., howsimilar businesses across the US actually performed.Benchmarking enables the physician owner to betterunderstand how the practice as a business is performing—it likewise becomes a quantified foundationfor decision-making going forward.
A less comprehensive but no less valuable exerciseis conducting a procedure value per hour analysis.This is a tool that can help the physician ownerbetter understand what procedures and services netthe greatest benefit in relation to the time and effortexpended. Similarly, analyses of accounts receivableaging help identify and point to potential businessprocess improvement needs. Physician-owners whoregularly measure financial and other business performanceactivities tend to exhibit higher levels ofperformance. If you want to improve something, itmust be measured.
In the same way, measuring customer perceptions(what a practice does or does not do well on a dayto-day basis in the eyes of the patient) is an equallycritical process for managing the medical practice asa business. A practice may believe it is doing thingswell, but if that is not the perception of the patient as the paying customer, then it is, simply, not doingwell (for the cosmetic medical practice that is essentiallyall cash-based, such perceptions can overridebusiness success). We recognize that it is easy to getcaught up in the everyday pace of the practice andas a result lose sight of what really is (or is not) happeningin terms of meeting customer expectations.Yet, customers can and often do vote with their feet,particularly where cash-based services are involved.We all do it, so it is important that the practice consistentlyobtain and measure customer feedback.
Acquiring Information and Learning
To aid in soliciting customer feedback, consider utilizingeither a traditional paper-based patient satisfactionsurvey or a Web-based process that measurespatient satisfaction continually throughout the year.In either case, the focus of such activities is onmeasuring and learning how patients, as paying customers,perceive not only the overall experience ofcontacting, visiting, and securing services from thepractice, but also the individual experience with itsphysician(s), other professionals, and office supportstaff. Lessons learned from measuring customer perceptionsshould become the basis for training anddeveloping employees; it likewise should point tobusiness process improvements within the practice.Allowing customers to provide, on a confidentialbasis, insight as to what is working (or not) andwhat they would like to see change is absolutely keyto developing and growing any business.
Another effective exercise is to have the practice“shopped” with the goal of learning how prospectivecustomers (and patients) perceive contact with officesupport staff. Data from such activities often demonstratesthe need for customer service-related training,business process improvement, or both.Common are findings around the need for improvedbasic phone skills; product and/or procedure knowledge;and credentialing skills concerning the practice,its physicians and other professionals.Frequently, developing more formalized protocolscoupled with training office support staff can lead tomeasurable improvements that benefit the practiceas a business.
Measuring how effective the medical practice is atretaining patients is another area often overlooked. Itis far more expensive to “buy” new patients for thepractice than to hone the business processes withinthe practice aimed at retaining existing patients.Based on analysis, patient-recall protocols and systemsinitiatives can be implemented to improvepatient retention rates, which should be measured,managed and acted upon on as a recurring businessprocess and such processes can have favorable revenueeffects for the medical practice.
Employees, of course, are the single largestexpense for any medical practice, and employeesdirectly affect patient perceptions, good and bad.Notwithstanding such importance, even cursoryreviews of medical practices typically find questionablemanagement processes/capabilities; little to noformal staff training, development and/or educationregimens; and little in the way of regular measurementof individual and collective performance.Ideally, there will be explicit and visible managementfunctions and capabilities; clearly defined positiondescriptions as the basis to measure individualaccountability and performance; and a regular andrecurring process of work performance reviews andprogram evaluations to measure and track businessperformance. In addition, and even better for thepractice, there will be compensation methods tied toindividual and practicewide performance; regularperformance-management reporting aimed at educatingand developing all employees of the business;and an eye toward developing a culture within thepractice providing for candid discussions (one thatpermits issues to be raised without fear of retribution).High-performing businesses tend to displayand embrace such performance attributes.
The ability to execute or actually get things doneis rooted in business process effectiveness. Even themost skilled and able employee eventually willbecome frustrated where business inefficiencies gounchecked. Thus, physician-owners should make adetermined effort to identify suspect businessprocesses as well as protocols focused on customer“touch points” within the practice that may bedetracting from overall growth and development of the business. For example, in terms of convertingprospective cosmetic inquiries into scheduled consultationsand, eventually, into paid procedures,what is the process for handling phone and/or websiteinquiries, i.e., who responds; what materials aresent and when; what timeframes are allowed forthe responses and follow-ups; how is such informationtracked; and, importantly, how is what islearned used to benefit the business of the practice?Many offices simply do not focus on businessprocesses, do not have or do not document businessprotocols to guide office staff behaviors and activities,do not measure key practice/patient-relatedactivities, and thus, are not able to learn and makepositive business changes based on objective dataversus intuition. A common business trait in highperformingpractices is a process of measuring andthen acting on what is learned.
Effective Business Planning
Ultimately, to grow, develop, and manage the medicalpractice more effectively as a business requiresplanning. Effective business planning should touchon all of the basic business components—financial,customers (patients), employees, and business (clinical)processes. The financial and customer businesscomponents are natural starting points, since theflow of dollars and perceptions of customers arecentral to business success. What you learn aboutfinancial performance and customer perceptionsoften naturally leads to opportunities involvingeither the employee or business process componentsor both.
Business planning for the cosmetic practice neednot be complicated. It does, however, require activeparticipation by the physician-owner(s) as well asthose employees responsible for practice programsand operations. The value of planning is in doing itand not having it done, or worse, not doing it all. Asa management process, business planning should beviewed as a means to assess the business of thepractice, and then to think ahead based on what islearned. For the physician-owner, it becomes a wayto develop business agendas for improving the largersuccess of the medical practice.