Subject: Practice Success

August 9, 2024

Dear Friend,


Is your medical group tripping over its own governance feet?


That was the subject of Monday's blog post, Why Your Group Must Get Out of Its Own Way: Governance. You can follow the link to read the post online, or just keep reading.


Overly democratic or consensus style systems of medical group governance make it impossible for the group to adopt a strategic, as opposed to a tactical, outlook.


For example, consider a consensus style forty-three physician orthopedic group that's unable to come to agreement on how to respond to an important referral source's request that they expand their office hours on Fridays. From a purely tactical standpoint, the group considers the cost of the extra hours of operation and, although unspoken, of the convenience factor as run through each doctor’s personal filter.


But the strategic analysis is very different: If we value their referrals, how do continue to obtain them?


As to the question of who should be making that decision, true democracy doesn’t work in business any more than it works in running a city, state or nation -- it's slow and inefficient.


As I advise clients, I’m a strong proponent of the “strong leader” form of governance. Whether that leader is grandfathered in or elected every year or two is an issue that turns on the culture of the specific group. If elections are the culture, that’s where democracy comes into play: representative democracy. And, I'm not saying that boards of directors, or their equivalent, aren't important; I'm simply saying that day to day business decisions, as opposed to policy decisions, belong at the operational level.


Leaders must be empowered to lead. Not all of their decisions will be good ones, so they must be free to fail as well as to succeed. Requiring a group vote or establishing a board consisting of all of the shareholders guts leadership and replaces it with its poor relation, consensus, which by nature suffers from the defects of peer pressure and compromise.


Lead, follow or get out of the way.


Or, as the English author G.K. Chesterton poetically put it, “I’ve searched all the parks in all the cities and found no statues of committees.”

Watch the video here, or keep reading below for a slightly polished transcript.

Let's talk about bankruptcy. Hospital bankruptcy that is.


In connection with their Chapter 11 bankruptcy, Steward Health system is selling two hospitals, one in West Monroe, Louisiana and the other in Hope, Arkansas.


The one in West Monroe hit my eye because I'm familiar with the area. This hospital sold for $500,000 plus some assumed debt. I don't know exactly how much debt was assumed, but my guess is that the hospital sold for pennies on the dollar. Steward is trying to cut their operations back, raise capital and eventually emerge from Chapter 11 as a smaller but hopefully viable entity.


So, what's this mean?


Certainly for Steward it means they've they failed and they're trying to recover.


But let's think about this differently.


Will the hospitals be viable on their own? If they aren't, are there competing hospitals to which surgeons can take their patients? Are there ASCs to which cases could go? What's going to happen with contracted hospital-based services like anesthesia, radiology, emergency medicine, pathology, and hospitalists? Will the new owners continue to use their services?


The epidemic of hospital failures (and it is an epidemic) has an impact greater than simply on hospital systems; it has an impact on physicians and physician groups who are tied to those facilities, and to the patients that need them.


For physicians and groups, it's becoming more and more dangerous to become tied to a single facility because if the single facility fails, well then, the whole hospital/business ecosystem is gone.


Think about that as part of your business planning.

Watch the video here, or keep reading below for a slightly polished transcript.

Frustrated. Trapped. Duped, maybe.


According to 2023 reports, by 2021, nearly 70% of physicians were employed by hospitals or investor-owned corporations.


And now, they complain about the loss of autonomy, the imposition of workplace rules, less income potential, and (no) surprise, less job security.


According to a University of Chicago survey, approximately 61% say they have from no to only moderate freedom to make referrals outside of their employer’s system. Close to 50% say that they change their patients’ treatment to reduce costs, either to comply with their employer’s policies or because of financial incentives.


Stripped of their own patient relationships, of in-bound referral relationships, and of any independent business process, many believe that they’re trapped. They’ve checked out of their future, and fear that they can never leave.


From experience working with both office-based and hospital-based specialists in these situations, I can tell you that there is a functional exit door and that many have found it.


Other hospital/corporate-employed physicians are likely to be pushed out of the exit door as a result of the increasing number of healthcare entity failures and bankruptcies, such as the 2023 closure of American Physician Partners, which employed more than 2,500 physicians and other medical professionals.


Whether the exit is voluntary or involuntary, unhappily employed physicians and those that are laid off, are either going to leave practice, decide to take an entrepreneurial medical practice route, or, as good news for physician-owned medical groups, seek a medical practice future with an organization that views them as professionals, not as cogs in a system. 

Listen to the podcast here, or keep reading for a transcript.

I'm going to share a secret with you today. There's no such thing as value. At least not in the fixed sense. In fact, value is as malleable as clay.


You, as a seller or as the proponent of any deal, can't set value for a buyer or deal partner. Value to that third-party is set by him, her, or it. Only if they think that they are getting value from the deal -- something worth more to them than the worth of what they are giving up -- will they close the deal.


Of course, value plays a role in your decision to close the deal as well. Your value determination is based on the worth of what you're giving up measured against the worth of what you're getting.


And, magically perhaps, "worth" and therefore "value" are subjective concepts.

Even more magically, because those concepts are subjective, they can be influenced. Although you can't set the value for your opposite, you can heavily influence how your opposite perceives value.


I often refer to this as framing: The creation of a situation, a perception, or a background in which the negotiation takes place or in which we want to put the mind of our contracting opposite. Change the frame, change the value.


Here's an example right off the shelf.


Say you suffer from migraine headaches. When you need relief you need it fast, so you decide to stock up on pain reliever. You see two different packages of Excedrin: Excedrin Extra Strength and Excedrin Migraine. Here are images of the packaging from the excedrine.com website:

Which do you choose? If you're like most people, you'll choose the product made specifically for migraines because, after all, that's what splits your head in two. You're willing to pay the extra $4.49 over that for regular Excedrin Extra Strength for 200 capsules, as revealed by a search of the internet I made while writing this. After all, it's migraine medicine, not just regular old headache or flu or stubbed toe medicine.


The only problem, at least for you? The ingredients are exactly the same:

Acetaminophen 250 mg
Aspirin 250 mg – Non-Steroidal Anti-Inflammatory Drug (NSAID)
Caffeine 65 mg


The migraine frame shifts the value determination by 142%!


Crazy!


Yeah, crazy like a fox.

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