February 1, 2019

Dear Sean,

Can 1 plus 1 ever equal 3? The answer might surprise you.

In fact, it's the subject of this past Monday's blog post, Medical Group Mergers: Making 1 + 1 = 3. Follow that link to the blog or just keep reading for the rest of the story:

When I was a kid, there was a new method of teaching math that was heavily marketed to our parents. It was called the "new math.” It was supposed to make it a way for math to be more easily understood by students.

We kids joked that “new math” was going to make 1 plus 1 equal 3.

As funny as we thought that was, in math class 1 plus 1 never made 3. But, despite our teacher’s inability to conceive that it ever could, in the domain of medical group mergers 1 plus 1 can equal 3. In fact, it should or there’s a large chance the deal shouldn’t be done.

Now when I say “merger” I don’t necessarily mean merger in the true legal sense, although it could be. It could be an acquisition. But in general, I’m focusing on the peer-to-peer combination of medical groups as opposed to a deal in which a local medical group is flat out being acquired by a national practice, whether or not financed by outside investors.

And, by 1 plus 1 equaling 3, I mean that when you structure a merger or evaluate a merger partner, you want to avoid a merger that is merely additive, one that takes 1 plus 1 and gives you 2.

The better approach is to bring on a merger partner that takes the 100X that you’re currently doing plus the 100X that they are currently doing, and which, when combined, results in 300X or even more.

Now, of course, I'm not talking simply about gross revenues all of a sudden making some sort of magical, mystical, metaphysical jump.

What I am talking about is the creation of additional value whether it has to do with the fact that it changes the way you can contract, whether it changes the way that payers look at you, whether it brings on skills that are much easier bought than homegrown, or whether it means expanding into a new geographic area in a way that is far less expensive than by organic growth.

To be truly valuable, to be truly powerful, to be truly rewarding, look for that new math.

Look for deals where one plus one actually does equal 3.

Tuesday - Success in Motion Video: How To Expand Your Years Of Active Practice And Profit

Watch Tuesday's video here, or just keep reading below for a slightly polished transcript:

I was at a conference a few weeks ago at which a speaker made a comment that physicians within a given specialty didn’t like it when other physicians within that same specialty made “money off of them,” which I thought was an interesting comment.

Maybe it's true, but it does seem to fly in the face of the apparent reality that the great majority of physicians leaving training are perfectly happy to become employees of groups.

In fact, in many instances, the majority of freshly-minted post-residency physicians are perfectly happy to go to work for large hospital-owned groups, or very large investor owned medical groups in which employment is the model. In other words, there is no possibility of partnership or shareholder status. Zero! But they’re perfectly happy. It’s a job and that's what they want.

There’s a dichotomy there.

On the one hand, some physicians feel that if their colleagues profit from them, it's unethical, unbecoming, or immoral. On the other hand, an increasing number of physicians are just looking for a job in which profit flowing to someone else is part of the equation.

What’s this mean for you? Certainly, if you are a partner or shareholder in a significant sized medical group, whether it’s a hospital-based group or an office-based practice, that has traditionally made everyone a partner or shareholder, you need to seriously question whether that's really the model needed for the times.

Often more senior shareholders, and I’ve spoken and written about this before, have this notion that I call the “expiration date.” That's the number that's metaphorically stamped on their bodies: “Discard after December 31, 2021.”

It’s their expiration date, the date they’re going to retire, leave the group, or be bought out by their partners, whether for real money or token money.

But I’m suggesting that the trend toward the acceptance, even the welcoming, of a permanent employment relationship should mean that there is a better way for current medical group owners to buy many more years of active business life. And that’s a life in which you’re not necessarily devoting as much time to the practice of medicine as to owning and operating a practice that employs other physicians.

It’s a way of buying others' productivity from physicians who are perfectly happy to sell it, and, in fact, expect a future in which they sell it and don’t own it.

Why shouldn’t you own it? Let's talk about how this applies to you and how you might profit from it.

Wednesday - Medical Group Minute Video: How Many Felonies Have You Committed Today?

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

How many compliance related crimes have you or your colleagues or employees committed today, whether purposefully or, completely inadvertently?

A friend, a former federal prosecutor, recently told me about a book called Three Felonies a Day. The book addresses the fact that, due to the burgeoning number of criminal laws and, even more concerning, regulations imposing criminal penalties including imprisonment, almost everyone unknowingly commits a number of acts each day that could be charged as federal crimes by overzealous prosecutors.

Among the top hits for many medical groups are billing related crimes. The wrong code, the overstated anesthesia time, the unknowing Stark Law violation, can all result in criminal liability charged under multiple federal laws such as health care fraud, mail fraud, and wire fraud.

Also ever popular are violations of the federal Anti-Kickback Statute, a criminal law making it illegal to offer, solicit, pay, or receive any remuneration for the referral of federal health care program patients. What, you didn’t realize that health services for Peace Corps volunteers are one of the covered programs? Oops. Felony time.

The sheer magnitude of the punishment, let alone being tossed out of further participation in federal health care programs, means that medical groups must take prophylactic steps to prevent, detect, and remedy compliance law violations. As in now. Before you get caught.

For example, every physician group’s (or health care entity’s) billing and coding operations, whether in-house or outsourced, should be audited on at least an annual basis, if not more often. And, every group must have an active compliance program, not just a “policy” or a “plan” kept in a three-ring binder designed to gather dust.

Let’s all go on a felony diet, starting today.

It doesn’t require much will power. You can get all the help you need.

Thursday - Podcast: Sam Walton’s Failure Is A Lesson For Medical Groups (Rebroadcast)

Listen to the podcast here, or just keep reading for the transcript:

Sam Walton has a lesson for you. No, it’s not buy low and sell low. It’s something very different.

Before Walton founded the Wal-Mart chain, he operated variety stores. (To anyone under 50, see Wikipedia.)

His first store was wildly successful. That is, until he realized that he had signed a short term lease with no renewal option. At the end of the few year term, the landlord not only took back the space, he took over the operation of the store.

Has your medical group made the equivalent mistake? Many have. They’ve put themselves in the position that the hospital or another medical group can take over their business as legally, easily, and cheaply as Walton’s landlord took over his store at the end of the lease.

For example, a hospital based group, let’s call it Trusting Falls Medical Group, has a three-year exclusive contract with St. Mark’s Community Memorial Hospital. Its leaders spent scores of hours recruiting physicians to the group. They've developed trust with the referring physicians, with the medical staff at large, and maybe even with the local community in general.

Then, towards the end of the contract term, the hospital announces that it’s not going to renew the contract with Trusting Falls. Instead, it’s going to send out a request for proposal to four large, national groups. How will the “winning” group staff the facility? With most of Trusting Falls' physicians.

You can do much to avoid this type of situation by taking to heart what Walton did next. He made sure that he always held very long term lease rights. I’m not saying that you can get a 99 year exclusive contract, but you can build protections into your current contracts that diminish the economic burden in the event of non-renewal and that make your “store” less likely to be shifted to new ownership.

Note that this issue, in slightly different dress, also impacts office based practices. For example, you wouldn’t be the first cardiac surgery group to find that the hospital has recruited more than half of your surgeons to become the "poster docs” for the hospital’s new cardiac care center. Your position in the new regime? There isn’t one.

Books and Publications

We all hear, and most of us say, that the pace of change in healthcare is quickening. That means that the pace of required decision-making is increasing, too. Unless, that is, you want to take the “default” route. That’s the one is which you let someone else make the decisions that impact you; you’re just along for the ride. Of course, playing a bit part in scripting your own future isn’t the smart route to stardom. But despite your own best intentions, perhaps it’s your medical group’s governance structure that’s holding you back.

In fact, it’s very likely that the problem is systemic. The Medical Group Governance Matrix introduces a simple four-quadrant diagnostic tool to help you find out. It then shows you how to use that tool to build your better, more profitable future. Get your free copy here.

Referrals

We're always looking for more great clients! Drop Mark a line!

Whenever you're ready, here are 4 ways I can help you and your business:

1. Download a copy of The Success Prescription. My book, The Success Prescription provides you with a framework for thinking about your success. Download a copy of The Success Prescription here.

2. Be a guest on “Wisdom. Applied. Podcast.” Although most of my podcasts involve me addressing an important point for your success, I’m always looking for guests who’d like to be interviewed about their personal and professional achievements and the lessons learned. Email me if you’re interested in participating.

3. Book me to speak to your group or organization. I’ve spoken at dozens of medical group, healthcare organization, university-sponsored, and private events on many topics such as The Impending Death of Hospitals, the strategic use of OIG Advisory Opinions, medical group governance, and succeeding at negotiations. For more information about a custom presentation for you, drop us a line.

4. If You’re Not Yet a Client, Engage Me to Represent You. If you’re interested in increasing your profit and managing your risk of loss, email me to connect directly.