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| Dear Friend,
It's almost as if they said, "dear investor, please open a hospital so that we can prevent you from closing it when you find out it's a money losing dog."
Back in October, 2020, I wrote, in a post called City Loses Hospitals Like We Lose Our Keys, about the fact that Trinity Health, a system based in Livonia, Michigan, was closing down Mercy Hospital and Medical Center. Mercy, located in Chicago, is the city’s oldest hospital; its roots go back to 1852.
Mercy was losing $ 4 million a month and Trinity had tried to sell it without success. They had also tried to combine it with three other Chicago hospitals to form a new health system that, overall, would have been more sound financially. That failed, too.
So at the time, last October, they decided to close the hospital down. In its place, they envisioned an outpatient facility.
Ah, but politics being politics, things aren’t so simple in the State of Illinois. One needs permission to open a hospital and, surprise, one needs permission to close one.
To bring the story up-to-date, the state refused to give that permission. As a result, last week, Trinity put Mercy into bankruptcy, which will almost certainly result in the hospital’s closure.
But wait, there’s more! Politicians being politicians, things aren’t so simple in the State
of Illinois.
One genius, a state Representative, was quoted as saying “by pulling this lever, it again shows us that they do not want to provide healthcare to the Southside of Chicago.”
Sure, that’s it. It’s simply a matter of “choice” to close a for-profit facility that’s become involuntarily nonprofit at the cost of $4 million a month.
Here are some takeaways:
1. If you are a for-profit hospital corporation and want to open a hospital in the State of Illinois, certainly in the City of Chicago, you might be crazy.
2. The future of healthcare isn’t hospitals. It’s the outpatient facilities, notably ambulatory surgery centers, that replace much of what they were. Not 100%, of course, but no one
is thinking of a future in which there are zero hospitals, just fewer of them for the
sickest patients.
3. It’s become even more unsafe to base your medical practice on an affiliation with one hospital. No hospital, no practice. |
| | | Business Life in the Time of Coronavirus Mini-Series
The coronavirus crisis caused a short term economic crisis for many medical groups. Our mini-series shows you the way out. Plus, many of the concepts discussed are applicable during both good times and bad.
[If you haven't already seen them, follow this link to watch our entire series.] |
| | Watch Tuesday's video here, or just keep reading below for a revised, more polished transcript:
What's the purpose of a partnership agreement? What's it for?
What is it for when, say, some colleagues are putting together a medical group or an entity for a surgery center?
Now, when I say partnership agreement, I don't necessarily mean that it has to be a partnership agreement; it could be a shareholders agreement, or it could be an operating agreement in connection with an LLC.
What I’m talking about is a document that's being put together to govern the creation of a new entity, a new business entity.
Well, obviously, the document exists for the purpose of setting out the rules by which the entity comes together. And, certainly, also the rules by which the entity operates. For example, how the profits and compensation are going to be distributed.
But in reality, the agreement is for much more than that.
It's also to govern what happens if and when the business begins coming apart. To govern what happens if there are say, disruptive partners. To govern what happens upon death. To govern what happens upon the loss of a facility. To govern what happens in the event that other partners come on board. To govern what happens if you spin off part of the business, and so on and so on.
But many people just want to get it over and done with. They want to deal with what's happening on the way in. They don't give enough thought to what might be happening on the way out.
Without those provisions, you're left to the dangers of applicable state law, both statutory law and court opinions, which, I guarantee you, is probably not exactly what you had in mind.
Spend more time on the way in, so you spend less time and less money on the way out.
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| | How to Deploy the Secret Sauce of Opportunistic Strategy
Webinar On Demand
They say that COVID-19 has changed the world, creating the "new normal." Many of your colleagues and many hospital administrators are running scared.
Others, leaders like you, know that crisis means opportunity.
Let me provide you with the strategic tools and insights that you need in order to seize opportunities, whether they’re in the context of your current business relationships, the expansion of your business activities, or the creation of new ventures.
You will learn:
•Defense as a defective default: It’s necessary, but not sufficient.
•Exploiting weakness: Drop the guilt and identify opportunity.
•Flat line negotiation is fatal: Understand its myths and limitations.
•Negotiation reality: Learn to identify and deploy on multiple planes to affect the outcome.
•Maneuver: Harness the power of maneuver, both in overall strategy and in specific negotiation strategy.
Others see a crisis and freeze in fear. Learn how to see the opportunities and obtain the tools to increase your odds of obtaining them.
The price to attend is $479. The cost of not attending is astronomical. |
| | | Wednesday - Avoid Shiny Objects in Healthcare Deals - Medical Group Minute - Redux
Watch the video here, or just keep reading below for a slightly polished transcript:
I pushed the wiring instructions over to him.
A few minutes later, I confirmed that close to $10 million was in the account of my client, the sole shareholder.
Then we all went to lunch.
Ah, the shiny object, the more or less instant gratification. The $10 million in your pocket. Or the won RFP and the new contract with St. Mark’s Community Memorial Health Center.
But what comes next? And, has your undivided attention on the shiny object created a gap in, or, perhaps worse, a blockade against, your future?
For example, consider the sale of a medical group that comes with an enforceable five-year post-employment covenant not to compete.
If you are a selling shareholder Dr. Smith, age 63, who’s retiring or moving from Bakersfield, California to Bangor, Maine, the covenant is a nonissue.
On the other hand, Smith’s partner, Dr. Jones, age 43, with a spouse whose job is not portable and with two kids in junior high school, has to stay local.
As a result, the practical result of the covenant will likely be that Jones has no choice but to be forced into continued employment at reduced compensation with the group’s new owner for many years to come.
What if Dr. Jones had focused so intently on the shiny object, the coming sales proceeds that were burning a million holes through her mind’s eye, and not given much, if any, thought as to what situation it would create five and more years out?
This situation is by no means limited to the medical group M&A market.
It is there in connection with “won” RFPs (the situation of the “winner’s curse”).
It is there in connection with employment agreements.
It is there in many, many instances.
Every deal, every arrangement, every contract has to be thought of both in the context of your tactical goals (maximizing the desired specific outcome) and in the context of your strategic goals (maximizing the desired long-term outcome.)
Most of us do well in terms of identifying tactical goals. It is the two or three or more moves down the line into the future, the strategic goals, that generally get short shrift.
Then they come back and bite you in the ass.
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| | | Listen to the podcast here, or just keep reading for the transcript.
Henry grew his restaurant from a shack selling hot dogs into a wildly successful business generating an incredible profit. It took years of labor, great service, and development of superb relationships with customers.
Then it ended.
You see, the restaurant was Henry’s sole business. And, it was located smack dab in the middle of a county fairground.
The fact that the county leased the facility out multiple times each week for large events which drew tens or even hundreds of thousands of people. Most of whom where hungry and who had no option of eating somewhere else on the grounds. This was no longer of any consequence when the county refused to renew Henry’s contract and, in essence, gave his business to a new “vendor.”
In reality, Henry never really owned his business. He was simply its caretaker. He just realized it a bit too late.
in essence, this is the same situation many hospital-based groups have created for themselves. Their entire business is, in essence, located on “leased space,” that is, at a single hospital. And, that lease is probably abysmally short, it might even be subject to termination at any time on 90-days notice.
And soon, due to the wave of financial alignment with hospitals, office-based specialists will increasingly be in the same boat.
More and more hospitals are more and more upfront about the vendor status they have placed you in. Even if you resisted expansion of your business for years out of some misplaced notion that you would be poaching on your colleagues down the road, pay attention to the lesson of Henry and his restaurant: It was a concession stand — just as is, in many hospital administrators’ minds, your practice.
Whose mind will be easier to change, the administrator’s about your vendor status or your own about the need to strategize, and then act, to preserve your future?
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| | | Calibrate Your Compass
Read our exclusive RedPaper to guide you through this evolving situation.
The coronavirus crisis caused a short-term economic crisis for many medical groups. Our RedPaper shows you the way out. Plus, many of the concepts discussed are applicable during both good times and bad.
|
| | Help Us Help You With Helpful Content
What tailored content would you most like to see during this
time? How can we focus on solutions to your most pressing strategic concerns?
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| | | | 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.
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| 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 Free.
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| | | | 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. |
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