Physician Strategy News: January '08
Strategic Planning for Practices
Despite being large, complex businesses, many physician practices never develop a strategic plan. Rather, their efforts focus on day-to day operations, on issues such as meeting payroll and patient throughput.
That can be dangerous for many reasons. First, planning is essential to building group consensus. Without dialogue about group priorities and concerns, there is a risk that the individual physicians will create their own expectations and priorities. If allowed to continue, these divergent perceptions can lead to group splintering.
A second danger is that risks will not be fully assessed and understood. There are risks from competition, payers, quality failures, etc. that can threaten group performance and even existence. Developing approaches to counter those challenges is essential for long-term group health.
This risk is now being transferred to hospitals, as they assume ownership of physician practices. Owning the practices and the referrals they produce is a significant reason to make investments in practices. To yield maximal benefits, the hospital must engage the physicians in discussions on a variety of strategic topics. Five of these are addressed below.
Revenue Growth. How will the group grow its revenue? Potential strategies include expanding the group, adding ancillary services, improving coding and collections, increasing referrals, increasing throughput of patients with greater efficiencies and extenders. This revenue growth should be core to any planning effort.
Managed Care Leverage. How can the group, in concert with the hospital, gain more leverage over payers. This comes with size and negotiating ability, and both must be part of the planning process. This is a serious weakness for small private groups, and with proper focus can be the key benefit of banding together under the hospital banner.
Physician Compensation. Physicians want a great income and a great lifestyle. Compensation needs to allow physicians to make this trade-off, but should not give them both through hospital subsidies. Physician input and involvement in solving the problem is crucial to their understanding and acceptance. And getting this right is crucial to the group's success.
Physician Culture. To create value for the hospital, physicians must begin to think, act, and move as a group. Developing the culture implies that you need to develop physician leaders, leave some decisions in the hands of those leaders, and insist that physicians not abdicate their roles in the practice. This is perhaps the most important principle in developing a strong group, but is also the toughest strategic issue to address.
Quality. Employed groups offer a great opportunity to improve quality. The hospital is likely able to fund new resources, such as EMRs, while the physicians know how to leverage those resources to improve care. And creating a quality focus will be mutually beneficial.
Strategic planning for the group is much like that for the hospital. It will be somewhat truncated (unless your group is enormous), but should address market and competitor analysis, internal and environmental assessments, and a review of the hospital's strategic priorities. The outputs should mirror those of the hospital's plans: objectives, strategies, action plans, and financial plans.
Such an endeavor will bring value in two primary ways. First, it will begin to establish your working relationship with the employed practices. Through discussion of the key issues and agreement on how to proceed, you will begin to create rapport and a shared vision upon which future efforts can be built. Second, it will focus your activities related to the group, and it will increase your opportunity to produce the results the hospital board expects and desires.
Questions or comments? Call David Miller at (502) 814-1188.
