Ask a doctor why he or she decided on a career in medicine, and you might hear a mix of reasons: a yearning to help people; a keen interest in science; desire for a role that commands respect. Maybe some will even admit to wanting a potentially lucrative career that is also prestigious.
One thing you probably won’t hear, though, is a longing for a management role in a $3 trillion industry - even though that is another way to describe what being a physician means today in the U.S. health care system.
Lack of appreciation for medicine as a business - and reluctance to develop business skills - can hold new doctors back, making it harder for them to reach their primary goals of providing excellent patient care and achieving enduring career success and financial security.
"It’s a travesty that physicians do not receive a business education," says Maria Young Chandler, M.D., MBA, associate clinical professor of pediatrics and management, University of California, Irvine and chief medical officer of The Children’s Clinic, a six-site nonprofit health center in Long Beach, Calif. "Medicine is a business. Without business skills, physicians could find themselves swimming upstream."
After as much as 10 years of post-graduate education, though, getting an MBA may not be appealing or feasible for many young physicians. The good news is, any physician can become more conscious of the business aspects of the health care field.
And that’s the first step to developing critical business skills like decision analysis, negotiating, networking, marketing and operations management that will help them avoid unnecessary career obstacles and thrive.
Perhaps the biggest obstacle for new physicians in navigating the business of medicine is their mindset.
"Ironically, so many of us went into medicine precisely because we had no interest in business or technology," observes Mary Ellen Timmins-Finnell, M.D., a pediatrician with East Milton Pediatric Associates in Milton, Mass. "But even salaried physicians need basic business skills."
Doctors also apply assumptions from their medical training to the business world - and can undermine their own goals as a result. "Many doctors assume that everyone they deal with looks at the world the way they do, with an eye on the greater good, and that they’ll always be treated fairly," says George Garcia, M.D., an anesthesiologist with South Shore Anesthesia Associates, a 50-person anesthesia practice in Massachusetts.
A new physician’s mindset is influenced by years in an academic environment, with progress determined through testing for proficiency; by the code of ethics doctors share; and by analytical processes organized around patterns, homing in on a correct diagnosis.
Business, on the other hand, requires a different set of critical-thinking skills, much more tolerance for ambiguity, and recognition that others may by driven by different motives.
With wide-open choices of geographic locations and clinical settings, career planning for new physicians would seem to be exciting and fun - a just reward after a long haul of study and residency work. But choosing a job is also a critical financial decision. And too often, physicians don’t evaluate job opportunities through a business lens, instead making choices based primarily on current creature comforts like location or base salary. That lack of businesslike planning can undermine physicians’ careers and financial security down the road.
"Too many young doctors we interview take a short-term view," says Garcia. "They focus on a single variable, such as current salary, instead of considering the practice that might be best for them over the long haul." Garcia chose his current practice based largely on its culture - a choice he appreciates more fully a decade later.
"Our practice is very democratic - all of our doctors are compensated based on workload. We don’t have resentments among overworked new physicians, and our older partners can tailor a schedule that meets their lifestyle preferences."
Jack Valancy, a practice management consultant who specializes in evaluating physician employment contracts, validates that view.
"Older doctors sometimes view new doctors as their retirement plan. While they may offer a high base salary to attract them, the practice’s compensation model may still favor the senior physicians."
A higher salary may seem all but irresistible to doctors with high student debt loads. But these packages can come with conditions that make them less profitable over the long run than a more straightforward offer with a somewhat lower salary. And taking on more debt to buy into a practice or making a binding, long-term commitment may risk other financial downsides (for example, in the event a move is necessary because of a spouse’s career).
Culture and mindset play out in other ways, too - for example, technology. "If I were looking now for my first job, I would look for a practice that is already up to speed on technology, already using EHR," says Alexandra Haessler, M.D., FACOG, a urogynecologist in private practice in San Francisco. "Your practice will work much more effectively with hospitals and other practices, and just be much more efficient. Evaluate the community you’re considering on the same basis - a medical environment that’s pro-technology makes all interactions easier and less frustrating."
A practice that’s using EHR might also be more likely to use social media, email and text to keep in touch with patients - another sign of efficiency. What’s more, starting your career with fluency in technology could expand career options down the road.
Businesspeople have developed the habit of evaluating job opportunities as a basket of current and future financial rewards and career pros and cons.
For example, a new MBA graduate might set up a spreadsheet modeling each offer’s income potential over the next three to five years, incorporating the possibilities for bonuses and raises based on performance. Expected local demand for their services would also be factored into the equation. And the model would incorporate other financial components like retirement plans, insurance, and local cost of living, along with intangibles like corporate culture, mentorship and career development, and the likelihood of moving upward in the future.
Physicians can do the same, analyzing the economics of their options along with the contribution each could make toward longer-term goals like moving up the administrative ranks in a hospital system, becoming a partner in an established practice, or setting up a practice of their own. Personal goals like raising a family should be factored in, too.
Faced with an employment contract, an MBA grad wouldn’t hesitate to get advice from an attorney, as well as from other experts in the field. Businesspeople routinely form teams of individuals with different roles and responsibilities, and seeking input from other professionals before deciding. Doctors evaluating an employment contract can do the same - seeking input from both an attorney and other professionals (more experienced doctors, consultants) with knowledge about how employment contracts are typically structured and how they can be customized.
Of course, analyzing the content of job offers is just a first step toward getting the best possible offer. Getting the best range of choices also requires negotiating. Post-residency job hunting is many physicians’ first opportunity to try out their negotiating skills - although you wouldn’t know this from the passive approach some new doctors take.
A willingness to accept what’s offered - without negotiating - can be increasingly costly over a physician’s career. Employed physicians may leave money on the table when negotiating job packages, or settle for less favorable conditions. Physicians in private practice may miss numerous opportunities to earn more money or have more satisfactory terms when contracting with payers, employing staff, setting agreements with hospitals or securing major expense items like leases, technology and supplies.
"Physicians tend to want to make everyone happy, often at their own expense," observes Garcia. "And they don’t assume that the other side is negotiating," so they’re afraid to rock the boat.
For example, many private practice physicians simply accept reimbursement rate schedules from their payers, without attempting to negotiate. While it is true that standard rates are frequently set for all providers in a market, it’s not always the case - and even a small differential on an important billing code could mean thousands of dollars to a practice over a year’s time. Similarly, physicians may not realize that data is available to help them negotiate staff compensation that is fair - even generous - but not excessive.
By letting employees take the lead in negotiating instead of arming themselves with information, physicians can passively undermine their practices’ profitability.
Businesspeople tend to assume transactions and relationship-setting situations are negotiations. Though not every transaction is negotiable, it never hurts to try. More often than not, there are points of flexibility.
Natural negotiators also recognize that everyone comes to the table with different priorities. Negotiating well means putting yourself in the other person’s shoes, and recognizing where you have leverage - and where you don’t. For example, if your pediatrics practice serves a relatively small portion of an insurance company’s members in an area well-served by other pediatricians, you may not have much room to negotiate higher reimbursement. On the other hand, if you’re the most popular pediatrician for employees of the biggest company in your area, they’ll be more inclined to work with you to keep you happy.
Gathering information is also essential. Hampered by their hyper-scheduled workdays, physicians may invest less time in data-gathering for major business decisions. But often a single investment in preparation and negotiation can pay off repeatedly over a long period of time (or, conversely, cut into profits again and again).
Businesspeople instinctively seek information to confirm their big financial decisions, but they don’t do it all alone: they utilize benchmark data (readily available to physicians through associations or practice management consultants), networking with peers (wonderful for things like technology purchases or a new job offer), expert input (e.g., from agents and consultants) or authority websites (e.g., real estate websites where leases can be compared).
Networking is a powerful tool for information gathering and decision-making - and, of course, it’s essential for career planning. But medical training means so many years on a prescribed path that many young doctors never developed the everyday habit of actively managing their personal networks.
Ironically, even the trend drawing many physicians to start their careers in larger health systems may inhibit doctors’ networking skills.
Pouya Shafipour, M.D., a Los Angeles-based family physician who completed his residency at Kaiser Permanente in 2008, explains that "Kaiser was a wonderful place to work partly because of the diversity of events for physicians inside the system to meet and share ideas. But because we did so much networking within Kaiser, we tended to do very little outside the organization."
Of course, networking with internal colleagues is essential for career development within the system - but it’s not enough. Maintaining ties outside your employer is critical to managing your career over the long term, so that you have flexibility to move geographically and into administration or out of a clinical setting altogether if that becomes a goal.
Students in top MBA programs actually consider the connections they make in business school to be among the most important assets they gain from the investment - and schools actively encourage that thinking.
Physicians can take the initiative to ensure they don’t lose touch with their colleagues before they leave residency programs.
Technology can provide a jump-start. Tools like Facebook and LinkedIn allow you to find old friends and stay in touch. Connections with old friends and new business contacts outside of medicine can be as or more valuable - you never know where the next referral to your specialty could come from, or the next idea that could assist you in building your practice. Joining the association for your practice type provides networking opportunities, too, among other benefits.
Businesspeople also understand the importance of being active in their networks and giving back. With a job that’s already got an altruistic component, the benefit of giving more may not be obvious to physicians. But "giving" in a networking sense can mean something as simple as providing a friend the name of a great recruiter or consultant, passing along the name of a perfect restaurant for a business dinner, or recommending a fellow physician in a different specialty - relatively simple for you, but potentially a big time-saver for the person who asked for the help. And getting out there in person is essential for developing connections, too, whether by attending networking events or conferences, or giving talks on your area of expertise.
Business literature these days is awash with advice on "managing your personal brand" - the idea being that, like it or not, every business interaction and every step of your career are a form of marketing.
Businesspeople accept this premise - understanding that your reputation among your peers, bosses and customers plays a huge role in your ability to generate business, complete tough assignments and move up the ladder. What’s more, politics are understood to be part of the equation. All in all, it’s better to be liked.
For physicians, though, the goal of being scientific, neutral and honest when making diagnoses can sometimes spill over unnecessarily (and unhelpfully) into other relationships. Garcia notes that this lack of appreciation for the importance of feelings can surface as far back as medical school. "I notice some med students don’t hesitate to say, ’I have no interest in pediatrics,’ or ’I can’t stand psychiatry’ when showing up for their rotations. They’re unintentionally insulting the physician who’s giving them something valuable - their knowledge and their time - instead of appearing grateful."
The same challenge can carry over into physician referral and even doctor-patient relationships. Simple things like follow-up letters to primary care doctors are amazingly powerful in sustaining relationships - and maintaining referrals that are vital to a specialist practice’s revenue.
Marketing your practice depends on these relationships, which in turn are aided by your physical location (proximity to hospitals, for example) and the relative supply of physicians in your specialty compared to the population. "Our practice is close to Boston’s hospitals and to so many of our referral partners that we have a steady flow of new patients and even sometimes have to close our panels," says Timmins-Finnell. "But I know if we were less ideally situated, we’d need to invest much more time and money in marketing directly to patients - offering newborn classes in local libraries, for example.
Successful businesspeople know that networking with colleagues, sharing knowledge through speaking engagements and participating in online forums and blogs are powerful tools for marketing their personal credentials to other professionals. These avenues work well for physicians, too.
Savvy businesspeople are meticulous about valuing their referral relationships. Doctors should be, too, never neglecting to say thank you for a referral or to provide the follow-up information the referring physician needs. For new practices, locating near sources of referrals and in areas that are relatively underserved by your specialty can make it dramatically easier to build a patient base. Online medical directories and ratings sites can give an idea how many doctors in your specialty practice in an area. The directories of major insurance companies can even tell you how many are taking on new patients, giving you a sense of how much competition you’d face.
But what about marketing to customers, i.e., patients? Advertising, promotion and sales tools are readily accepted in business, but for most physicians, the whole notion of "selling" medical services is anathema. The reality is that patients have choices, and doctors must find appropriate ways to promote themselves and encourage their patient-clients to stay with their practices.
On the bright side for physicians, today’s marketing methods - which lean increasingly toward information sharing and relationship building and away from overt selling - are much more suited to physicians’ orientation to their patients and their comfort level.
For example, physicians can strengthen their ties with patients by publishing a newsletter, blog or Facebook page that shares valuable information related to wellness or specific conditions. Even something as simple as reminder cards can send the added message of "we care." Dentists have long showed their understanding of this simple principle with their reminder postcards (addressed by the patients themselves!).
Any MBA would also tell you that anonymously surveying customers from time to time is a great way to know what people really think about your service. Large systems like Kaiser, Cleveland Clinic and Mayo Clinic have already made a standard practice of conducting such surveys - providing ongoing feedback for both their physicians and for their administrators.
Private practice physicians can hire outside consultants or researchers to help with setting up HIPAA-compliant surveys that allow patients to respond truthfully but anonymously, and without risking any breach of private data. Primary care practices should also make a habit of analyzing their physicians’ panels to see if they’re losing patients - and investigate the cause if so. All physicians can use online tools like Google Alerts to monitor what patients are saying about them and their specialties online on review sites and blogs.
Perhaps more than any other aspect of the business of medicine, the money side of the operation (revenues, expenses, cash flow and profitability) is challenging for most physicians as they start out.
Some young physicians hope to avoid business issues altogether by joining a large medical system like Kaiser or Mayo. These large organizations also often offer more predictable work schedules and shorter hours, attractive benefits like 401(k) plans, and even sometimes job-sharing.
With their focus on primary care as the hub, a system like Kaiser can be especially rewarding for family practitioners, internists and pediatricians.
However, despite the scale and division of labor that permit doctors to spend most of their time on medicine, these organizations are still businesses, and it’s essential that doctors realize that to manage their career progress.
"Taking a position with a large health system has many advantages, especially for young doctors with small children," says Garcia. "But the flexibility that is so attractive to doctors also makes them more replaceable."
Finding ways to stand out among dozens - maybe hundreds - of doctors doing the same job is important to managing your career, especially in an environment in which doctors are an abundant resource.
Additionally, by avoiding business matters as "not my job," doctors miss out on the opportunity to learn and advance within a large practice or health system. On the other hand, demonstrating an appreciation for the business side - whether simply by turning in charges on time, being diligent about documentation to support your coding, or appreciating the need to stay on schedule - will be recognized and valued.
For physicians in private practice, the first step to appreciating the business model is to recognize that the only revenue the practice generates is through their billings. In this respect, medical practices are like other professional services firms like advertising agencies, law firms and consultancies, but with a key twist: third party payers.
"Understanding coding and billing may be the single most important thing for new physicians in private practice," says Haessler. "In large practices, under-coding can be almost invisible to the partners - and cost them thousands of dollars."
Unlike other professional services, where fees are agreed to with the customer upfront, in medicine, insurance companies decide how much they’ll pay for services provided to a patient. So physicians’ understanding of how to document their services plays a huge role in how much they’re paid. What’s more, insurance companies have also impacted practice revenues inadvertently by shifting more of the responsibility to patients through co-pays and co-insurance. While theoretically doctors are clearly entitled to these payments, both physicians and staff often have difficulty asking for the money, instead allowing patients to be billed for the balances.
Any business person knows that this habit is tantamount to forgoing revenue because some percentage of balances billed will always need to be written off.
Besides maximizing revenue, doctors must be vigilant about expenses, too. Staffing is the single biggest expense for most practices, and investing those compensation and benefits dollars wisely is key. Cutting corners on staff to save money is a mistake too many physicians make. Every additional administrative task a doctor takes on cuts into time for revenue-generating patient visits. Economists call this concept "opportunity cost" - and businesspeople manage it by delegating non-revenue tasks to lower-cost employees wherever appropriate.
In order to advance, junior businesspeople must quickly learn that the priorities of those above them are the priorities that should matter most to them. The takeaway for doctors: Though medical objectives come first, it’s wise to develop an understanding of how the business side functions and how business is impacted by the ways doctors organize, prioritize and document their work.
For physicians in private practice, the key challenge is getting all the revenue the practice has earned into the coffers. Billing and collecting are specialty activities in most businesses, and also in medicine. Outsourcing the billing function altogether may be necessary to keep up with billing technology and best practices. With respect to coding, it can be helpful to take special seminars related to your specialty, or to bring in a coding consultant, or both. Remember that the expense of developing coding and documentation skills is really an investment. A few extra dollars per patient will add up to thousands over a year’s time.
Hiring well, especially when it comes to choosing a practice manager, is perhaps the best investment a practice can make. The practice manager minds the store while physicians are busy minding the patients. Like a board of directors of a large company working with senior management, the physicians in a practice set the overall tone and mission of the practice, and the practice manager keeps the trains running on time. Because the practice manager will oversee all the daily activities related to bringing in revenue, serving patients (i.e., customers), and managing inventories and expenses, the practice’s profitability depends on his or her performance.
A Silicon Valley saying about hiring - "hire slow, fire quick" - is good food for thought for physicians managing prac¬tices. Beginning managers usually underestimate how damaging an underperforming employee can be and how long it can take to identify the problem, remove the employee and find a replacement. Savvy managers (and physician managers) quickly learn that it’s generally much more productive and profitable to take a bit longer to hire the right person than to take a gamble.
This article provides just a taste of some of the most important business skills physicians can develop. Much more can be gleaned by adopting a student mindset on the job and through the variety of useful books, publications and blogs exploring the business side of medicine.
Whether and how to dig deeper into more formal business study or even another degree depends on your long-term goals.
Elizabeth Woodcock, MBA, FACMPE, practice management consultant and author of Mastering Patient Flow, says, "Much of the decision to get further training is dependent on time and money. But it’s also dependent on interest - what do you want to do with the skills? If it’s to manage your business better, then perhaps a few courses at a community college or a pre-conference business program at your next specialty society meeting might be appropriate. On the other hand, if it’s to become the CEO of a health system, then a course towards a master’s degree in business from a prestigious institution is in order."
Joe Capko is a senior marketing and market research consultant with Capko & Company. Laurie Morgan is an experienced marketing, business operations and strategy consultant.