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October 25, 2013

How to evaluate a practice

"When you’re working in a small group like this, it’s almost like an extended family…it’s important to get to know everyone…what their strengths are and what they have going on in their lives," says Emergency Medicine physician Christopher Gentle, M.D.

When you’ve seen one medical practice…well, you’ve seen one medical practice.

The huge number of variables among them make it next to impossible to conduct a true apples-to-apples comparison when weighing options and deciding which offer to accept. Add to the equation the fact that what’s important in a practice opportunity varies from physician to physician, and the picture becomes even more complex. One physician will put great pay and benefits at the top of the criteria list; another will place a high value on the reputation of the group; and yet another will be most concerned about how new associates become partners.

When evaluating a practice, it’s essential to do the research and take the time to get clear answers to your most important questions before inking a deal with a new employer. The history of a practice, how it’s structured, the group’s financial stability, the perception of its doctors within the community, how compensation and benefit packages are structured, and the culture of the organization are just a few of the points that warrant careful scrutiny.

Business basics

Mike Fleischman, a management consultant with Stroudwater Associates in Atlanta, says that physicians - even those who are not particularly interested in the business side of medicine - should familiarize themselves with the basics so they can ask the right questions when evaluating a practice opportunity.

"First, they should find out how much doctors in their specialty generate in average annual revenue," says Fleischman. Keep in mind that revenue means fees collected, not what’s charged. Those are two very different numbers due to discounts and write-offs that are common in all medical and surgical specialties.

Some of the revenue figures are pretty impressive, until you factor in practice overhead - another number that doctors should understand and ask about when interviewing. "Overhead means all expenses that the practice incurs aside from physician compensation. In orthopedics or general surgery, overhead might run 40 to 45 percent," says Fleischman. "In family practice, it can be up to 65 percent." Find out the average for your specialty (and by group size) and compare that figure with what your potential new practice reports as their overhead percentage.

Another important concept to study before interviewing is the RVU, or relative value unit. If your compensation is based, in part, on productivity, chances are good that your work will be measured in RVUs. Learn about RVUs at the Centers for Medicare and Medicaid Services website (CMS.gov) and at the American Medical Association website (ama-assn.org). All third-party payers - not just Medicare and Medicaid - use the RVU system to calculate reimbursement. "Physicians should find out how much they’ll be paid for a work RVU," says Fleischman.

"I always also have new physicians ask about how often the income distribution plan is updated. A follow-up question should be, ’What is the income distribution plan once I become a partner?’" says Fleischman. If the answers to these questions are vague, proceed with caution. "Marriages end because of money, and practices are no different," he says.

If becoming a partner means making a financial contribution to the practice, Fleischman says it’s important to find out how much debt a group is carrying and what is included in an expected buy-in amount. "I had one situation in which an orthopedist was asked to pay $250,000 to become a partner after two years," says Fleischman. That number sounds high until you realize what the young doctor was getting for his money. "The group has four operating rooms, two MRIs, and a physical therapy department. He was buying into an established revenue stream," he says. "Some practices have a lot of toys."

Related: Physician compensation: What’s it worth to you?

Organizational structure

There are entrepreneurial physicians who still "hang out a shingle" and maintain a solo practice, but they are few and far between. The financial realities of practicing medicine - ever-increasing overhead coupled with stagnant (at best) levels of reimbursement from third-party payers - make it difficult for soloists today. Much more common are arrangements in which doctors are employed by a group practice, hospital or health system, either with or without the option to eventually buy into the group and become a shareholder partner. When considering a new opportunity, understanding the organizational structure is key.

Birmingham Heart Clinic in Alabama, an 11-member cardiology group, is a "hybrid," according to business administrator William Sester. "We’re an independent group, privately owned by shareholder physicians, and we’ve entered into a clinical co-management agreement with the Cardiovascular Institute of the South (CIS)," says Sester. With more than a dozen locations around the South, CIS provides practices with executive management services, quality improvement initiatives, and leverage to negotiate contracts that smaller organizations might not have access to.

Birmingham Heart was in the process of solidifying their arrangement with CIS last year at the same time they were recruiting their newest associate, Brian Flowers, M.D., who will join the practice this July. "We told him what we were doing and he came on knowing what was going to happen," says Sester.

"They saw and sensed that health care was changing and that they couldn’t continue the same model that had been in place," says Flowers. "They were working out the logistics. It wasn’t completely clear how it would impact the schedule and call, but I knew they were interested in doing a good job, that they trusted each other, and were well-respected and competent."

Flowers had investigated practice opportunities throughout his fellowship. As the end of his training drew near, he became more intentional about his job search and went on a weeklong road trip around the South to interview with several practices. Flowers’ family is in Mississippi and his wife’s family is in Georgia. "I knew the Southeast was where I wanted to raise my family," he says.

Even as Flowers was planning to move to Charleston, S.C., for his cardiology fellowship, he knew he’d eventually return to the Southeast to practice. He had done his internal medicine residency in Birmingham, so he was familiar with the area.

At the end of the day, Birmingham Heart Clinic won out for a number of reasons in addition to being the ideal location. "I looked at several larger groups with 20 to 30 physicians. Their roles were fairly defined, and if you have a niche that you wanted to work in, that was a great scenario," says Flowers. He, however, wanted to practice a broad scope of general cardiology.

One aspect of Birmingham Heart that appealed to Flowers was that he would be working in an outlying rural office part of the time.

Near the top of Flowers’ list for what was important in a practice was joining a group of doctors who got along well and respected one another.

"The atmosphere [at Birmingham Heart] was what I was looking for. They all enjoy one another and during the interview they were talking about things going on in their lives," says Flowers. "They trained in many different places, but they all have similar backgrounds." Flowers’ interview included a night out for dinner. "My wife Meg got to meet all the doctors and spouses and I could see she was comfortable and excited," says Flowers.

It was attractive to Flowers that Birmingham Heart has very little turnover among its physicians, and that they are in different stages of practice. "My intent is to stay here for 25 to 30 years, and knowing that they are in it for the long haul and that I’d be practicing with the same people for a long time was a plus," he says.

Flowers says he’s intent on pulling his own weight, including eventually being involved in some of the business aspects of the practice, but he wanted assurance that as the "new guy" he wouldn’t be expected to generate income to compensate for others in the group who were taking it easy. Fortunately, that didn’t appear to be the case. "They told me I’d be signing a contract similar to the people just ahead of me. They seemed interested in everyone being happy and being on equal footing," says Flowers.

Reputation matters

Fresh out of training, family physician Constance Beckom, M.D., bravely opened a private practice in Virginia with three of her fellow residents. She stayed with that group for 10 years before moving to the Las Vegas area earlier this year to be closer to her children and grandchildren. Beckom, a former nurse, says she went to medical school "later in life" and her partners in Virginia were all quite a bit younger then she was. "They were going in a different direction," says Beckom, which also factored into her decision to relocate.

In deciding which group to go with, the reputation of the physicians she would be joining was important to Beckom. When contacted by Southwest Medical Associates (SMA), Beckom researched how they were regarded using LinkedIn, Vitals.com and Angie’s List. "Don’t believe everything you read on the internet," she says. "But when you see the same thing over and over, that isn’t just one individual who is unhappy with a practice." Beckom advises anyone looking for a new practice opportunity to simply Google the names of some of the doctors in the group and see what shows up.

In doing her homework about SMA, they came up clean. "It looked like a good, solid group," says Beckom, who also assessed SMA’s financial health using the internet. The practice is owned by UnitedHealth Group, a publicly traded company.

Another way to find out about a group’s reputation involves a little sleuthing. "I tell physicians to go into town a day early and meet with the hospital CEO and then get permission to go onto the floor and talk to nurses," says management consultant Fleischman. "You can also walk into the local Walgreens, say you’re new to town, and ask the pharmacist who they’d recommend for a doctor."

In addition, strike up conversations with the desk clerk at your hotel, waiters when you’re out to eat, and anyone else who seems open to talking. You can find out a lot about how people perceive the local health care scene by asking open-ended questions and listening carefully to what is shared.

Doing her internet research provided Beckom with information she used during the interview process. "You should go in knowing something," she says. "You need to know what the policies are, what they believe in, what they’re trying to accomplish."

How she would be oriented to her new practice once on board was also of interest to Beckom, so she asked about it during interviews. "Are they just going to put you in an office and then it’s trial by fire?" she says. "SMA has a wonderful orientation program." Another check mark in the plus column for the organization.

Beckom says SMA was quite transparent with her during the interviews. "Coming from my own practice, I know what it takes to make money, what it costs to keep a practice running," she says. Beckom also inquired about base salary, productivity pay, patient scheduling, how flexible things were in terms of what doctors could and could not order, and - most important - the culture of the practice. "The biggest thing to know is their philosophy and whether it fits with yours," says Beckom. "I wanted a company that held itself accountable and treated employees with respect. I love my job. SMA has great policies and they try very hard to take good care of patients," she says.

The right fit

Before accepting a position at Citizens Memorial Healthcare in Bolivar, Mo., Matthew Cherry, D.O., interviewed at both very large and very small hospitals.

For Matthew Cherry, D.O., the two main factors in settling on a practice opportunity after he completed his radiology residency and musculoskeletal fellowship training in 2012 were location and fitting in well with the people he’d be working with every day. "We knew we wanted to stay in the Midwest. Both of our families are here and family is really big for us," says Cherry who, with his wife, Mary, has a 6-year-old son and a 3-year-old daughter.

"We prayed for guidance about where to start looking for a practice opportunity. It can be quite overwhelming. It was the good Lord who showed us how to narrow our search," says Cherry. That search ended in Springfield, Mo. The couple reside there and Cherry practices in nearby Bolivar at Citizens Memorial Healthcare (CMH) in a three-man radiology group. Although employed by the hospital, Cherry says the group runs more like a private practice.

Before accepting the job in Bolivar, Cherry interviewed at very large and very small hospitals. "I wasn’t sure what kind of practice I wanted to be in, but I quickly realized that a 20-man group wasn’t for me. If you put 20 docs in a room, someone’s not going to get along," says Cherry. "I didn’t want to be involved in the politics and extra stress involved with big groups."

When he interviewed with CMH, Cherry took note of the fact that everyone seemed to know everyone else. They made him feel welcome and needed. "I had one interview and liked the family atmosphere. I could see myself there. My partners had a lot in common. A week later I had a contract in the mail and that was that," he says.

Cherry appreciated the fact that the contract itself was straightforward. "It was extremely easy to read. Some others I looked at you couldn’t even understand and it was like they were trying to hide something," he says. "This one was clear cut. I had it reviewed by a lawyer and they couldn’t find anything wrong with it."

New to the staff and with the benefit of the fresh perspective that goes along with that newness, Cherry has become an asset to CMH’s in-house recruiter Donna Shelby. "She has me sit in on candidate interviews now," says Cherry. He’s noticed that physicians interviewing to relocate to Bolivar are interested in what the community has to offer as well as the quality of the facility.

Cherry says physicians, especially those coming right out of training, should do their homework and not necessarily accept the first offer they get. "The first hospital that offers you a job…it’s going to look like a lot of money compared with residency. Don’t let that cloud the picture. Interview with at least four or five places and get a feel for how things are run and how involved administration is in day-to-day decision-making. Talk to as many people on staff as you can. The doctors who are in the thick of it will have good insight as to what your future there would look like," says Cherry.

Related: Finding a practice that fits your life

Putting in the time

Emergency medicine specialist Christopher Gentle, M.D., got to experience first-hand the old adage that "nothing is certain except death and taxes" when he received a phone call a couple of months before completing his residency. He’d signed on with an emergency medicine group to practice at one of their hospitals in Maryland when he got news that the group had lost their contract and a new company was taking over.

"They told me I had options. I could stay and work with the new group or get out of the contract," says Gentle. "That’s the nature of emergency medicine. A contract can change hands at any time, and you have to be aware and flexible."

Gentle decided to give the new group a go and stayed for about four years. During that time he discovered that he liked the administrative side of emergency medicine while serving as peer review chairman and being in charge of quality assurance functions for the group. "I wanted to take the next step and look toward becoming a medical director," says Gentle.

As luck (or good fortune or positive intentions or whatever else might have been at play) would have it, an opportunity came up in nearby Martinsburg, W. Va. The medical director of Salutis Emergency Specialists was ready to step down after 19 years at the helm.

"This was very appealing to me. It was only 20 minutes away and exactly what I was looking for, which was being mentored and then, when I was ready, being able to step into the medical director role," says Gentle.

As good as it all sounded, Gentle knew he needed to do his homework. He met with the medical director to get an overview and then had a day-long meeting with members of the group. "I got a sense of the history, the philosophy, and the structure of the partnership," says Gentle. "You look at the basic things, too, like compensation, benefits, clinical hours and standard package."

A third meeting was held at a restaurant where Gentle and his wife, Madonna, got to know members of the group and their significant others in a more casual setting. "When you’re working in a small group like this, it’s almost like an extended family…it’s important to get to know everyone…what their strengths are and what they have going on in their lives," says Gentle.

He also took the time to meet with the hospital CEO, the dean of the local medical school, and nursing administrators. "Separately, I also talked to people who had worked there before to get a sense of why they left," says Gentle. "I didn’t find anything worrisome. I met all the major players and gathered a lot of information."

Putting in the time to get to know the ins and outs of the group before signing a contract paid off. Gentle started work in May of 2012 and took over as assistant medical director this past January. "Next year I’ll be medical director," he says.

Related: Love where you land

The final decision

Fleischman says that there are certain warning signs that physicians should be aware of as they evaluate a new practice opportunity. These include high turnover among physicians or staff, family members working in the office (not usually a good idea), a group not keeping up with technology, any hint of poor relationships among physicians, an inexperienced practice manager, too many people involved in day-to-day management, and inequality in a call schedule. "Don’t be afraid to walk away if you see red flags. There are plenty of openings right now.

If something doesn’t seem right, it probably isn’t."

After you’ve done your research, made your decision, and have an offer on the table, Fleischman advises donning your business hat. "You can’t do this on a handshake. At minimum, get a letter of intent that spells out pay and benefits," he says. "Never start work without a contract, and have someone who is familiar with physician employment agreements review that contract before you sign."

Karen Childress is a frequent contributor to PracticeLink Magazine.



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