Effective managing partner can advance group practice’s mission

Ophthalmologists should follow these steps to selecting, directing and compensating a strong leader.

Issue: October 10, 2008

ByJohn B. Pinto

John B. Pinto

It is ironic that in the remarkably intelligent profession of ophthalmology — the science and art of vision — that practices so infrequently see where they are going. They lack vision. They put one foot in front of another, developing more by opportunity than by any coherent, objective, linear plan.

Until recently, the result in the historically robust economic environment of eye care has been an acceptable, well-intended, survivable degree of mission drift and operational folly.

With 40% profit margins, it is hard to get worked up about a 10% error in running the business. However, the future business environment for practice owners is going to be far less benign than the past. Your practice — and especially your group practice, in which every error is magnified by scale and internal politics — is entering an era in which strong, effective leadership is no longer optional.

We are already seeing this in the increased number of practices that are faltering, even bankrupting, in the current, still-mild economic deceleration. And still, the leadership needed to operate successfully is not coming forward in most practices. Why is this?

In group practices, I think the most common reason is the underlying discomfort that most eye surgeons have in turning to the most talented of their practice’s owners and saying, “Please lead us.” This requires trust and a mild loss of control, which is never comfortable for eye surgeons. But the two key points of resistance to selecting and empowering a formal practice leader are an incomplete appreciation for the right leader’s profound contribution to a practice’s success, as well as a lack of housekeeping details about what a managing partner should do in your practice and how they should be selected, managed, rewarded and eventually replaced.

Let us cover each of these in turn.

A simple position description

Every practice setting is unique. As general guidance, the responsibilities of your lead partner should conform to the priorities and problems that your practice is expected to face in the near and intermediate future. If your practice’s main challenge is financial, you need a leader with economic skills and interests. If the biggest opportunities lie in growth through merger and acquisition, your managing partner should be good at building relationships and negotiating terms. As a starting point, here is a stripped-down, generic position description that you can use to build something more germane to your setting.

Core skills and resources inventory:

Up to 8 hours per week for internal/external meetings and data analysis.
An ethical grounding that consistently makes quality patient care the top priority.
Financial acumen sufficient to evaluate monthly reports and to monitor progress toward agreed profit targets.
The ability and widely held credibility to actively mentor fellow doctors and to not avoid uncomfortable situations or conflicts.
The ability to communicate directly and clearly, in writing and verbally.
Sufficient discipline to stick to board-agreed directives, and not “freelance” policy.

Core duties:

Work with the practice’s administrator to transform board-mandated mission, goals and policies into daily operations.
Provide oversight with the administrator and external accounting resources in the preparation of monthly financial statements and volume performance reports; participate in the preparation of a forecast of practice performance; co-responsible for assuring that an appropriate cost-benefit analysis is conducted for all new projects, policies, capital equipment purchases and other initiatives.
Work with the administrator to coach each provider and enhance their total performance; intervene briskly if volumes or revenue lag.
Sit on the practice management committee composed of selected senior staff, which manages day-to-day operations; chair the practice’s board of directors.
Maintain ongoing, senior-level contact with institutions, friendly competitors, the practice’s sources of patients and with payers in the region.
Work with the administrator to prepare and at least annually revise the practice’s strategic plan; lead the board approval process for each subsequent edition.
Be involved in provider and senior staff recruitment activities.
Use internal providers and outside advisory resources to conduct risk management, utilization and quality assurance reviews.
Work to resolve provider-to-provider conflicts, including scope-of-practice, care pathway and patient assignment issues.

Selecting a physician leader

This is not a popularity contest. But it is common in my consulting experience to see boards select as their first managing partner the doctor who is the oldest, the highest producer or the most affable. This is sometimes not the appropriate choice. In subsequent elections by the same board, it is not unusual that partners are more thoughtful and less automatic in their selection. They commonly go on to pick a colleague who has better leadership skills, more time available for the task or is up-and-coming, with a real zeal for the future of the group.

Ultimately, as a nominal majority-rules environment, your managing partner only needs 51% approval. But only an unwise partner would accept the position, unless a subsequent confidence vote affirmed a much wider consensus and approval.

Managing your managing partner

The common misconception is that your managing partner is the new “big bad boss” of the practice and can rule autocratically. Only in some limited settings, during periods of frank crisis, is this appropriate. Rather, your managing partner should be actively managed by the board to understand and carry out its democratically affirmed directives.

Here is an example of how to do it right. The board of Smith Eye Care, after observing a 15% drop in revenue in the last two quarters, along with a 25% drop in profits, declares the need for an urgent turnaround. Rather than march out of the room and start cutting expenses or signing new payer contracts, the managing partner in all but the most emergent settings should convene a small task force with the practice’s administrator and accountant or CFO, along with any other senior department heads.

In a month or less, they should write a turnaround plan that is passed to the board for approval. After the board OKs the plan, the administrator and the entire management team executes it. And the administrator and managing partner are formally accountable to the board for tangible results.

Leader compensation

The job of managing partner, if carried out well, is of priceless value to the rest of the partners. Unfortunately, that is exactly what a lot of boards want to pay their leader — nothing.

Compensation guidance for a practice with less than $5 million in annual collections and a strong administrator — so the lead doctor only has to spend about 5 to 8 hours a week in the role — is to pay an honorarium of $15,000 to $25,000 per year. This should be dispersed monthly or quarterly and be a flat amount, not indexed to practice performance. In larger practices, or practices with a weak or absent administrator, the appropriate stipend should rise; the highest figures seen today top out at about $75,000 per year. But even then, this works out to be a modest hourly income compared with surgery (and not much fun, either). Remember, it is an honorarium, for the honor and privilege of the position, and not meant to be on par with a surgeon’s hourly value.

Managing partner tenure

What is the appropriate term of office? Some of the best managing partners hold the job, with the keen support of their boards, for a decade or more. They report that it takes that long to figure out how to get the job done right.

It is reasonable to have a fixed period of time per term (I like 2 years) but with no term limits, so that at regular intervals the board has a chance to formally re-select the managing partner or not, without the discomfort of having to conduct a mid-term impeachment, as can happen with an open-ended term.

For more information:

John B. Pinto is president of J. Pinto & Associates Inc., an ophthalmic practice management consulting firm established in 1979. Mr. Pinto is the country’s most-published author on ophthalmology management topics. He is the author of John Pinto’s Little Green Book of Ophthalmology, Turnaround: 21 Weeks to Ophthalmic Practice Survival and Permanent Improvement, Cashflow: The Practical Art of Earning More From Your Ophthalmology Practice, The Efficient Ophthalmologist: How to See More Patients, Provide Better Care and Prosper in an Era of Falling Fees and The Women of Ophthalmology. He can be reached at 619-223-2233; e-mail: pintoinc@aol.com; Web site: www.pintoinc.com.