Steps to replace, transition your practice administrator

Modern practices demand stronger practice CEOs and executive directors.

Issue: February 10, 2016

ByJohn B. Pinto

“When I meet successful people I ask 100 questions as to what they attribute their success to. It is usually the same: persistence, hard work and hiring good people.”
– Kiana Tom

“When I’m hiring someone I look for magic and a spark. Little things that intuitively give me a gut feeling that this person will go to the ends of the earth to accomplish the task at hand.”
– Tommy Mottola

Much has been written about adding, subtracting and shifting care providers in an ophthalmology practice because it happens so much today. Labor substitution between MDs/DOs and ODs obliges advance planning, especially with upside-down physician labor markets and practices bidding up the price of professional labor.

Less has been written than is needed about the parallel labor volatility taking place in the upper levels of practice administration. The complexities of modern practice, combined with trends toward practice mergers, are demanding stronger practice CEOs and executive directors, when once office managers and administrators would do.

Here are a few common questions.

Why do practice executives leave?

Administrative departures are about 50% practice-driven and 50% driven by the manager who retires or leaves for a better career. When managers are terminated, it is rarely for a singular error or omission. Ophthalmologists are famously non-confrontational and slow to pull the plug. Most fired administrators have to rack up numerous career missteps over time. When I ask the typical physician client, “Why do you think it’s time for Frank to go?” the typical response is, “It just feels like he’s overstayed, it’s no single thing, something has simply gone out of our relationship. It’s time to move on.” When managers leave, the answer is a bit more focused: “I’m ready for a bigger challenge,” or “The handwriting is on the wall. I’m no longer getting the respect here I once enjoyed, and I’d rather leave voluntarily than be terminated.”

Is it time to replace or simply augment our administrator?

No manager can be all things to all practices. Your administrator may be a numbers whiz but lack interpersonal skills, or vice versa. No amount of interviewing and background investigation can guarantee that the final administrator candidate you hire will be an intellectual and temperamental fit this year, much less in the years ahead, when practice scale and complexities may outrun their competency. In many cases I find a perfectly acceptable, hands-on operations manager who, through no fault of his own, lacks the strategic chops, critical thinking or financial acumen the board desires. Certainly, in many such settings replacing the manager or hiring a CEO-level executive above him is the right step. But in other cases — smaller practices or those that are economically pinched — boosting the engagement of the managing partner or backfilling missing skills with outside accounting support can be the best and thriftiest path forward.

What skills should the contemporary practice executive possess?

The cheeky answer is, “All of them.” And it is not too far from the truth. It helps to be a polymath. In a single week, the manager of even a modest two-surgeon practice can be involved with federal regulatory issues that could shut the practice down, architectural decisions that will influence efficiency for the next decade, and human resource choices that will make or break your clinic flow. But few practices of any size can afford an all-knowing, all-doing Swiss Army executive. So you have to focus on those talents that are the most pressing and frequently needed. If your practice is economically on the ropes, financial skills head the list. If you have a co-managing cataract practice, sales and outreach talents may be the most important. Hire for the chief problems and opportunities while realizing that any less critical skills missing in your new manager can generally be outsourced or handled by someone else on staff or in the boardroom.

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Should we hire from within or go outside to find our next business manager?

Two generations ago, any smart, energetic technician or billing clerk could reasonably aspire to practice leadership. Not so today, except for the smallest boutique settings. But neither does a largely theoretical MBA or accounting degree alone guarantee success. More typically, we see that the best practice lay leaders today have a solid formal grounding in accounting or finance, combined with many years of progressively greater responsibility in ever-larger organizations. Given the staff composition in most practices, this means that you almost certainly need to recruit outside of your practice. What is the most predictive success factor? Selecting someone who has been successful in a medical practice that is the closest to yours in terms of service mix, structure, scale, growth pace, work intensity and boardroom environment.

What planning steps should we pursue in replacing our current manager?

In the ideal situation, in which a replacement has been anticipated months or even many quarters in advance, you can undertake the following serene steps:

Update the practice’s long-term business plan so you have a context for deciding what level of administrator will be required.
Form a search committee, inclusive of the outgoing administrator, board members and mid-level managers.
Cast a wide net and be patient in selecting a just-right fit.
In the best circumstances, arrange to have your outgoing administrator available as an ongoing consultant to aid the transition and to also hedge against the typical 50% odds that the next administrator you hire will not work out and you have to start all over again.

When your administrator’s departure is abrupt, or worse, acrimonious, you may be obliged to skip some of the above steps and add others:

Making an appropriate, upbeat announcement to practice staff and associates.
Notifying vendors and others in the community about the change in status.
Naming an interim administrator (commonly the managing partner).
Requesting that mid-level managers prepare to work more autonomously for a while.
Calling on your accounting and other consulting services to bridge the unplanned gap.
Cutting a few corners in securing the next administrator in the practical interest of time.

How long will it take us to find a new administrator?

The answer to this is proportionate to the size of your practice, your expectations and the resources you apply. Small practices, with luck and modest needs, may secure an acceptable candidate in a matter of weeks, often raiding a nearby like-sized practice. Large practices have greater needs and more at stake. Such practices, which hire one or more executive search firms and muster a formal search committee, may be able to onboard a replacement in as little as 3 to 4 months from launching a search, but 6+ months is a more realistic expectation.

What are administrator compensation trends?

In a word, “up.” Let’s break this down into zones for the starting base salary ranges typically seen at four practice scales in the average market for the average qualified candidate:

Small, one to two doctors, $1 million to $3 million practice: $60,000 to $80,000.
Medium, three to five doctors, $2 million to $6 million practice: $80,000 to $110,000.
Large, more than six doctors, $7+ million practice: $110,000 to $200,000.
Very large, 15+ doctors, $20+ million practice: $200,000 to $300,000 and up.

In most cases, typical benefits include:

A potential performance bonus equal to 10% to 20% of base salary.
A relocation allowance of up to $10,000.
Three to five weeks combined vacation, CE and sick leave from the outset.
A $2,000 to $5,000 annual CE stipend.
Personal and family health coverage.

These figures are much higher than a decade ago. Is it fair that administrator wages have been rising at a faster pace than ophthalmologist wages? Of course not. But supply and demand, combined with sharply greater career burdens at every scale of practice, drive the market.

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What can our practice — and especially our doctors — do to make our next administrator more successful?

This is a potentially very long list, but the three most prominent success factors are:

Strategic intimacy: Getting the new manager and the doctor-owners on the same page regarding the 5- to 10-year plan for the company.
Numeracy: Assuring that the new administrator, managing partner and middle managers are communicating fluently on the key performance indicators (profit margins, growth rates, surgical density, payer mix, optical remake rates).
Accountability: Providing the board with not less than a monthly written recap of the status of all open projects and alerts regarding any looming performance lags.

For more information:
John B. Pinto is president of J. Pinto & Associates Inc., an ophthalmic practice management consulting firm established in 1979. John 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, The Women of Ophthalmology, Legal Issues in Ophthalmology, Ophthalmic Leadership: A Practical Guide for Physicians, Administrators and Teams and a new book, Simple: The Inner Game of Ophthalmic Practice Success. He can be reached at 619-223-2233; email: pintoinc@aol.com; website: www.pintoinc.com.