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Publication Exclusive: Practice decline syndrome: Fighting the dwindles Practice Management
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“There is at least one point in the history of any company when you have to change dramatically to rise to the next level of performance. Miss that moment — and you start to decline.”
– Andy Grove
“Success comprises in itself the seeds of its own decline ... .”
– Pierre de Coubertin
Based on what I am seeing in my client travels around the country, an increasing number of once-great practices are undergoing PDS: “practice decline syndrome.”
The syndrome can go something like this composite from several practices over the years:
Stage 0: It is 2001, and a large practice (let’s say with seven MD partners, two associate ODs, two locations and $11 million in annual revenue with 42% profits) is healthy and in the pink. All partners are still in their peak earning years. Strategic planning is little more than a list of priority actions for the administrator in the next 12 months. And one of the doctors says, “Why worry about the future? I’ve got 23 cases on for this Thursday.”
Stage 1: It is 2008. The Great Recession is taking hold. Refractive surgery is abandoned, replaced only in part by more senior care. The practice’s first awkward EMR conversion, because of insufficient planning and a poor vendor choice, has led to an 8% drop in production and a 15% drop in profits. And the doctors say, “What the heck, a 36% profit margin is still pretty good, right?”
Stage 2: It is 2012, and practice profits are now 30%. Of the five remaining partners, two are edging toward retirement, and one has a sick spouse curtailing his clinic time. In order to maximize partner profits (for this year only, of course), they pass up hiring a young partner-track surgeon, which means that within a couple of years there will only be three owners. There is still no succession plan. And the doctors say, “Hey, why bring on another surgeon when any two of us can handle all the cases by ourselves?”
Stage 3: It is 2016, and practice profits have now fallen to 26% for the two remaining partners. Board squabbles over resources and policy are increasingly common and harder to resolve with just two votes in the boardroom. Frustrated by conflicting demands from the owners and increasingly impossible demands from Medicare, the administrator resigns. He is replaced by a pleasant but inadequate naïf. And the doctors say, “This isn’t what I was hoping for in a practice or a partner, but I only have to hang in here another 9 years and my retirement plan will be fully funded.”
Stage 4: It is 2018. The practice fails, splits up or sells to a better organized competitor, or starts a turnaround process to bring it back from the brink.
Click here to read the full publication exclusive, By the Numbers, published in Ocular Surgery News U.S. Edition, August 10, 2016.