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BLOG: $10 million club: Solving problems on the way to becoming a much larger practice, part 2
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Large practices commonly feel as though they have run out of things to do next. By the time a practice reaches $10 million or more in collections, virtually all possible ancillary services have been developed. There is generally already at least one ASC. Optical dispensing is old hat, and the special testing department can’t really add any more patient services. In already-large practices, all or nearly all appropriate subspecialty areas are covered, and any that haven’t been added yet are likely of no interest to the founders, either due to an incompatible patient base (pediatrics) or lackluster economics (neuro-ophthalmology).
As the largest (or near-largest) player in their market, practices in the $10 million club often run out of the competitive zeal they once had. It’s a little like becoming the best tennis player in your club — you no longer have a “pacer” out ahead, driving you to improve. Also, with age and relative success, the founding doctors can often run out of financial needs. With no more homes, cars or dream vacations on the list, or simply a desire for more free time, the motivation to strive dims. Medical entrepreneurs are like any other kind, driven in part by financial reward and a striving for social rank.
If the next generation of doctors in the practice hold similar or greater dreams, the practice can readily undergo another doubling on their watch. But without this, the practice is like a kingdom with an ineffectual prince in line for the throne. And when a lead doctor leaves, you lose not only his leadership but his production. Everyone else’s overhead rises, and a negative profit spiral can ensue, reinforced in turn by the lack of leadership.
I’ve long observed that at or near the $10 million threshold, practices can go through a period of “diseconomy,” opposite the expected economies of scale, in which sheer complexity and all the moving parts demand a stronger middle management team, upgraded information systems, new facilities and endless meetings to facilitate communications up and down the line.