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Monday, June 30, 2008

Doc vs World: Episode 3

My name is Richard A Schoor MD FACS, and I am a urologist in solo practice in Long Island. In this day and age, the solo practictioner is the medical equivalent of the eco-survival specialist: without the proper skills, knowledge, and a bit of luck, you can die out here. Like my true survival specialist-alter-ego, Bear Grylls, I have amassed quite a bit of experience in survival, only in the harsh medical landscape rather than the jungle, the desert, or the tundra. While I have not had to eat bugs, snakes, or carrion to survive, I have had to eat a lot a crap!

Today, I will be trying to survive the double digit increases in malpractice insurance liabilty premiums that are facing New York's physicians. Of course New York is not the only state in crisis. Just ask any doctor in Florida, New Jersey, Massachusets, or Pennsylvania and they can tell you that thriving is no longer the goal. Economic survival is the name of the game.

Here's how to survive dramatic rises in liabilty rates.

One, you must budget, budget budget. And not just your office finances, but your personal ones too. You may need to float your business with a personal loan in the case of cash flow disruptions in the office and vice versa. In the office this means being an absolute miser. Negotiate for rock bottom fees with vendors, turn off your lights, disallow overtime, hire part-time employees, hold on to bills as long as long as possible; essentially do more with less. Put off that vacation untill things get better.

Two, you must plan for the future. The rates will go up this July. They will go up more next July, and still more the following one. When it comes to liablity insurance rates in NY, the direction is and has always been one way--up. Knowing this, one can plan an escape. In the time frame of a year, any physician can relocate to another state, join a practice, and start again. You may take a loss on your house, but ultimately you'll come out ahead. Even in states with long lines for licenses, the whole process can be completed in 18 months, tops. You should know financially if your practice can survive this July's increase and even next July's, so realistically you have 24 months to get out of Dodge. When faced with certain demise 3, 4, or 5 years hence, or survival with a calculated risk, take the risk.

Three, look for alternative insurance vehicles. In the last few years, deus-ex-machina has come in the form of RRGs. RRG's, or risk retention groups, are insurance mechanisms that cover businesses of similar risk characteristics when tradional insurance has become too expensive. Congress passed the federal law that allows for these RRGs inthe 1980s and since then many have formed in a variety of industries, including medicine. Anesthesiologists have had successful RRGs for many years and while the rates for anesthesiologist with traditional insurance companies have risen , anesthesiolgy rates have actually dropped for those covered with the RRG. There is an RRG for emergency physicians and even one for orthopedics. A new one, called SCRUBBS, is being formed for urologists. RRGs are under ferderal jurisdiction, rather than state control. As a result, insureds can move about the nation and retain their policies. On the downside, since RRGs are not under state insurance rules, insureds have no protection--zero--when these companies go bankrupt. In other words, switching to an RRG is risky, but survival and calculated risk go hand in hand.

Lastly, do not ask for devine intervention, providence, or the good will of others to protect you. In the wild, it is survival of the fittest. Same thing here. Many people I know have said the following: "they can't let doctors in NY go bankrupt." I say bull. This type of logic has led many people, cultures, even civilzations to their downfalls.

Eight years ago I stood among a bunch of obstetricians before grandrounds and listened to them gripe about their malpractice premiums. At the time, they were asked to pay $90,000. "How could it get any worse?" said one. "Albany will intervene" said another. Now these same docs are paying over 200K per year and Albany has done squat.

Albany can let doctors go bankrupt and they will. No help is coming. You're on your own.

But you have the tools to survive. Stay calm and use them.

Good luck.

The IU.

Friday, June 20, 2008

Why is a manager worth their incomes?

I recently posed that question to a bunch of practice managers on a listserve and got some great feedback. A good practice manager is worth their weight in gold, as long as they exhibit excellence in the followings areas:
  • Human resource management
  • Billing and coding
  • Payroll
  • Business development and strategy
  • Information technology management
  • Risk management
  • Financial management
  • Contract negotiation and insurance company management
I could not agree more. A good practice manager is truly worth their weight in gold and can help you generate income, run a business, and be a doctor.

Thanks.

Monday, June 09, 2008

How can an established medical practice go under? It is easy.

The used to be a saying that went something like this: there are no starving doctors. When I decided to become a physician, in 1987, that was certainly true. Now, established practices that have served communities for 40 or more years are going bankrupt. The question is how can this be happening?

It is actually quite easy. Here's how:
  1. Take a practice full of established patients that are older and sicker.
  2. Combine that with rock bottom reimbursements especially for that exact patient demographic
  3. Add to this brew soaring medical liability premiums and rising payroll costs
. . .and you have a ship on the verge of foundering.

Then throw onto the already struggling business disruptions in cash flow, the inability to get additional financing, ie loans, and rising energy costs and voila, the ship goes down like a rock.
Very easy indeed and it can all happen in the span of 3-4 months.

Here's how to defend your practice from this demise.
  1. Have 3 months of operating expenses for the business, minus your salary.
  2. Have at least 3 months of savings to cover your personal costs.
  3. Develop a 5 year plan for your practice and strive to achieve it.
  4. Know your numbers amd metrics inside-out, backwards and forwards.
  5. Be lucky!
Good luck.

Friday, June 06, 2008

Doc vs World: Episode 2

Imagine this:

  • You're an orthopedic surgeon and part of a group. You have 3 partners, 2 of whom have been in the practice for 15 or more years. You are a partner, but not a managing one. What that means is that you come to work, do your thing, and get "partner's pay." One day, the managing partners call a meeting. In the meeting, they ask that all employees go 2 weeks without a paycheck because the practice is out of money. The partners, they say, will go without pay "until further notice." What do you do?
You don't believe this scenario? Believe it. This exact thing is happening in an orthopedic group with which I am familiar. So, again what do you do?

Well first, as a partner you must make it your business to know about the financial health of your business. You are a partner and it is your right. In this case, however, your options will depend on your answers to several questions.
  1. Do you have savings?
  2. Do you have another source of income?
  3. Do have good credit and can you get a loan?
  4. Are you willing to relocate?
  5. Have you planned for this contingency?
If you have savings or a source of income that can last 1 year, you can go off on your own. Otherwise, I don't believe that this is a viable option, unless you have an established practice, a loyal patient and referral base, and an unenforced no-compete clause. In that instance, you may be able to become cash positive in 2-4 months. Here's how to start.
  1. Get phone.
  2. Get a box.
  3. Get an address, even if it is a PO Box.
  4. Get all your provider ID information and credentialing information gathered and organized.
  5. Put all of the above information into the box.
  6. Set-up a new PC or LLC.
  7. Get a biller, even if you need to out-source it.
  8. Change your provider IDs to your new location and your NPI to your new address.
  9. Find office space or sublease on a per diem basis if need be.
  10. Collect all copays.
  11. Do not submit ANY claims until all provider IDs and your NPIs have been confirmed as switched, unless of course you want your old employer to get all the money.
  12. Answer your phone 24/7.
  13. Tell your kids they ain't going to camp.
Good luck. But there is a lesson here. Whether you are a partner or not, as a doctor you are a small business man. You must know the details of your business and you must have an exit plan. This disaster plan must be in place even during the good times. When the bad times come, they'll come plenty fast and your plan could save you. This plan should include savings, alternative income sources, your own insurance policies, knowledge of the competitive landscape and possible employment opportunities and even a license to practice in another state.

I hope this never happens to you, but if you're reading this intently, I suspect it did. Contact me if you'd like.

Again, good luck.