MPE: The backstory - Part 1

Today, I would like to present the history and background so that you know what kind of people comprise MyPracticeEngine.  Of course, when discussing history of any kind, there are usually varying accounts of the events comprising that history.  Individual eyes have their own individual interpretation.   No such biases exist in this story.  As such, in this version of the story, we shall refer to it as the “correct” version and as such, the official one.

Things all started in the mid 1980’s.  My father, Bart Palmisano, Sr., had his own accounting practice and I, Bart Palmisano, Jr., was an aspiring business person negotiating his way through the latter stages of high school and working for him after school and during summers.  One of his clients, an orthodontist, had built a practice in Florida with multiple offices.  The marketing side and treatment part of the practice generally ran pretty well, but the business side was nonexistent.  There was no monitoring of results, no controls over important items like cash, no reconciliations of important balances and generally no business systems.  As a result, more than one unscrupulous employee walked right into that business system void and out with over $250,000 in stolen payments.  The business was nearly bankrupt despite the strong satisfaction of patients with the treatment outcomes.

We began the process of sorting through what was taken, how it was taken and most importantly, how could we prevent the money from being taken again.  We designed and implemented systems to prevent the theft.  None reoccurred and those that tried to steal were dealt with severely.

From this episode, a business concept was born.  If we could provide this service for one doctor, would others be in need of such a service?  After all, most doctors had been in school for a very long time learning a specific craft.  Our assumption was that they wanted to concentrate on that craft and not deal with a lot of the important, yet generally less enjoyable, functions of the business side of a practice.

As we began to market ourselves with referrals from the original orthodontist and his friends, other business-related issues popped up in practices.  One practice was severely delinquent on its bills.  Could we work things out with their vendors for them and get them current on their bills without having to burden them?  Of course.  Another was tired of paying thousands per month for his practice management software.  Could we come up with a less-expensive solution?  Sure.  Another was paying too much for bands and brackets.  Could we get him out of his current contract and into a less expensive purchasing arrangement?  No problem.

Other new services sprang out of the natural evolution of the processes themselves.  If we were to effectively implement cash controls and handle accounts payable, we should also handle the monthly financial accounting for the practice.  One large cash item with a lot of administrative headaches was the payroll paid to the doctor, associates and staff.  If we took on that service, that would relieve the doctor of a number of headaches and fit in nicely with the accounting service.

One service that we got a number of questions about was marketing.  As a practice owner, you know how much time you spend thinking about and worrying about new patient flow.  There wasn’t a doctor that we talked to that wasn’t interested in bringing in more patients and easing their concerns about where new patients would come from.

In this area, we developed a couple of key tenets of the business (with major help from the doctors we were already working with).  First, the market for orthodontists marketing to referring dentists seemed to be saturated.  We needed to develop a strategy to bring the message to the public.  A Supreme Court decision in the late 70’s to allow professionals to advertise had opened up the avenue to bring our message directly to the public in the form of radio, TV and print media ads (we weren’t to the Internet Era yet).  Second, we needed a compelling message.  What did people worry about with orthodontics more than anything else?  Answer: cost.  How could we make the cost easy to fit inside the average American’s monthly budget?  The answer there was to eliminate the traditional down payment and charge monthly payments.  Finally, we needed to be able to access the patients who would normally ignore orthodontic treatment because of the cost.  The solution there was to reduce the monthly payment to a level substantial enough to allow a profit for the practice (if run efficiently), but low enough to entice people to start treatment.

Once we had a marketing system in place, things began to expand rapidly.  More and more doctors wanted us to implement our systems to bring in patients (that didn’t involve them having to chase down general dentists) and relieve the burden of a lot of the back office duties that they either did not enjoy or with which they had no expertise.

Building the business via word of mouth was nice, but slow.  Each new office improved our ability to provide more services and generate a return on investment.  We had generated a little cash and had some good banking relationships which we wanted to utilize to grow the business.  If we wanted to enter a new market, why couldn’t we just build an office from scratch, affiliate with a local doctor and get rolling?  Building a new office was costly, time consuming and challenging for an individual doctor.  Like our other services, why didn’t we just take care of that for the doctor so that he could focus on treating patients?  And so, the real estate and construction system was born.

This department is a good example of the degree of service we provided.  We would find the best markets (using our internally developed Competition Factor number), find a location within the market, negotiate the lease, design the space, find a builder, get the building equipped, inspected and ready for service.  If the doctor desired, all he had to do was to walk into the facility when it was ready and begin seeing patients.

Our economic arrangement with the doctor was to effectively, in a legal fashion, share in the profitability of the practice (or taking equity like a normal private investor would).  That way, if the practice struggled, we both took a hit.  If things were successful, we both shared in the success.  Most importantly, we were all “pulling on the same end of the rope.”  The doctor and our company both earned income in the same way and we both shared incentive to make it successful.  This was another fundamental tenet of our business.

The broad spectrum service offerings evolved into answering the question of what services can we provide to the doctor so that all he or she has to do is to focus on seeing patients.  So, the payroll service became a full-fledged human resources operation.  Controlling income cash became a full accounts receivable service complete with billing and following up on past due accounts.  Other departments evolved similarly.

Because we provided a large number of services and were tied so closely to the practice, we got involved in the deep details of just about each and every practice issue.  If a direct mail campaign was necessary in Tallhassee, FL, we did everything from researching the market there to designing the ad to getting it distributed.  If there was an unhappy patient at the front desk in Charleston, SC, the front desk person could call us.  Failing practice, growing practice, different areas of the country, we were able to see a lot. To save cost, we did a lot of things ourselves so we learned a lot.  Farming out to 3^rd parties usually didn’t work because our business was a relatively unique animal.  We weren’t completely an outside service provider, but we weren’t owners either.  A lot had to be figured out and this gave us an even deeper understanding of services, technology and available products out there.

As a company that wanted to put its earnings back into the business, we had to be careful not to let the cost of our services grow out of control and eat away at cash available to expand into new areas.  A large part of controlling this was embracing technology.  Before transferring information via modem was cool, we had them installed (2400 baud, anyone?).  We had software customized to meet our needs as a service provider to multiple entities.

By the end of 1992, we had a successful organization with around 50 offices and 30 doctors employing our services.  We felt that the concept was strong, proven and replicable.  We wanted to expand at a substantially faster pace.  Lines of credit from the bank were nice, but we were uncomfortable with substantial debt and the amounts being offered (up to $5 million) weren’t substantial enough for a significant nationwide expansion.

The only real option was the public, capital markets.  We were ready to plunge into a brave new world.  In part 2 of our exciting story, we will take you there.

Check out the second and final part here.