Our group practice process is now starting to kick into a higher gear. A lot of the prep work has been done. You’ve identified your locations, put together a business plan and gotten financing in place or at least started that process moving forward.
Now, it’s time to start with the less tedious, theoretical part of the process. We’re going to start putting offices into place and dealing with the operational part of building our group practice. In other words, now it gets fun and nerve-wracking all at the same time. Let’s take a look at some of the key considerations at this point in the process:
Where should I put my first new office?
Obviously, as you start this process, you want to put your first office in a place where you will be successful and not feel like going through all the work to build your practice was a huge mistake. And from experience, I do know that doctors going through this process find areas that they absolutely love. The demographics are perfect, you’ve found a beautiful location right in a strip center with a Target and a Lowe’s and before the ink is dry on the lease, you have people wondering when you will be open for business. That’s a great scenario, but before jumping on that, consider choosing the office with the closest geographical location. This spot should have passed all of the location tests we discussed earlier and you can achieve synergies that will substantially assist the success of your new office. With that, let me move into the next, obvious question.
What are these synergies you are talking about?
We touched on this briefly in a previous post, but the cost and marketing benefits of having multiple locations are major reasons for embarking on the effort. Here are some of the big ones.
Staff synergies – As discussed earlier, let’s say you have an office with 8 days per month of volume (you may be stretching that over more days to stay busy, but as we’ll discuss later, you won’t have that luxury/burden under this model). Even if you are lucky, you will be hard pressed to find a staff happy with just working those 8 days. If they can move between offices, they can be productive every day not just during 1/3 of the month. Having your staff seeing patients on just about all work days versus a small portion is a huge efficiency boost for a practice. As we’ve discussed before, this is your largest cost and ensuring that your largest cost is directed toward something productive as much as possible provides the best results. If your new office is close to your existing one(s), staff movement between them is easier logistically and not emotionally draining.
Marketing synergies – In a lot of cases, marketing dollars spent on office 1 can now be spread across multiple offices to reduce the cost per office. For example, let’s say that you have a deal in place with a few local businesses to give their employees and customers a discount. It costs virtually nothing to add a new office name to the existing promotion. If your offices are close to each other, the exact same businesses that fed patients to office 1, will be located to feed patients to offices 2, 3 and beyond.
If you advertising on TV or radio, this difference is even more pronounced. If your new office is in the same market, the cost is minimal to add the new office to your current ad. None of your spots need to change. And the cost can be spread among all of the offices participating. So, if you are spending $5,000 per month to advertise office 1, the cost goes down to under $1,700 per office if you have 3 offices advertising to the same area. Plus, you know that the ads currently running already work (or else you wouldn’t be running them). Compare this to potentially opening in a new market where you need to produce a new ad, get on a new marketing schedule and hope that the new spots are placed in the correct time slot and on shows that attract your base patient base.
Of course, unless you are in a top-10 market, at some point you will probably have to enter a new advertising area, but in the beginning, take as much advantage of marketing synergies as possible.
Purchasing synergies – As your practice grows, you are in a stronger position to negotiate deals. Consider a local lab that you may use. If you bring that lab 2, 3 or 4 times the number of patients that you’ve previously brought them, you can negotiate a better deal. If the delivery distances for that lab are not materially different, you will be in a much stronger negotiating position.
Mental stability synergies – OK, maybe this is not a synergy, but you need to consider this as you start the process. Let me give you an example from my own experience. When OCA was first getting into gear, all of the offices built were located in the southeastern portion of the US – in the same area as our home office. So, if a problem came up like unexpected staffing turnover or equipment problems or a construction stoppage, we could travel out to the location and get the problem solved. When we built an office in Seattle, WA, we got thrown out of our comfort zone. Now, these problems had to be solved from afar. We couldn’t just make a short trip out to the offices when something went wrong (and something will always happen). That caused an additional level of challenge and stress. When you are just starting out with building a group practice, you don’t need extra headaches. Keeping things close by helps you to avoid that cost and difficult associated with distance. As you get more comfortable with everything, branch out further. And yes, I do understand that we live in an internet generation and communication is a lot easier, but many things are still best handled in person.
When do I move on to my next location?
This answer varies depending on the mentality of the person running the project. Some will say, “As soon as I feel like I have a lead on potential financing, we’re identifying sites and negotiating leases.” Others will take the opposite view and say that they need to see 6 months of growing profitability before making their next move.
From what I have seen, the best results seem to come when practices get comfortable that an office will be profitable before moving on to the next office. So, let’s say that the office is not profitable yet, but it is starting 30 new patients per month, the staff looks stable and productive and the doctor seeing most of the patients has settled into t a nice groove. At that point, you can put some effort toward nailing down that next location, securing financing, etc. This solution is a bit more conservative than the maybe money = let’s build, but a bit more pragmatic than the slow-and-steady approach. But again, you need to make that decision based on your own personality and belief in the offices that you have built. Group practices can succeed no matter what the mentality of the doctor.
No comments:
Post a Comment