Evaluating a practice management company

We have been away for several months because we took advantage of an opportunity to get deeply involved with a group practice that had some needs for which our services were a good fit.  

Far more interesting are the reasons that the opportunity came about.  This practice had been affiliated with a practice management company (also known as a MSO or DMSO).  At some point in the middle of last year, the management company encountered some financial issues and stopped paying a number of bills.  What started as a delay to pay for what I will term “luxury” type services – services that could be eliminated in difficult times – evolved into failure to pay the most basic of invoices on things like supplies and rent (rent!).  

If you are a practice looking for an organization to handle the business management of your practice, you obviously need to look first at the financial arrangement and time commitment laid out in the contract, but here are some areas of concern/potential red flags:

Willingness to share information

Any good management company will be willing to share as much information as legally allowable(+) to give you a picture of where your practice stands and what is being done with the money generated by your practice.  This includes regular updates on statistics, financial positions, cash flow analyses, payables listings, receivables listings and many more.  If a company is reluctant to provide that to you, you should be comfortable for the reason why.  Nothing described above should be so sensitive or confidential that you don’t know about it.  If that reason doesn’t work for you, be wary.

[+ Some companies are publicly traded and have restrictions on the information that can be disclosed or they need to protect the confidentiality of other practices under their care.]

A realistic, long term view

There are 2 parts to this.  First, there needs to be a long term view to running the business.  If the strategy is to jack up down payments to increase immediate cash flow or run promotions designed to pump up ancillary statistics (like number of phone calls), either you or the company need to reconsider the relationship.  Running the business to get through the next quarter does not fit with the definition of a going concern and may not be a good fit for your practice if you have long term interest in remaining with the practice.

Second, that long term view needs to be realistic.  If part of the long term plan is to have someone put some large sum of money into the business either via an acquisition or debt financing, that does not represent a realistic long term plan.  That’s a potential outcome, but certainly nothing that the business should be pointing toward.  This is especially true if the business is showing a loss.  No one is going to put a large chunk of money into a loser despite promises and hints indicating otherwise.  When I was with OCA, we had a very profitable, growing business.  We would have loved to have been acquired at a big multiple by a large player like Johnson and Johnson, but we did not even get a whisper of interest.  Dentistry and orthodontic business management still represent a relatively niche industry that doesn’t attract a ton of high-quality suitors.

Make sure the company is continuing to improve

Technology for business management has advanced materially in the last 10-15 years.  A lot of high costs can be replaced by technological and systems improvements while improving the quality of the service.  Good management companies are constantly on the lookout for those improvements and trying new things.  Not everything will work, but that’s the nature of running a successful business.  The best solution in 2002 may not be the best solution in 2016.  

Beyond that, the basic nature of services should continue to improve.  The best management companies continually learn more about your practice and the challenges it faces.  Every conversation should display a deeper understanding of the issues in your practice and an increased knowledge base of how to deal with those issues.  If you continue to get the same recommendations, even when they don’t work the first couple of times, you may have exhausted what that company can provide for you.

Affiliating with a practice management company is not for everyone, but can be a great resource for a number of doctors.  Before jumping in with one, make sure you are comfortable that they can do the job and fit your goals.

As always, we are here to help if you have questions or need assistance, but aren’t looking for a major long-term commitment.  Feel free to contact us as bpalmisano2@gmail.com if you have any questions.