Merging practices, melding identities

Your practice is joining forces with another group; define success by more than bottom line growth.

By Bruce Maller, Lisa Peltier and Dana Jacoby, MBA

Many ophthalmologists have formed or joined large group practices in response to legislative and regulatory changes to the U.S. health-care system. In doing so, many did not think about how their merger would negatively impact their existing cultures, leadership and compensation packages. These issues are especially challenging when smaller groups merge — each practice has developed an identity, almost a personality, but now those employees have to give it up to create a new one. Conflicting visions and values, along with differences in leadership and management style, can pose problems. As for large groups merging, perhaps their biggest issue is deciding how to allocate revenue and share in overhead expenses.

In part one of this two-part series, we will focus on the key issues of culture, governance and leadership. In part two, we will address the critical issue of shareholder compensation while providing practical suggestions on how to optimize ophthalmology group practice performance.

How to avoid “culture wars”

We will define culture as a shared understanding of guidelines, principles, social mores and communication styles, resulting in commonly held assumptions and views among leadership and staff.^1-4 While culture is a critical “hinge” in building a successful group practice, it can prove difficult to create and measure: Few studies of culture and collaborative best practices either in health care or business have been conducted.^5-7

The unique dynamics of ophthalmic group practices involve sharing staff, investing in infrastructure and providing ancillary services. But this need to share practice resources is frequently in conflict with who spends, and how they spend. Although successful group practices demand a cooperative culture, many factors at play often bedevil attempts to foster one.

Collaboration defines how people who see different aspects of a problem can constructively explore their differences and search for solutions that go beyond what they thought possible — clearly what is needed when forming a new practice culture.⁸ But adopting a collaborative mindset can prove challenging as newly formed partnerships struggle with improving communication among stakeholders and developing a shared vision and mission.

A Harvard Business Review article, “Building a Collaborative Enterprise,” lists the following four key areas for developing a culture based on trust and teamwork: 1) A shared purpose, 2) An ethic of contribution, 3) The institution of independent processes, and 4) The creation of a collaborative infrastructure.⁹

Lay the groundwork

When developing a sustainable business model, a practice should invest the time and resources in creating a common identity with a shared mission, a vision and values. When contemplating a merger, these groups must talk about this common identity prior to going through the time and expense of completing the transaction. Group leaders, however, frequently overlook this step as they devote more time to legal, financial and operational issues.

For existing practices, the boards and leadership teams need to devote time to invest in this process, which can prove difficult as discussions may uncover strained relations between key stakeholders. It is important to have a proper forum to discuss these issues with the “volume in the room” lowered. Hiring an experienced third-party facilitator could help. Yes, this adds a layer of expense to the process, but it is most often worth the investment. The facilitator should educate himself about the group as well as the individual stakeholders, and interview or survey stakeholders before any group meeting.

Table 1 provides an example of a partner survey to obtain a baseline assessment of a group’s culture. Groups should implement the survey using one of many available online survey tools. Results can be easily tabulated and presented back to the partners as an agenda item during a planning session. These data can prove valuable in identifying areas of opportunity to improve partner communication and group culture.

Develop a strong governance structure

Historically, ophthalmology groups would elect each shareholder to participate on the company’s board of directors. The board would assume responsibility for developing policy and managing the affairs of the company. Delegated authority would be given to an elected president or managing partner to carry out the policies and plans of the practice. While this model is more likely to work well if the practice is large and has about 15 shareholders, it no longer gets the job done when groups grow in size and scope. Thus, many larger group practices have found that it makes more sense for the shareholders to elect a board that can assume responsibility for managing the company. The number of board members will vary based on group size, though most groups have an odd number (between seven and 11).

A practice’s effective decision-making starts with a well-constructed governance model. In the case of a professional corporation, the board of directors establishes the “rules of the road” concerning delegated authority and decision-making. The board elects the officers of the company whose job it is to carry out the day-to-day management of the company.

Depending on group size, it is not uncommon for a board to appoint various operating committees to provide delegated authority to carry out company policy and provide oversight for key functional areas. These would include finance and accounting, personnel management, facilities management, marketing, operations, IT and payer contracting. In some cases, the board may also appoint an executive committee (a smaller subset of the board) with delegated authority to work with the senior management team in implementing the company policy and business plan. The key is to establish consistency in communicating across the organization so that all stakeholders feel connected to the direction and decisions of the governing body. Figure 1 provides an example of a governance structure for a large ophthalmology group (20 or more MDs).

Figure 1: Sample Governance Structure — Large Group (20+ MDs)

The case for leadership

In large ophthalmology group practices, a strong group president or managing partner is essential. Oftentimes, the job is assumed by one of the partners in the practice and is not a full-time position. In other cases, the group will recruit a full-time individual either from within or outside the practice. Whichever type you choose, we recommend the board develop a job description that clearly outlines the individual’s responsibilities and scope of authority. A sample job description is provided in Table 2. Also, construct a compensation plan for the president or managing partner that is aligned with the group’s overall goals and values and that takes into account the scope of responsibility the leader assumes. Table 3 delineates responsibilities between the board and president.

Consider the “corporate” model

Many large groups have found it beneficial to further develop their senior management teams through recruitment of more traditional “corporate suite” roles, including chief executive officer, chief operating officer and, in some cases, a chief financial officer. These decisions are based on the size, scope, service lines, number of partners and overall complexity of the organization.

Key success factors with effective group governance include, but are not limited to:

1. Governing documents with clear lines of authority and decision-making criteria.

2. Effective delegation from the board to several operating committees; each should have its own charter and guiding principles.

3. Accountability from each operating committee to the board for regular communications, including status reports on key committee initiatives.

4. Board commitment to providing resources and support to developing the business skills and strengths of the leadership team.

5. A succession plan on developing a leadership “bench” to ensure long-term stability in leadership and management of the practice.

6. Board commitment to a formal strategic-planning process for continued focus on the company’s vision, mission, core values, strategies and tactics.

Strong, visionary leadership is a defining factor of a successful practice. Effective leaders should:

• Adhere to influential and authoritative, but benevolent, leadership principles

• Motivate, inspire and influence all

• Own conflict-resolution management and work toward successful outcomes with administrative personnel

• Innovate toward strategies for creation of best practices and optimal group efforts

• Focus on improving health-care outcomes

• Focus on providing opportunities for employee development while attaining financial and operational results

• Develop leadership opportunities for other team members and find creative solutions to short- and long-term challenges

• Develop confident, principled and ethical ways to approach their job responsibilities

• Garner the respect of all.

Groups interested in successfully building a culture should invest time and attention in developing practice-wide communication strategies. Meaningful communication reinforces core competencies and encourages active and honest discussions. Groups that struggle with communication have found that a partner survey can uncover inter-partner issues; some hire an outside resource to develop the survey and analyze the results. OM

In part two, we will discuss shareholder compensation programs and their role in optimizing performance of group ophthalmology practices.

REFERENCES

About the Authors
	Bruce Maller is the president and CEO of BSM Consulting, an internationally recognized health care consulting firm headquartered in Incline Village, Nev. and Scottsdale, Ariz.
	Lisa Peltier and Dana Jacoby are senior consultants at BSM Consulting. More information about the authors or BSM Consulting are available at www.BSMconsulting.com.