Sometimes you have to “go big or go home.”

The literature is filled with advice and differing philosophies about managing medical practice debt. Most approaches are formulaic, based upon a percentage of overhead, the number of revenue-producing providers (divided further into surgeons, ODs, PAs), ancillary revenue streams (cosmetic services such as Botox [onabotulinumtoxinA, Allergan]), retail (optical, contact lenses, etc.) and, lastly, premium channel liquidity-based procedures, such as premium IOLs, corneal-based refractive procedures, LipiFlow (J&J Vision) and even day-spa services.

Further, these “departments” are broken down into those that demand additional overhead to the business, such as additional FTEs and inventory, and those that do not. Many formulas set an absolute, do-not-exceed bar of debt as a percentage of overhead.

More complex formulas are combinations of differing and floating percentages, established upon the revenue each individual department or provider collects. This way, higher-producing individuals or services are not held back from expanding, nor are the newer members, lower-producing providers or services burdened by departments that are more established or deal with the practice’s “low-hanging fruit.”

For example, the overhead of retina specialists is often less than anterior segment/comprehensive ophthalmologists as the former depend on a primary base of referrals from the latter group, which may need to spend additional resources for marketing, diagnostic and other clinical resources. Similarly, neuro and pediatric ophthalmologists work plenty hard, but tend to collect less revenue than the comprehensive ophthalmologist.

So, how should debt service weigh in?

BE WILLING TO BORROW BIG MONEY

Many years ago, I met a very successful businessman who had built an empire selling foreign cars. From a single dealership, he became the highest volume dealer in a multi-state region.

He started out as my patient, and a friendship soon ensued. He invited my family to his lake home for a weekend, which gave us a terrific opportunity to discuss both the personal and the professional. This was early in my career, and I absorbed his every word like a sponge. The most helpful bit of advice this extraordinary gentleman gave me was something in direct conflict with the teaching of most of our best national consultants (whom I turn to frequently): “With some exceptions, in order to make big money, a business must be willing to borrow big money.”

I’m not sure that I understood what he was trying to tell me at the time, but in the 27 years since, I have held this tenet close, and, sometimes, against the advice of others, I have borrowed well over the formulaic limits to pull off some ambitious dreams of my own.

Now, understand that I am by nature debt adverse, and that a few of these dreams were not fulfilled, while some targets, frankly, failed. Yet, living by this tenet and being diligent about paying down debt service as quickly as possible, this unconventional fiscal philosophy has given me an edge in my community, which would have otherwise been unattainable by sticking to a more conservative MO.

FRUITS OF THE PHILOSOPHY

Examples of these dreams have included being the first practice to market in movie theaters throughout the community — a commonplace practice today but not 25 years ago. Another example: Taking over additional real estate as a then-solo practitioner in order to build an ASC in 2002, just after the certificate of need was relaxed in my state, and building an 18,000-square foot medical building in a nearby city before renters were committed. Each of these strategic moves garnered raised eyebrows from everyone except, thankfully, the bankers who financed these projects. Sometimes I needed to use my own home as additional collateral.

Most recently, I became the corporate partner with my city in order to have the naming rights to a new $80-million arena. This, I know, was ambitious, but it has been most rewarding, utilizing the facility for philanthropy, branding and participating in the many events that fill the 6,000 seats regularly.

PROCEED WITH CAUTION … BUT PROCEED

I understand that the consultants who guide most of us with our businesses will not agree with my opportunistic approach to managing debt, but I have kept it reasonably well controlled, and I have never over-extended myself to a dangerous level (i.e., borrowing money to cover outside-the-practice household operating expenses). I encourage you to be wise about your debt obligation, protecting both your practice and personal assets with enough disability and overhead insurance to cover expenses in the case of a temporary reduction in key-man/woman productivity. Within reason, investing in yourself is your strongest investment of all, and sometimes, big dreams require big debt.

So do not be impulsive but seek advice and form a strategy that includes a strong pro-forma. And then … go for it! OM

Steven M. Silverstein, MD, FACS, is a cornea-trained comprehensive ophthalmologist in practice at Silverstein Eye Centers in Kansas City, Mo. He invites comments. His e-mail is ssilverstein@silversteineyecenters.com.