Creating reality from abstract economic concepts.

At the risk of starting off on a dry note, medical practice owners need to understand two crucial economic terms in order to be successful:

Utilization: defn. 1. The action of making practical and effective use of something.
2. It can also be viewed as the proportion of the available time that a piece of equipment, person or system is operating.

Opportunity cost: defn. 1. The loss of potential gain from other alternatives when one alternative is chosen.

If you are still reading this after enduring the textbook definitions above, I’ll try to make your time applying them worthwhile. The issue of practice expansion does not come with an instruction manual. It is a delicate balance of trying to grow organically while not compromising the integrity of your practice. The following are some guidelines I have formulated over the years that incorporate those two economic concepts above.

OUR PRACTICE BECOMES A REFLECTION OF US

Making major strategic decisions will help mold and define what type of practice yours will become. Allocate some time to understand the desired “soul” of your practice. Socrates defines this “soul” as nothing less then the animated force of reality. Knowing this about your practice will enable decisions that move you toward the practice you desire and keep it from straying from core values.

THINK ABOUT POSSIBILITIES

It is easy to see barriers to change. These obstacles will be freely discussed among colleagues, but it is crucial to avoid negativity and fear. Aristotle observed that those who are frightened of losing what they have are the most vulnerable.

In decision-making, face reality but avoid acting solely on worry about what might happen. Fear can put the brakes on any project, causing you to miss opportunity. Eleanor Roosevelt best sums it up: “It is more intelligent to hope rather than to fear, to try rather than not to try.”

IMITATION IS A FORM OF FLATTERY

Often we look at other practices in an attempt to find “model behaviors” that will bring our future practice closer. I make it a point to travel to another practice almost every four years to help create an updated vision for my practice with new goals. Typically, “new goals” include physically expanding the practice. As you become busier, there is an instinct to take more space or hire more doctors. Barriers to expansion, though, are more people to manage, a bigger operating budget, more opinions at office meetings and travel between offices. How will you meet those?

MAXIMIZE UTILITY

Decisions to expand should include an analysis of your current practice. Start with the big picture. Fill in doctor usage on a monthly calendar, looking for opportunities to spread schedules out evenly through the month. Look at creating efficiencies to expand the number of patients seen in each clinic. Examples of this include hiring a scribe, patient flow monitor, buying a second visual field machine and grouping patient visit types together, such as postops or cataract evaluations. In larger practices, anticipating and thoughtfully distributing doctor and staff vacations will maximize utilization of current space.

However, there is a point where the utility of exam room space is maximized. Beyond it, patients will feel rushed and describe the office as feeling more like a clinic; they will also sense the stress of the doctors and staff. For example, say you are deciding whether to add four exam rooms, taking (usually this means renting) 20% more space. An accountant would look at past practice balance sheets and P&Ls to help show growth curves that predict growth and need. Use this information but add in the “utility” of the expansion — that is, how many more patients the practice can see on a daily basis and how much revenue those extra visits will yield; how much will you need to spend on additional equipment for those four rooms? Your time frame should include the present out to the next three to five years.

Additionally, you must rely on your instinct from “the street” or in the clinic hallways to influence assessment of need.

FOMO: FEAR OF MISSING OUT

Another issue when considering expansion is the impact that opportunity cost will have on a decision. In this case, not expanding the office may limit growth and thus revenue. Perhaps the office cannot add a half-day of retinal clinic each week because there is not room for another doctor. Or space constraints restrict a doctor during clinic in the number of patients seen or testing done. Focusing on opportunity is as important as focusing on the cost of the opportunity.

Often, our instinct is to continue doing the same. It is comfortable, predictable and already proven. Making changes requires motivation, risk, strategy and uncertainly. But, planning for change eases change. A good business plan needs to incorporate utility considerations and a review of opportunity costs. Balancing all this information will help create a road map for growth. OM

Scott LaBorwit, MD, is a principal at Select Eye Care, with locations in Towson and Elkridge, Md., and is an assistant professor, part-time faculty, at Wilmer Eye Clinic of Johns Hopkins Hospital, Baltimore. His e-mail is Sel104@me.com.

Disclosures: Dr. LaBorwit is a consultant to and speaker for Alcon.