From an early age, Bruce Maller understood the need for physicians to learn about business. His father owned a grocery store, and some of his uncles and cousins were physicians. But it was his father who helped put some of them through medical school. “My dad always used to talk to me about the fact that his brothers were not very good businesspeople,” he says.
Mr. Maller developed an affinity towards business as well as an interest in helping others, which he credits to his mother, a registered nurse. After an internship with a financial planning company that worked with doctors, Mr. Maller gained additional insights into physicians’ needs for business training, which he says “has simply not been part of their basic education.”
That was the seed, he says, that gave him an idea: What if he could take my understanding and love of business, combine this with his communication and social skills and apply them to help physicians deal with their financial or business-related challenges?
His first “client” was a young obstetrician/gynecologist friend in a group practice who voiced his concerns about his low compensation despite being a high earner for the practice. He convinced the group to let Mr. Maller conduct an evaluation. “That was really the first opportunity for me to go in and problem-solve,” he says. “It was a discovery — they actually listened to me. I’m this kid that really doesn’t have a lot of experience in business, doesn’t have an advanced degree, yet my message resonated with them.”
This was the beginnings of Mr. Maller’s career as a “professional problem-solver” and of BSM Consulting, which provides the tools and resources that practices need to make better business decisions. In September of last year, BSM Consulting celebrated its 40-year anniversary, during which the company has consulted with hundreds of practices and trained thousands of staff to put them in positions for success — in patient care as well as business. And the overall approach has remained the same as it was in the beginning. “I’ve been teaching this for all of my career. I say, ‘Let’s apply the same discipline you do diagnostically and clinically and therapeutically. Let’s just do that over here in the business world.’ And they relate to that.”
Here, Mr. Maller shares his thoughts about the state of the ophthalmology industry: How far have we come, where do things stand now and where are we going?
Ophthalmology Management: What do you believe have been the secrets to your success in building a successful consulting firm?
Bruce Maller: We’ve created a culture at BSM that team members covet and protect relentlessly. It is extraordinarily humbling to me that our people care so much. We’ve created this environment where people are highly accountable. But our team knows that we have a clear sense of purpose and a strong set of core values. Our leadership team provides the glue that ties all of this together with values that are aligned with those of the team. We also invest heavily in educating all team members to be effective in leading. This is a central part of our success. People feel better about themselves when they’re working in an environment that challenges them to be the best they can be.
This is just as important in our practices. The main differentiating factor in the better performers is a strong physician leadership team and a strong administrative leadership team that are completely conjoined; you can’t separate them. On the other hand, when you visit a practice that may not be performing well, it is not uncommon to see drama between the practice administrative leadership team and the doctors.
OM: You have worked with hundreds of practices during your consulting career. What are some of the most common mistakes you have seen?
BM: One of the biggest, most consistent things that I observe is that clients lack discipline in terms of consistently and strategically managing their business. They may have good intentions and want to develop a business plan and think about their future, but most really lack the ability or leadership to execute the plan in a thoughtful and strategic manner. So, they fall back into old habits, which is managing in a more reactive way. Then, they find themselves back in a similar situation, wanting to know why things aren’t functioning the way that they would like.
The lack of a consistent, strategic approach to running your business is often reflected in the lack of a clear mission, vision and a strong set of core values. Most practice issues or problems could be better managed if practices took a more thoughtful, organized and disciplined approach. For surgeons, their day job is very tactical. You have a problem with a patient that’s in front of you and you solve it medically or surgically. But business is different. Business requires a more thoughtful and deliberate approach. Generally, you can’t effectively manage people, nor a business, in a reactive, more tactical way.
Another thing I often see lacking is physician investment in self-improvement and leadership development. Many have not chosen or been able to invest in developing these skills. As such, I see many lacking in emotional intelligence, which is the underpinning of effective leadership.
The fundamental problem is that surgeons are busy and they are unable to prioritize development of these leadership skills. Over the years, it becomes increasingly challenging to run small businesses, maintain busy clinical and surgical practices and also balance personal lives. This is due to the changes in the regulatory environment along with downward pressure on third-party reimbursement and the day-to-day difficulties of managing human resources functions. Most ophthalmologists are expected to do more to maintain their productivity and efficiency.
OM: Let’s talk about the expected growth of patient volume. How will this impact the ophthalmic practice in the coming years?
BM: For practices, the implication really has to do with how to build a more efficient model for patient care that leverages technology and optimizes the MD’s time in a way that they can focus on what they are best able to do. That means educating the team to extend the surgeon as best possible in the OR and in the clinic. This also includes more effective use of optometry and clinical care teams while leveraging the resources that physicians have at their disposal. Many practices already do this incredibly well.
With greater demand, practices face throughput challenges. Practices with empowered teams and a healthy culture will be better able to figure out how best to find workable solutions.
OM: So where does EMR fit into the challenges of creating an efficient model for patient care?
BM: I couldn’t imagine as a provider not having EMR at my disposal. While we’re hearing some people’s dissatisfaction with the options that are available to them, some of the problems aren’t necessarily the technology but are perhaps the lack of training. Various things can be done to provide more effective training and development of team members to learn how to use a system to its maximum degree. We hear reports of systems that are challenging to use, but I think it’s more so a function of how to effectively integrate those platforms in a way that the team is involved in creating patient-centered solutions while optimizing efficiency.
When you’re changing from paper-based to electronic, it’s difficult. But I think it’s more so how do we optimize or make a good selection to begin with. Then, how do we find a vendor partner who is going to collaborate with us to make sure we’re achieving our internal goals, that it’s a system that makes the patient’s experience good, the doctor happy and the staff happy
OM: What changes to the staff’s contributions have you seen during your time in ophthalmology?
BM: The main thing that has changed is the availability of more robust educational resources for staff across the board: through the trade associations, companies such as ours and a company such as yours. The industry is doing a much better job of providing educational opportunities on a wide variety of topics through different media.
This is another factor that differentiates our best performing practices: they invest and strategically look at staff development as a differentiator. Given the current rate of low unemployment, staff members have many more employment choices today. They’re in higher demand today than they ever were, which puts burden back on practices to make sure that they invest thoughtfully in staff development — not just education and training but also career pathing. Ophthalmology has become an outstanding career for so many, and, given all of the environmental changes and advances in technology, there are many more opportunities for the best and brightest to pursue wonderful careers in this space.
OM: What are your thoughts on the influx of private equity (PE) in ophthalmology.
BM: I don’t think it’s necessarily good or bad. It’s our new reality. It’s here, and there are a number of important reasons why it’s here.
The main one is the investment “community” feels as though investing in eye-care services is a great business opportunity. They look at the demographics as extraordinarily attractive. This is a sector that’s going to grow. Additionally, they see this specialty as disparate, meaning there are a lot of small practices, and businesspeople look at small as inefficient. So, they believe there are efficiencies that they can find by developing stronger operating infrastructure that can be leveraged across many business units. They see that the margins are good, whether it’s on the clinic side, the surgery center side, the optical side. They look at the money being invested in new technology and feel this trend will continue for many years. They look at the fact that ophthalmology is a specialty that is somewhat insular, kind of like dermatology. Neither would be seen as a hospital-based specialty or part of the mainstream of medicine. Investors find that to be particularly attractive. Additionally, they are attracted to the cash-pay opportunities in the specialty.
The rate of consolidation fueled by investors is unlike anything I have ever seen. There was an early transaction or two done in the eye-care space about four years ago, but it’s really ramped up the past 12 to 24 months.
So, what do the financial guys really know about running the operation of an ophthalmic enterprise? The truth is ... not much. But they’re smart people, and they know enough to know that you might know better, the operators of an ophthalmic enterprise. They don’t want to come in and fire a bunch of staff and put their own people in place. But they really need to evaluate how to create a scalable operating platform that can support the growth necessary to turn this into a good investment.
Today, approximately 50 PE firms have invested in ophthalmology or are considering doing so. In a relatively short period of time, nearly 1,000 ophthalmologists have sold or are working for a PE-backed platform, a corporate investor, or a family office. We could easily see this number grow to 2,000 in the next two to three years.
For the model to work for PE investors, firms need to acquire enterprises that have a very strong opportunity to grow at a very fast rate because PE investors demand high rates of return on invested capital. Across the spectrum of investment vehicles, PE is considered a very high-risk investment. Investors expect a return on their money of at least 20% per year. You’re not likely to get that type of return in the stock or the bond market. So, to get an acceptable return, the ophthalmic enterprise must grow at an aggressive rate that, in most cases, is greater than the historical rate for most practices
One popular growth strategy is to buy practices that may be underperforming. For example, can a buyer take over a practice and improve its conversion rate to premium lenses or simply increase cataract surgery volume? Some buyers focus on growth through acquisition but understand that value can only be created if they are able to integrate the practice or surgery center from an operational perspective. Given the complex nature of practices and surgery centers, successful models will require collaboration between the investors, business leaders and physicians. To this end, governance and proper alignment of incentives among the stakeholders is paramount.
So, why are physicians interested in this? Although there are many reasons, the main one is really quite simple: Ophthalmologists are attracted to the fact that business people are willing to pay or value their business in a commercial way. For the doctors, it’s like you’re going to the prom and, all of a sudden, there are several suitors that find you very attractive. Because of the “tension” being created by many interested parties chasing possible deals, prices are being bid up to levels not previously seen or experienced in the specialty. And, for the first time in their careers, someone is telling them that their business is worth a heck of a lot more than it was ever worth within the context of a sale to a new partner.
Practice tips to use
Bruce Maller on:
- Problem solving: Rather than managing in a reactive way, manage problems that arise with a more organized and disciplined approach. Also, don’t put all the pressure on yourself. Empower the team to find workable solutions.
- Vendor relations: Investigate vendors to find a partner who is going to collaborate with us to make sure we’re achieving our internal goals, that it’s a system that makes the patient’s experience good, the doctor happy and the staff happy.
- Staffing: Invest and strategically look at staff development. This will not only differentiate your practice, it will help minimize staff turnover.
- Private equity: Before you rush to any decisions, take a step back and assess your strategic options. Don’t feel like you need to do something tomorrow because the truth is, you don’t. Sit down and evaluate the group’s vision and values.
- Adapting: Adapt your business model to the current environment, but never lose your focus on staff and patients. Be adaptable and flexible instead of just staying in your little cocoon and assuming “nothing is going to affect me.”
Many doctors are also tired of dealing with the administrative burden of running a business and find it attractive to turn these responsibilities over to a third party. The truth is most doctors do not want to deal with regulatory, legal, and HR issues. They would prefer to see patients every day and do what it was they were trained to do.
The deal structure is a bit nuanced in that you are now going to give up control and work for someone else. Doctors by their very nature are autonomous, high-control, needs-oriented human beings, and the thought of putting everything in the hands of business folks that they may not know is concerning — hence, the successful execution of these deals becomes very important. So, I think physicians need to be very thoughtful in their choice of partner, because challenges will arise. When they do, it will be important to be able to reconcile differences in a reasonable and fair manner.
If I were an owner/physician in a group, small or large, and had not yet done a transaction, I’d just take a step back and assess my strategic options. Don’t feel like you need to do something tomorrow because the truth is, you don’t. Sit down and go through a strategic exercise of evaluating the group’s vision and values. If the group feels autonomy is absolutely paramount, then you’re probably not going to want to pursue this because you’re largely giving that up.
And it’s not just group goals — each partner has to articulate what’s important to him or her because, in the end, it is important the partners reach consensus. You could have 20 partners with a wide range in age with very different life goals. For example, a 60-year-old with five more years in practice will view the world and opportunity very different than a 35-year-old ophthalmologist with 30-plus years of practice ahead of him. Reconciling these differences requires thoughtful and respectful discussion and evaluation.
OM: What advice do you have for residents, fellows, beginner practitioners? And how might that advice differ from 10 to 20 years ago?
BM: It begins and ends with understanding what makes you happy, both personally and professionally. The practice options may vary today more than they did 10 or 30 years ago, but the process itself is no different. If young physicians can educate themselves on the current market activity, consider and evaluate the pros and cons of different types of practice opportunities and relate those back to their own life circumstances, they’re going to make — hopefully — better choices. I taught many residents and fellows in the early part of my career and can vividly recall these kinds of conversations.
OM: Given all of what we’ve discussed, what do ophthalmology practices need to do to ensure that they are thriving in the next 10 to 15 years?
BM: The No. 1 thing is not losing focus on your staff and your patients. If you’re clear on your mission, on how you want to function and be viewed by various stakeholders and don’t compromise that, you’re going to be successful regardless of market changes. Granted, your business model will need to be adaptable to the current environment; however, it is important to remember we are in a service business focused on meeting and exceeding expectations of patients and referral sources.
Patients are going to want to continue to see you if they feel great about their experience. Their experience is a function of the happiness and satisfaction with the people who work for you. Staff who are happy and feel great about their employer are more likely to come to work with a positive attitude and are more likely to deliver a great experience.
That eventually filters its way back to relations with third-party payers. If third-party payers know that their beneficiaries are enjoying a great experience going to your practice and surgery center, they’ll want to keep you on their panel and hopefully compensate you fairly for what you’re doing.
Secondly, successful practices have to be nimble, adaptable and flexible. The rate of change in the current world order and what will take place in the next five to 15 years is going to occur at a faster pace than the pace we’ve experienced the last 10 to 25 years because of a confluence of market-based factors. Just take the example of consolidation; that’s going to create its own set of unique issues and challenges. So, to be aware of and educated about these things is critical. Be adaptable and flexible instead of just staying in your little cocoon and assuming “nothing is going to affect me.” That may work for a 65-year-old ophthalmologist who has a five-year time horizon. But, it will not work for the 35-year-old ophthalmologist with a 30-year time horizon. OM
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