Expanding Your Medical Practice: When Is The Right Time?
#medicalpracticemanagement, #practicegrowth, #expandingyourmedicalpractice, #doctorspartnerships, #businessstrategy.
A few important notes:
What is not working at your current location won’t work at the new one. Avoid wishful thinking.
What is working at your current location has a reason why. Unless you know the exact cause, do not assume it will work at the new location.
Innovation
Avoid experimenting with your new location.
Is there a new technology, new drug development, or a treatment trend that could have a meaningful effect on your medical specialty in the next 12-24 months?
Are there any policy discussions that will impact your insurance claims?
Should you consider diversifying your offerings or adjusting your referral sources or business model to mitigate these changes?
Adapting and testing new things is better done at your main site, as you can test (proof of concept) through your trusted staff and create focus groups with known patients to provide feedback – under “controlled” environments.
Your new site should start with your proven successes: what you do and know best. Start your innovation efforts once you have a stable, profitable, and proven new operation.
Repeat Your Wins
Develop a replicable operation —think of it as franchising your practice.
Document and standardize your processes to ensure consistency across all locations; create an operational manual.
The look and feel, service level, call scripts, triage protocols, consents, and everything that works best for you have to be the same at every location. This way, you can control the outcome*.
This will also facilitate the training of the new staff and reduce the learning curve. You want your new site, your team, and your equipment ready to go in the shortest time possible. Yes, time is money (lost or made)!
*The golden rule in quality control is to create a process so consistent that when a failure presents itself, it is also consistent and very recognizable, so you can quickly identify the root cause and fix it. The headache comes when a failure occurs occasionally and in different ways –a common sign of processes that are not explicitly defined, documented, and repeatable.
Note: I’m sure you can relate to this, as patient symptoms and diagnosis work similarly. In this case, you can design the system yourself and apply alerts to the specific failure mode.
Soft Launch
Pilot testing the new location and sharing resources with the main office can significantly reduce your risks and initial investment.
An efficient way to minimize risk is by testing the new location. If possible, consider subleasing space for a few days a week in an existing medical facility to gauge the viability of your expansion. Choosing a medical building with specialties complementing yours can become a significant advantage. For example, if you are in pain management, a chiropractic office or an orthopedic surgery clinic can be great complements, and they can also share referrals.
If the new location is close enough, you can create a rotation team to cover a few days a week. Same for some mobile equipment and inventory.
As your new location starts getting traction, you can begin your plans to build or lease your own clinic and start the recruiting efforts for local staff.
When you hire the new staff, train them at your main office. Let them see, feel, and experience the working culture you expect at the new location—it cannot be taught through a manual.
What has been described in this point, specifically pilot testing, is a crucial stage of new product development processes (NPD). It is a proven method developed by the most successful companies in the world to spend the least amount of resources and increase the success rates when launching new products and services to the world. I will describe this methodology in detail with its own article.
Know The Differences
Research the new region carefully. Tailoring your services to local demands can define your clinic’s success.
Know the players. Who is your competition in the new location? Are you getting closer to your specialty’s biggest and most established players? This can be an advantage when it comes to finding vendors, trained staff in your specialty, services to maintain your equipment, etc. The other side is that you will share the same referral pool, which will take time to build.
Local cultural and socio-economic differences can significantly impact service reception. A suburban area might see higher demand for pediatric and family medicine than urban centers, requiring more emergency and acute care services.
Unless your brand has enough presence to have patients traveling to see you, you will need a detailed referral network plan. As mentioned, teaming up with complementary specialties in the new region can make this effort much easier.
You can research the new region; however, this point goes hand in hand with the soft launch approach. Learning the way of the land at the new location will be a combination of theory and practice. Artificial intelligence won’t solve this point yet; there is no way around this.
Financials, Budget, and Forecasting
Races are lost at the last minute. When creating a budget and a forecast for your expansion, be very detailed and very conservative.
Note: This budget/forecast must be for at least the first three years (or 36 months).
Create a comprehensive list of every single item you need to operate the new location (inventory, equipment, furniture, software, hardware, alarms, etc). Fortunately, you already have all that information (right?). Have a cost for each item and make a column for “initial investment” and a column for “monthly.” This means that you will initially identify what you need to buy to get the new place up and running, and then your monthly expenses as your volume increases.
Based on your current practice, you can list all the monthly service expenses you estimate to incur: rent, power, internet, maintenance, disposals, insurance, cleaning services, gas/oxygen, etc. This effort will also include your staffing needs, including salaries, training expenses, and traveling.
Now, you will create a forecast, anticipating how many patients you will see each month. This must be separated by services (consultation, treatments, others) as each has different prices (codes) and collection estimates. As your patient volume increases each month, you need to adjust your monthly expenses too (sounds obvious, but …).
With this information, you are now ready to “simulate” how each month for the next three years will look based on your expected revenue and expenses. This will provide the cash amount you need available each month to get your new location to the breakeven point or self-sustainability.
5. Very important: this is a cash flow analysis, not a Profit & Loss estimate.
In summary, know your numbers in detail, and do not run out of cash!
And Lastly, Unified or Independent Branding
Expanding your medical practice under a main brand or creating new brands for each location is a major decision that must be considered carefully. It depends on your practice's risks, including the type of treatments provided and the types of patients.
Suppose you have experimental treatments with potential side effects and/or treating vulnerable patients such as minors or pregnancies. In that case, controversies can occur, and you might want to safeguard your practice with its unique branding.
Suppose you have a low-risk, high-volume practice with well-established treatments. In that case, you can leverage your trusted reputation and digital presence through positive reviews.
Let’s look into some advantages and disadvantages to help us decide.
Advantages
Leveraging an established brand can attract patients more quickly due to existing trust and recognition, facilitating faster growth.
Marketing efforts can be shared and may be more cost-effective, as the same strategies and materials can be used across multiple locations.
A well-known and larger brand can have a higher value. It might have better leverage in negotiations with suppliers and insurance companies.
Disadvantages
Any adverse events or dissatisfaction publicly available in one location can impact the entire brand’s reputation, potentially affecting all locations.
A single brand might not resonate well across different regions with varying demographics and patient needs.
Resources might be stretched thin and cost more, especially if the brand expands too quickly without adequate marketing support for each location.
It becomes imperative (as mentioned) to maintain a consistent quality of service and patient care across multiple locations.
The branding strategy is not as simple as it seems. The main point is how to leverage, react, and minimize the damage if something bad happens.
Conclusion
With utmost respect, my main goal is to share insights with physicians and medical professionals to provide just enough information to help them ask the right questions in the business world. Healthcare is a high-margin, high-cost venture with many risks and a sensitive moral approach; small strategic changes can significantly benefit patients and providers alike. Thank you.