Surgeons are known for their proactive personalities (“Let’s get in there and do something.”) For those who lead the field, this is especially true. In today’s climate of declining reimbursements and increasing pressures, there is no time to waste in using such zeal to take charge and build a productive, profitable orthopedic center.
Dr. Peter Sharkey, an orthopedic surgeon and partner at the Rothman Institute in Philadelphia, has been instrumental in creating rapid growth at that institution. He says, “Using our facility as an example, in 1997 we went through a transition and the group split. Dr. Richard Rothman, the only remaining doctor who had a well established reputation, appealed to the five junior doctors to stay. We did, and in the intervening years we have grown to more than 70 doctors, eight surgical centers, and an array of services including orthotics, pain management, and physical therapy. Revenue has increased 20 fold, with 15 to 20% increases per year.”
Dr. Peter SharkeyNo magic accounting here…just solid practices and philosophies that came together to accelerate excellence. Dr. Sharkey: “When trying to propel an institution to new heights, the foundation you should build on consists of people…you must choose the right partners. That doesn’t mean that these are people with whom you agree all the time. You can have personal clashes with a fellow surgeon, but to engender loyalty to the practice, you should never talk ill of that person. Loyalty should be a shared goal, with everyone understanding that when you form a partnership, your interest and theirs are one in the same. If you damage them, you damage yourself.”
Such wisdom results in people being focused on their work, as opposed to squandering time and energy on matters of the ego. Thus, there is more time for growth. “While naturally you should aim to attract doctors who are compassionate and technically proficient, ” states Dr. Sharkey, “in order to differentiate your organization it is important to have other offerings. At our institution, for example, we established teaching and research as necessary aspects of partnership. As someone continues to publish, he or she will develop a reputation that should in turn reflect well on the organization. Again, using the Rothman Institute as an example, we decided that if someone does it all (research, publish, teach) he or she will become a shareholder in the organization. That way you have earned the privilege of participating in the creation and evolution of our corporate philosophy, not to mention the direction of the organization.”
Dr. Sharkey continues, “This structure works well as it provides a solid system of incentives. Those doctors who choose not to pursue the research/publishing/teaching route can still be offered a great salary and a 9 to 5 schedule with no extra responsibilities. Those who opt to do more, however, should have access to ancillary benefits, something that motivates doctors to go the extra mile. Whereas one may be lured by the lights of American Idol in the evening, despite fatigue, the incentivized surgeon will likely press on and work on his or her research paper.”
Creating a juggernaut of a practice also incentivizes another party…the insurers. Dr. Sharkey: “Rapid, smart growth means that you are increasing your market share, which in turn means that the insurance companies stand up and take notice. You are in a significantly better position to negotiate with insurers when you are coming from such a powerful position. The other option is that, to a large extent, they dictate how you practice medicine.”
Another monolithic presence in any community are the hospitals. “As usual, ” advises Dr. Sharkey, “you should be in a position of good leverage. If this is the situation, then the hospital will be more likely to provide your surgeons with dedicated resources like anesthesiologists and nurses. They could also make two operating rooms available so that while one is being cleaned you can do a case in the other. These types of things end up having positive trickle down effects. In my situation, for example, because of the institute’s level of clout with the hospital, I may do more than 10 cases in a day and be done by 5:00PM; most surgeons don’t have the resources to do more than about three cases a day. And I’m not even exhausted, managing to go to the gym after work and then spend time with my family.”
Dr. Sharkey continues, “Another example of where leverage can help involves the reimbursement/call issue. More orthopedic surgeons are asking for reimbursement to cover ER call. If your facility is not a powerful player, the insurers will reimburse you at a level of their choosing, an increasingly relevant issue given the number of indigent patients being treated in the average ER. For an orthopedic surgeon to receive proper compensation, he or she needs to be affiliated with an organization that has sufficient market share/clout. Otherwise, if you complain, the hospital will say, ‘Well, go somewhere else.’ Because our facility has significant market share and an outstanding reputation, the Rothman Institute has portability, meaning the ability to move a practice, with minimal loss of patient loyalty, from location to location, independent of all factors other than the doctor. This characteristic gives us tremendous leverage with our hospital partners.”
Practicality and creativity can come together to solve issues such as call compensation. Dr. Sharkey: “Recent studies have shown that a minority of orthopedic surgeons get paid to take ER call—perhaps 20%. We have devised a system whereby we pay the junior doctors to take call, meaning that the senior (double entendre here) surgeons aren’t awakened in the middle of the night and are fresh for the next day’s cases. Not only do the younger surgeons have more stamina than we do, but they like this arrangement because they are compensated and have the opportunity to develop a practice. For those who don’t want to acknowledge the age and energy differences, I say, ‘If you’re 60 and do an open femur surgery, you’re going to be tired the next day.’”
Bones, BMPs, and buildings? Dr. Sharkey explains, “When undertaking strategic growth it is critical to spread your talents and resources over as large a geographic area as possible. This is important from a couple of perspectives. First, it allows patients to see doctors in the suburbs. Secondly, the doctors will have access to patients who wouldn’t come to the city. Although the doctors have to travel, they are being allowed to invest in the surgical center. Owning real estate is a good way to offset the reductions in reimbursement; if it is a very large building you can lease the space and thus have equity in the practice. This ‘generate income without being there’ is a great model indeed.”
“Ultimately, ” advises Dr. Sharkey, “if you run things well, you can hire people to take good care of patients. That way things sort of run themselves, and you don’t have to focus on the money. It becomes a nonissue. But if you’re not making the money, then you can’t practice the way you think is best.”
Another leader who looked out over the horizon, grimaced, and then got to work was Dr. Frank Kolisek, The President of OrthoIndy, a musculoskeletal organization with six major office locations, two surgery centers and an orthopedic hospital in Indianapolis, Indiana. Dr. Kolisek notes, “As the years went on I saw a trend towards decreasing reimbursement both from the government and from insurance companies. With regard to the second party, when you are a small group, you’re told to sign the agreement they provide or not…you have little bargaining power. If, however, you have a big group, the insurers might have trouble getting employers to choose their plan if you are not included.”
Dr. Frank Kolisek“The lesson, ” says Dr. Kolisek, “was that to negotiate with the big boys you need to be big. You also need to be big in order to have the capital to invest and build ancillary business companies. It became clear that over the long haul quality of care could suffer, and you could lose control of your practice by trying to do too much so you could make ends meet financially. We want to be in charge of delivering the highest quality of orthopedic care to our patients in a timely, safe and efficient manner. After all, this human side of medicine is the reason we became doctors. Being able to offer high quality and cost efficient care will not only help our patients, but it will help lower the costs of health care in general by having fewer complications.”
On his mission to inject growth into his own orthopedic center, “in house” became Dr. Kolisek’s mantra. “To grow at an accelerated pace, an organization needs to bring as many services as possible under its own roof. Every time a surgeon orders a healthcare product he or she signs it as a prescription, whether that’s physical therapy, sending someone to another surgery center, ordering therapy or using someone else’s equipment. It became clear to me that we should be on the receiving end of things in order to control the quality of care delivered to our patients and to offer the convenience to our patients of one stop shopping.”
“We became increasingly frustrated that the local hospitals were cutting back in different ways, including decreasing the nurse to patient ratio. In such a situation it’s not possible to work at a high level of efficiency, which is in part related to the long turnover time between cases. Building up one’s own facility, however, means that you can have control over staffing ratios and turnover times, among other things. And you will have the authority to spend more money on patients for certain things because you will be in charge.”
Regarding the negotiation tango with hospitals, Dr. Kolisek notes, “In the last two years general hospitals have started taking one of two approaches. Some try to work with doctors and create a win– win –win situation for the patients, doctors and the hospital. This could be something like a joint venture in an efficient and convenient physical therapy center or surgical center. The advantage of this is that it is probably a long term solution.”
“Other hospitals, accustomed to being the only game in town, are approaching things in a short sighted manner. Their attitude is, ‘Everyone is using our surgical and physical therapy centers now. Why would we be motivated to do a joint venture? We should have the doctors work for us so we can control them.’ The reason for their frustration is that physician groups are getting larger and beginning to provide an increasing array of services, which means, of course, more competition.”
Far from a blood pressure reading or a pain scale rating, the numbers most relevant to growing an orthopedic organization are more along the lines of how many doctors you have and what services you offer. Dr. Kolisek: “Small groups will see their incomes continue to decline, and they will die a slow death as reimbursements continue to decline and expenses continue to increase. They will either have to merge with other small groups or will have to become employed by a health care system in order to survive. It’s unfortunate, but it is what it is. At least by joining with another group, some of the expenses can often be spread around, thus controlling the overhead and possibly allowing them to offer more services to their patients.”
The least effective approach, says Dr. Kolisek, is to carp and stew. “The worst business model is to simply sit and complain about your income going down, and that things are not like the good old days. Step back, get some fresh air, and decide what you need to do to survive in the new environment. This is not magic…you just need to have a solid business model. Using OrthoIndy as an example, our starting salary is a lot lower than groups in our area and lower than the hospitals. Yet we are bombarded with doctors who want to work here. This is because the high salary the hospital is paying is only guaranteed for two years…then it’s an ‘eat what you kill’ scenario.”
Dr. Kolisek continues, “Then there are the groups that pay high starting salaries, but all of a sudden, after two years, the doctors can’t earn that much, and their salaries are cut. We have smaller starting salaries but our business model means that once you become a shareholder you can invest in the ancillary activities and obtain income from things such as MRIs, surgical centers, and the hospitals. It is just a better overall business model that works long-term.”
Opportunities abound, says Dr. Kolisek. You just have to be open to them. “In trying to build an organization, it is important to look around and see what the needs are of the communities outside the main center of population. For example, there was a small rural hospital outside Indianapolis that didn’t have an orthopedic surgeon for their ER seven days a week and they were often transferring patients via ambulance to a hospital in the city. We started a telemedicine program such that we contract with the hospital for call and we can evaluate x-rays long distance in order to provide information to the ER physicians as to who should immediately be transferred and who can safely be treated at home in the next day or two. This saves money and maintains quality of care. Patients are happy when their local orthopedic surgeon can treat them at home.”
So share the wealth within the practice, look around for a top-notch group that may want an engagement ring…and think outside the hospital.
