Managing a Practice: In Search of the Perfect Size
April 2007 Issue
It's a universal problem that applies not only to the size and level of development of an O&P practice, but to almost every facet of life where creativity allows expansion and exploration. How far? How big? What style? What philosophy?
Goldilocks, exploring the suitability of various porridge temperatures, chair sizes, and bed mattresses, in each case was able to find the one "just right" for her. And-if you take careful note of individual market conditions-so can you.
We asked several O&P business owners of various size operations what factors determined their level and rate of expansion, and under what circumstances additional satellite locations were desirable-if ever. As one might expect, the answers we received were as different as the markets the businesses serve and the philosophies of the business owners.
Frank Snell, CPO, FAAOP , president of Snell Prosthetic and Orthotic Laboratory, began developing satellite locations across Arkansas in 1988, after serving the state from a Little Rock office established in 1911.
After 77 years of success as a single-location business, what prompted such a change in tactics?
In part, the move was precipitated by the unexpected death of an O&P practitioner/business owner, Snell remembers, which left a void in some physicians' practices and hospitals that had previously been served locally.
"What we started as a one- or two-day-a-week office grew into a full-time office within about six months."
Rick Fleetwood , Snell Laboratory general manager, notes that a movement toward community-based service was a major motivator in the company's decision to begin and continue outreach efforts. "By creating additional, conveniently located service sites, we have reaped the rewards of developing relationships within the communities-with the patients and the communities themselves."
Fleetwood believes that community-based service is still an active force, evidenced by the recent proliferation of other business openings. Snell Laboratory's continued success despite such competition is due, he believes, to its philosophy of providing only fully staffed offices with full-time coverage "because that's what the community deserves. They should have someone there every day. Part-time facilities do not effectively meet the needs of the disabled community."
Snell Laboratory has continued to open an additional satellite location every few years since 1988. Today, the company operates eight fully staffed offices across the state, in addition to its Little Rock home office, where billing, collection, and management are centralized. However, Snell admits that opening satellites is getting harder. "First of all, most markets are saturated with multiple locations. Then there is the move toward requiring accreditation for each satellite and practitioner, and the need for each office to have its own Medicare identification number for billing purposes. We can no longer just bill out of the home office. Then there are the staffing and management issues governing a facility that you do not work in day-to-day."
Like Snell, Greg Gruman, CP , president of Winkley Orthotics and Prosthetics, headquartered in Minneapolis, Minnesota, operates a multi-location business that has been in his family for several generations.
Winkley, however, has gone through a previous wave of multi-site expansion and downsizing, searching for the perfect formula. In the 50s, there were 16 free-standing, fully staffed Winkley offices spread from Minnesota to Hartford, Connecticut, and Ft. Lauderdale, Florida. In his father's time, however, Gruman reports that most of the facilities were sold, and the company gained profitability as it became smaller.
Now on the grow again, Winkley has nine locations-a main office with eight satellites, each of which has at least two practitioners and a full-time office person.
"When you have multiple offices," Gruman explains, "you can cover more territory. As major hospitals work out affiliations with rural hospitals, they're interested in the continuity of care that we can provide. We can see patients at the primary hospital and follow up on them at the outlying hospitals that may have originally referred them."
Unfortunately, however, changing requirements and pressure from the managed-care organizations (MCOs) have taken quality, credentialing, and even price out of the competitive mix. What's left is location. "Just to get into the game, the ante has been raised. The focus now is on geography, and that is the way I think the market share of the future will be determined. I would say that having satellites and having access to smaller communities is going to be how we make a living in the future.
"The disadvantage of multiple offices, however, is that you have a lot of duplication of services," Gruman points out. "And that is not cost efficient."
How many, then, is the "right" number of locations, and what determines that number? Gruman is shooting for 12 locations. "That will bring us up to a projected volume of around $15 million. More facilities should increase volume, and if our locations were right, we could consolidate some of the other locations that we currently travel to. Right now we're spending $1,000 a month on mileage reimbursement to get our clinicians to the patients."
From the perspective of the single-location O&P business owner, however, those mileage costs are a necessary part of his overhead.
After working for two O&P industry employers, including Hanger Orthopedic, Terry Shaw, CPO, BOCOP, FAAOP , returned to Owensboro, Kentucky, to establish Shaw's Prosthetics Plus. In the ten years since, he's grown from a 1,500-sq.-ft. leased space to his own 3,000-sq.-ft. facility.
"What I enjoy most about being a small facility, and the reason I'm here, is better patient care. As a facility owner I can determine how much time I need to spend with a patient. They aren't rushed through. We've spent up to an hour and half just talking with an upper-extremity patient who had a bad experience elsewhere."
Patients like knowing that Shaw will spend as much time as needed, employing what he calls an old-fashioned, patient-conscious approach. However, new technology is also very much a part of his philosophy, especially since 75-85 percent of his fabrication is done in-house.
Would he consider adding additional locations? Growth is always preferable to the alternative, he points out. "If you don't try to grow, you go backward. So we're always looking for different referral sources, new patients, etc. But the reason I got into the field was to help people; it wasn't to become a multimillionaire."
As a result, Shaw is interested in eventually adding additional practitioners rather than more locations.
"We already serve four counties, and I visit three of them every week. As a single practitioner, your time management has to be very good because you are the marketer, practitioner, and ordering assistant. You're...doing it all. That doesn't leave much time for yourself."
|Bill Beiswenger, CPO, FAAOP, with a prosthetic patient.|
Bill Beiswenger, CPO, FAAOP , agrees. He and partner Bill Teague, CP, moved to Colorado 17 years ago to open Abilities Unlimited Inc. Within the first five years, they were able to buy property and build a 9,000-sq.-ft., state-of-the-art facility in Colorado Springs. Since then, they have successfully expanded their service area to include a part-time satellite office in Denver and multiple clinics across the state. But when asked to consider further growth, Beiswenger admits that he is not enthusiastic about spending more time to develop additional business.
The company's volume developed as it began partnering with a children's hospital, traveling with hospital staff to clinics across the state to provide pediatric O&P care, which spared Beiswenger the cost of maintaining multiple facilities.
"That's worked out really well for us, accessing multiple locations through our allied health partners. I think it's a unique way to do clinics without financially having so much overhead."
Philosophically, Beiswenger believes that patient service and the O&P profession would both be improved if practitioners chose to be colleagues rather than competitors. "In some cities, they can't even talk to each other. We should support each other as mutual resources. It's sad that our profession isn't quite there yet. I'm hoping that the newer generation will manage it."
|Gary Lamb, CO, FAAOP|
Gary Lamb, CO, FAAOP , owner of Comprehensive Orthotic-Prosthetic Enterprises, Abilene, Texas, also enjoys taking as much time as needed to answer all patient and family questions. Lamb decided to stay small in an effort to maintain the quality of workmanship. "Working only by physician referral, we strive to establish relationships based on trust and confidence."
Lamb served as department head of orthotics at a local rehabilitation center in the 1980s. When the logistics of selling his home made it impossible for him to accept an invitation to join a large multi-facility O&P group, divine providence opened an alternate door, he believes. Physicians in the community asked him to stay in the area and open his own single-practitioner operation in 1988.
Why hasn't he expanded? The need never justified it. "I never got busy enough for a long enough period to be able to justify adding another practitioner. Although there were times when I was swamped and worked really long hours, it was for one month. It's not possible to find a practitioner in this field within a month's time. Most people look for a practitioner for six months or more."
Like Gruman, Lamb notes that values have changed. "Those relationships and the quality of workmanship and the level of service that I provided to build this practice are no longer important. Today, the volume business is driven by the insurance carriers.
"When 20 percent of the people who come in my door go out without spending a dime because I am not on the network and can't get on the plan, there goes the profit margin!"
The "rising cost of healthcare" is not due to greater earnings by healthcare providers, he believes. "The rising cost is in the insurance industry, which is growing while physicians are going to half-time practice in order to reduce their malpractice premiums."
Jim Fenton, CPO , owner of Fenton Orthotics and Prosthetics, Miami, Florida, can address the size issue from both perspectives. In 1967 he purchased his father's company, which he grew to 14 employees in 3,000 sq. ft., but he began downsizing in 1991, allowing natural attrition of ambitious young employees pursuing their own dreams, to go unreplaced.
"The biggest expense in our field is the help; extra employees drive up workers' comp and group health insurance, and those are significant costs in today's world. I came to realize that the less I replaced them, the more money I was making," Fenton says, and thus wound up with a one-man practice in 1995.
He still operates two satellite offices within a 38-mile radius, but both offices are unmanned except on the days he visits to provide services. Other times, their phones are forwarded to his main facility.
"The climate grows more difficult every day," he cautions. When his son wanted to establish his own larger practice in 1998, Fenton says, "To put it politely, I browbeat him into doing a one-man operation. I didn't think that the local numbers could support multiple practitioners. It's worked relatively well for him. He now has two offices, but he is still the only practitioner."
He warns aspiring solo practitioners to weigh the benefits carefully, however. "If you can't trust somebody in your community to cover for you, you're on call 52 weeks a year, nights, Saturdays, Sundays, and holidays. The telephone cannot go to the hospital for you."
So what is the best size to be? Somewhere between the Cecile B. DeMille epic and the "Blair Witch Project" camcorder-style production, there's a safe and appropriate scale for everyone's business. But choose your venue-and judge your relative capabilities-carefully.
Judith Philipps Otto is a freelance writer who also has assisted with marketing and public relations for various O&P industry clients. She has been a newspaper writer and editor and has won national and international awards as a broadcast writer-producer.