Transitioning ownership of a medical practice can be extremely risky, especially without considerable preparation, according to medical practice consultant Nick Hernandez, CEO and founder of ABISA, LLC in Valrico, FL.
“Succession planning is not a boiler template that you can apply from one practice to another. There are a lot of nuances that are really particular to your practice,” he says, adding that the process requires a focus on many different areas, including recruitment, leadership development, practice development, practice ownership and exit strategies.
“While planning for retirement or contemplating a reduced role or ownership transition may seem like something that is years away, the reality is that positioning your practice to maximize value, as well as minimize the disruption, can take a great deal of time and careful planning.”
Hernandez adds that many physicians have discovered the hard way the consequences of inadequate succession planning.
Not only can ill-prepared physicians subject themselves to unnecessary financial and mental stress while navigating transition, but the practice itself can struggle and, in some cases, fail.
He says strong physician leadership is critical toward sustaining and growing a medical practice, especially in an increasingly complex healthcare industry.
“Balancing things like patient care, entrepreneurialism, partnership, and development are all reasons why physician owners and practice managers should worry about succession planning. When you have a departing lead physician who has had a strong run at the practice, there is often worry about the successor’s ability to maintain that momentum,” says Hernandez.
When a senior physician has not properly prepared for the transition, there is considerable anxiety about whether and how quickly a successor will be able to correct the course.
Hernandez says physician owners are ultimately responsible for ensuring that a practice continually has high-quality operations and high-quality employees. Solid succession planning is a key element in meeting those responsibilities.
The process starts with developing a clear plan that conveys a medical practice’s mission and its current strategic priorities.
“The strategic planning that you have should include specific actions that detail things such as who is going to do what and by when, in order to address each of the particular priorities that you set down.”
Hernandez warns that succession planning isn’t a one-time event that a practice can complete and forget about. Your medical practice needs to conduct meetings with a variety of key employees at least once per year. A major focus of those meetings should be how to manage effectively during a transition of ownership.
“When you talk to others about succession within the practice, realism must really be your foundation. This is no time for wishful thinking, hoping that an uninterested or an incapable physician will suddenly become full of passion and business skills,” he says.
Passing the reins of leadership
Physician recruitment is a huge part of succession planning, adding that a growing shortage of physicians is making recruiting a top priority for both private and hospital-based practices.
Without a life-blood of new physicians coming into a practice, it is likely to die, according to Hernandez.
Your medical practice needs to objectively evaluate physician candidates for both their experience and their potential to ensure “a clean and certain break” during transition. “In other words, after you give up the reins, get off the wagon.”
Hernandez says it can be beneficial to hire a knowledgeable medical consultant to assist in the candidate evaluation process.
Leaving recruitment solely up to administrative staff isn’t wise, because their efforts can easily be short-circuited by physician dynamics, resource problems and organizational inertia—the tendency of an organization to continue on its current path.
When practice leaders take a hands-off approach to physician recruiting, Hernandez says that causes both physician resistance toward bringing in new providers and the potential for inadequate recruitment funding, because leaders control the purse strings.
“Without leadership involvement, physician recruiting simply becomes everybody’s lowest priority.”
Keys to successful recruitment include:
- Individual vision,
- Structured accountability,
- The need for leadership to recognize physician recruiting as a critical challenge, and
- The need to formally communicate that recruiting is a top priority.
“As leaders, we also need to establish clear recruiting responsibilities,” he says. “Practice managers should assign specific accountabilities covering the development of our strategic recruiting plans, as well as short and long-term recruiting goals. As managers we need to require formal reporting on recruiting activities—who is doing what—as candidates come in.”
These actions will create a sustained leadership focus on physician recruitment.
The candidate interview process
A key tactical area of successful recruitment is a candidate interviewing process capable of producing good and timely hiring decisions.
It starts with developing evaluation criteria for all of your physician candidates and defining decision responsibilities from staff across your medical practice.
Hernandez says it’s important to develop a standard template of questions and stick to it to ensure that apples are being compared to apples.
“Administrators also need to make sure that physicians actually cooperate in making this recruitment visit a good experience for those candidates that are coming in.”
Candidates should meet with a variety of staff members to ensure the best-quality of feedback during the candidate evaluation process.
Hernandez says candidates need to be welcomed with a positive attitude and constructive information, because “nobody wants to work for a place that is de-motivating from day one.”
Keep the process moving forward
Succession planning requires a lot of work and the process must keep moving forward and not be allowed to stagnate.
It is vital to determine what senior physicians want and what incoming physicians are looking for. Hernandez says senior physicians can indicate a desire to retire and then flip-flop on that idea afterwards. That can cause big problems for a newcomer who has a goal of taking over a practice sooner than later.
Conversely, an incoming physician may just want to be an employee and have no interest in taking over a practice. Hernandez says your practice needs to have a clear picture of everyone’s goals and those goals need to be communicated properly to physician candidates.
If a senior physician or senior partners intend to sell a practice, including real estate and equipment, Hernandez says a valuation needs to occur, after which time lawyers will become involved in matters such as shareholder agreements, operating agreements, and buy/sell agreements.
“The bottom line is that a well-thought-out succession plan that is crafted well in advance and in consultation with an expert advisor is the kind of stuff that is going to help avoid unnecessary legal and financial issues that can appear during those periods of transition,” says Hernandez. “A well-executed succession plan can maximize your assets, certainly can protect your practice and its partners, preserve the founders’ legacy, and ensure that the senior physicians are actually rewarded for a lifetime of hard work.”
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