The Death of Dr. CEO
From the time of Normal Rockwell, up to and including the baby boom generation, it was a natural assumption that physicians opened medical practices. Back then, they were as manageable as the local mom-n-pop shop, but now, they are a dying breed with fewer and fewer physicians considering entrepreneurship.
Challenges of Physician Entrepreneurship
Today’s physician faces higher barriers of entry. Chief among them is the price tag necessary to open a simple small office. A 1500 square foot primary care office in Brooklyn recently cost $150,000 just to open its doors to the public. It did not include specialized equipment, fancy decorating, a marketing budget, or staffing costs. It also did not include the cost of the business consultant, accountant, and attorney. The doctor financed his practice with a credit card, a capital loan from a bank, and private savings.
A majority of today’s newer doctors opt for an employment arrangement that guarantees a paycheck and a lifestyle in exchange for some loss of autonomy. They choose to enter into contractual arrangements that may or may not lead to partnership arrangements, or they go to larger institutions and become part of the corporate machine. Some look to work with older doctors considering retirement in 5 or 10 years as their ticket to entrepreneurship. However, entrepreneurship is endangered by rising tuition, malpractice costs, over-regulation, and heavy handed over-sight requirements that physicians of yesteryear never had to contend with.
Studies performed by the American Medical Association revealed that there are 792, 154 licensed physicians in the U.S. today and approximate half are baby boomers. The U.S. Economic Census demonstrates that from 1992-1997 the number of medical offices increased 4.2% and from 1997-2002 the number of medical offices decreased 4.6%. The common answer received when investigating this phenomenon was that physicians banded together to create group practices. The true answer is that physician entrepreneurialism remained flat while the number of newly licensed physicians rose by approximately 198,000.
A Call for Business Acumen
Trends indicate the need for today’s physicians to learn to be business savvy. Research revealed that many medical schools have introduced MD/MBA dual-degree programs with less than 1% enrollments. It is offered to medical students interested in career paths as administrators of larger institutions, but it does not foster entrepreneurialism among physician candidates. For Dr. CEO to succeed in today’s medical environment, strategic business acumen is a necessary requisite.
American Express performed a study in 2005 that demonstrated 63% of physicians surveyed were interested in learning to be more business savvy. Unfortunately, there are very few entrepreneurship programs available and it is considered an oxymoron to think of physicians and business in the same breath.
The Dangers of Not Promoting Entrepreneurship
The implications of letting the physician entrepreneur die is the same as it is for small business in general. The back bone of the United States economy is based upon small business. The backbone of medicine is based upon the relationship built between doctors and patients. All of medicine churns on that interaction. The more successful physicians are ones with the entrepreneurial autonomy to work hand-in-hand with patients long-term. It is an autonomy not encouraged by today’s standards.
Entrepreneurialism fosters innovation at the grass roots level which then contributes to the uplifting of society. Every business success story started with an innovative idea in someone’s lab or garage that became a business – defining new markets and changing the experience of consumers for the better. To drive out Dr. CEO is to stamp out innovation – the hallmark of medicine and business. Yet little is being done to foster entrepreneurialism among younger physicians or prevent the mass exodus of current Dr. CEOs from occurring as baby-boomer physicians begin to retire.
Why is Dr. CEO Dying?
The answer lies in economic and industry literature that reflects a widely accepted mindset. The general concern is that physicians will place their self interests ahead of the well-being of their patients. Since physicians have the power to sway patient decision-making, they can sway them toward procedures that make practices more money but do not necessarily create better outcomes. “Money Driven Medicine”, a book written by Maggie Maher, supports this theory, though not just among physicians. It suggests it is more pervasive among larger institutions such as hospitals, insurance companies, medical device manufacturers, and pharmaceutical companies.
Presidential administrations past and present, business experts, and numerous economists all agree that the road to correcting many problems in healthcare today is to encourage natural market forces much the same way it does for business in general.
To that end health savings accounts were introduced as a tool to encourage consumers to negotiate costs and drive them down. Additionally, states are being encouraged to overhaul their health systems starting with a $1.5 Billion federal subsidy awarded to New York State in November of 2006. The goal is to eliminate redundancy that causes hospitals to compete with one another rather than collaborate for the best interest of patients. It is a start with a large learning curve and fraught with many complications, but a start none the less.
Demand, not supply, generally dictates most industries. Today’s medical market, however, is characterized by supply driving consumer demand. Physicians compete with supply demands when determining the best course of treatment for a patient, including increasing economic costs for treatments that do not produce better outcomes but give permission to charge higher rates. Newer treatments have not always proven or guaranteed better or more efficient care. And today’s market is comprised of consumers who are ill equipped to qualify or quantify the avalanche of information on the Internet to determine what is most appropriate. The information is conflicting and does not encourage full disclosure of the best treatment choices.
Yet the health care industry and consumers continue to define Dr. CEO in “rockwellian” terms. Rockwell’s doctor is now in a different market with different rules. Yet he is expected to straddle a fine line between society’s desires for Rockwell-like behavior and physician attempts to play by modern rules. It is a no-win situation.
What the Industry Can Do
The industry is fractionalized, chaotic, and in a state of extreme change. With change comes great opportunity. Like every other industry, the entrepreneurial spirit leads the way by seizing opportunities and turning them into note worthy innovations. For example, the frustration of one family living with cancer led to the creation of Salick Cancer Centers. The vision of Salick was to create a center that made the experience of seeking treatment for cancer easier and as pleasant as was humanly possible. Salick strove to eliminate much of the difficulty that patients experienced from processes and systems that abused them unintentionally but were considered routine and acceptable. It was one man’s answer to a broken system.
The entrepreneurial spirit is what makes and keeps America strong. Dr. CEO is in the best position to expedite positive change not only because he has an economic stake but also because he puts his reputation on the line.
If we can encourage physicians to become primary care doctors when there is a shortage or become specialists when the pendulum swings in the other direction, we can also encourage entrepreneurialism. Where we encourage physicians to open practices in less populated rural areas, we can also encourage constructive market competition among denser areas by fostering business success through continuing medical education credits in business not just treatment. These are just two of many good places to start.
The healthcare industry is over-looking why the US government goes to great lengths to encourage small business success through the numerous programs it offers would-be entrepreneurs. The primary concern is that patient well-being will not take precedence over the opportunity to earn more money. Maggie Maher provides compelling evidence to suggest that this true in large medical corporations.
As long as the Hippocratic Oath remains sacrosanct among licensed medical providers and they retain respects as experts, the point is mute. I have not met any physician-entrepreneurs willing to sacrifice their hard earned licenses for a few more $$$ from a patient. Most go in the opposite direction by giving more, not less, than what they get paid to do.
What Physicians Can Do
Physicians can learn how to think like business owners. The foundation of business begins with translating dreams and capabilities into a business vision. It is a process that helps physicians combine their dedication to medicine, to their community, and to their enterprise in a way that helps them design a successful business. It propels business owners to make conscious and proactive decisions that benefit both the organization and the people it serves. It eliminates the question “what comes first the patient or the business”? Instead the business purpose is to actualize the vision by creating value. Currently the health industry lacks such insights.
Physicians can learn what a business model is and how it applies to their practice. Every enterprise, whether for-profit or non-profit, has a business model. The base of the business model is the spirit of the business owner. Every business model should have three view points. They are the economic, rational, and emotional views of every business. Business owners should start with the emotional view because that is the driving force behind why they do what they do.
The vision sits in the center of the business model and acts as the overarching guide encouraging distinctiveness among enterprises. Thus no two enterprises are exactly alike because no two visions are alike. Therefore what works for one practice may not work for another similar practice because owner visions are different.
Medicine is an art and a science, and so is business acumen. It requires education, counseling, and tools. There are a myriad of ways to obtain it, but none that supports the physician’s logistical demands or provides continuing education as an incentive. It is the only industry where small business training is not encouraged.
Physician-owners need to acknowledge and accept that many of the challenges they face as providers-owners, are identical to other business owners in other industries. Entrepreneurs from every walk of life complain about the lack of time, lack of funds, problems with collecting outstanding debts, supplies, hiring and firing, government regulations and licensing requirements, risk insurance, marketing, and providing value to their community in a way that leverages their personal brands. A physician- owner is a business owner that provides medical services.
In addition, a physician-owner needs to be aware that when they are delivering care they are acting as employees in their business. The role of a medical provider and the role of business owner are different. The physician- owner is both the owner and manager of his business in addition to being an employee – roles that involve different mindsets, skills, and responsibilities.
The role of business owner takes precedence over the role of employee. The business owner decides what to do and then how to do it. The employee executes. “What to do” and “how to do it” are leadership and management skills that Dr. CEO must learn to acquire.
Additionally, the key difference between medical operations and the operations of other industries is that the life of a patient is at risk. Dr. CEO has a social responsibility greater than any other entrepreneur. However, as a general rule, entrepreneurship contributes to the social uplifting and wellbeing of society by changing current experiences for the better.
The health industry does not keep statistical and factual records on the exact number, scope, and needs of privately owned practices because it is too difficult to do. We must rely upon the zeitgeist about the challenges medical providers face as business owners. They are abundant. The impact diminishing entrepreneurship will have in the health industry in the near future is very real, yet no one is paying attention or saying much about it. Why isn’t the physician entrepreneurial spirit given the same weight as that of its business counterpart?
Physician entrepreneurship should be actively encouraged to grow rather than quietly allowed die. The need to protect the lives of an unsuspecting public is valid. It should encourage physicians to be at their best as practitioners without sacrificing the right of self-determination as business owners, and without suggesting it must be a choice between the best interest of business and the best interest of patients. It should support both – the true nature of entrepreneurship aligned with the intent of the Hippocratic Oath.
Ms. Horowitz is CEO of M2Power, Inc. – a business advisory firm specializing in health care and small business. She is also a licensee of the Maestro Business Academy providing education, counseling, and tools for owners of small business and health enterprises. You may reach Ms. Horowitz at 516 409-0849 or by email at:email@example.com.
This article is based upon an up-and-coming book. Ms. Horowitz is interested in interviewing primary care physicians who own practices in internal medicine, family practice, pediatrics, and ob/gyn as part of her research.
In addition, she welcomes comments from physicians, experts, and other entrepreneurs in the medical field about the challenges they have as owners of health enterprises.