Road map for success: Planning the future of your practice

The single most important business tool available to medical groups, many experts say, is the business plan.

While a business plan requires some effort to develop and update, its benefits span the range of business activities that make groups successful. It's a blueprint for growth. It's a succinct practice description for recruiting. It's essential when applying for financing for new ventures. And parts of it can be used to develop marketing material or be the basis for the annual report.

Business plans span the gamut. They can be relatively static documents that describe the practice's mission, goals and staff. Or they can be regularly revised documents that include strategic and financial plans, with feasibility studies and timelines for project implementations. In any case, it's no mere mission statement to hang on a wall. It's a detailed account of where the practice wants to go, and how it wants to get there.

William Johnstone Jr., MD, an obstetrician-gynecologist and president of 35-doctor Pinehurst Surgical Clinic in Pinehurst, N.C., sees his organization's business plan as providing a unifying direction for the group.

"Most of our work is done within committees. The business plan helps all group members know the direction we're planning to travel. It helps us keep on track with our goals and make decisions throughout the year," Dr. Johnstone says.

Darrell Schryver, a Denver-based consultant and principal at the Medical Group Management Assn., adds that just the process of creating a business plan, the discussion and debate among the physicians putting it together, can be helpful, because it allows doctors to share what's on their minds and determine what goals are reachable for the practice.

"A business plan that has actual facts and figures can act as a reality check, so decisions are based more on the projects' viability and less on the doctors' intuition," he says.

More than one way to do it

Max Reiboldt, managing partner and CEO at the Coker Group, a medical consulting company in Alpharetta, Ga., says business plans should not be considered as one-size-fits-all documents. "Just as there are many different kinds of practices -- different governance, different sizes, different market areas -- there are also many different kinds of plans," he says.

For example, a solo doctor's plan might be a few simple goals listed on a legal pad. Groups in relatively static markets might need only a description of their current mission. Those in changing and highly competitive areas may have to use the plan to keep track of dozens of projects, from those in the feasibility study phase to those in the process of implementation. And groups composed primarily of older physicians close to retirement could emphasize history and tradition in their plans, while newer groups may focus more on opportunities for growth.

Despite the large number of plan types, Reiboldt and others say most plans contain one or more of four elements: a strategic plan, a feasibility study, an implementation plan and general information about the practice.

The strategic plan outlines overall -- often long-term -- goals. When the group is ready to move any strategic item to the front burner, it creates a feasibility study, which evaluates the strategy based on financial, marketing, regulatory and other issues.

Once on the front burner, the implementation plan provides the recipe for success: the milestones, timetables and budget, among other ingredients. And finally, most business plans provide information about the practice: its market area, the number of doctors and specialties, number and type of nonphysician clinical staff, and often brief biographies of physicians and primary administrators.

The flexible nature of business plans allows them to be used to help maintain the group's direction, even if it may need to take rest stops or detours along the way.

For example, 25-doctor Northeast Washington Medical Group in Colville, Wash., uses its business plan to track success in short-term goals without forgoing or forgetting long-term strategies. "Putting the long-term items in the plan keeps them in front of us while we spend more time on current projects," says Ron Rehn, the group's CEO.

Rehn says the multispecialty group's business plan begins its life at annual shareholders' meetings, where the group's owners tell the board the direction in which they would like to see the group move in the short and long term. Recent goals included bringing an endoscopy service and a physical therapy center, and purchasing a new building.

After the executive board approves a goal for further consideration, it is evaluated either internally or through outside consultants. "Basically, what we're looking for in the feasibility study is whether we will be able to complete the project and pay our bills," Rehn says.

If the project requires outside financing, the business plan is a centerpiece of the group's presentation to the bank or investors.

For important ongoing projects, Rehn uses the plan as a way to evaluate monthly progress, including measuring actual versus budgeted expenses and completed tasks that are relative to the timeline. He then generates a business plan variance report, which goes to the executive board.

Some groups use a business plan to flesh out ideas and determine their viability, even if they don't necessarily plan to implement them in the immediate future. For many groups, a business plan can be an occasional (rather than annual) endeavor, where ideas that had been percolating around the office are finally given more rigorous study and consideration.

An eye for a new plan

A few years ago, the Hauser-Ross Eye Institute & Surgicenter, a hospital-owned group in Sycamore, Ill., wanted to look more closely at a few ideas brought up periodically by its seven physicians. The group decided to do strategic plans and feasibility studies on these ideas.

The reports would provide a reality check on the plans and reveal the financial and marketing implications. These goals included adding a few subspecialties (primarily a glaucoma surgeon) and bringing in an optical shop for selling glasses. "The ideas were based primarily on our doctors' perception of what our patients needed and on the market. We wanted to add some solid data to those perceptions," says Chris Frankovich, the practice's administrator.

For example, some doctors at the group bristled at the need to refer patients out for glaucoma surgery. And others wondered why the group was the only one of its size in the area that didn't sell eyewear. But doctors didn't have a handle on whether adding a glaucoma surgeon, or other subspecialties it was considering, would be cost effective, given the number of cases and the reimbursement levels for those procedures. And an eyewear shop was problematic because 25% of the group's patients are referrals from opticians.

Look at the costs and benefits

Hauser-Ross' strategic plan included detailed SWOT (strengths, weakness, opportunities and threats) for each proposal. "Basically we looked at what they will cost to get into, what they will cost to staff and what kind of return we may expect," Frankovich says.

The plan, which has not entered the implementation phase, is the basis for conversations the doctors have throughout the year. "We use this as a guide to our thinking. Sometime in the future, we may decide to expand it into an actual project plan," Frankovich says.

William Edsel, CEO at Pinehurst, has instituted the practice of creating annual business plans that lay out specific strategic goals guiding the group for the next 12 months. While a once-a-year process is a bit arduous, "In today's medical environment, when something is two years old, it's not worth the paper it's printed on," Edsel asserts.

The process begins each October with a day-and-a-half strategic planning meeting in which doctors discuss ways to improve or expand the practice. Ideas might include things such as bringing in a new specialty, adding a new service, increasing clinical or administrative staff, implementing electronic medical records or opening an additional location.

Edsel describes his notes of this meeting as "line drawings or cartoons which haven't yet been colored in." He then asks the appropriate administrative staff and physician committees to flesh out the sketchy goals with data such as costs, potential return on investment, market implications, applicable laws and regulations, and technological considerations.

When the group was considering purchasing a computed tomography scanner, Edsel asked the finance committee to come up with cost and return-on-investment figures. Other committees, including patient care also were involved in that project. The committees have a big say on whether the project is viable, although final approval is made by the executive committee.

Approved projects become part of an eight- to 10-page narrative written by Edsel. The chief financial officer adds budget information, and the chief operating officer adds the practice's overall goals and objectives. All this, along with more static information about the practice (history, lists of physicians and so on), becomes the business plan.

At Pinehurst, the plan is not only used for documentation and planning, but also helps track progress made throughout the year.

Every quarter, Edsel and others at the group evaluate the progress of each goal in the plan. Finally, the year-end annual report includes a discussion of progress on the items in the strategic plan.