Choosing The Best Business Model For Your Practice
When choosing a type of practice model, podiatrists today have a number of options open to them and each option has its advantages and disadvantages. You need to choose the practice model that makes practical sense for you at this stage of your career and realize that there is no “one size fits all approach” in the selection process.
The following are examples of different types of practices.
Solo practice. There is not much to mention here regarding solo practices since this style of practice appears to be declining every year in podiatry. There are very few benefits of solo practice and the upside potential is very limited. The types of physicians whom I still see in solo practice are the ones who are creatures of habit. They are comfortable and do not feel the necessity to change. They need to be in control of every aspect of their practice and cannot think of turning the reins over to someone else who might offer them a more efficient solution.
Group practice. I would consider the small group practice to consist of three to five physicians and there is definitely a place for this style of practice. In this model, you can limit your upside due to scale but you can gain some leverage depending on your market space. In a small group, you still have more control and a small group of doctors can make all decisions. You and the other physicians function under one tax ID number and act as a cohesive group.
This model works better in some areas where you do not have much competition. This type of model leverages ancillaries the most when all physicians work out of one facility. I have seen this type of model create a nice $3 to $5 million revenue base with a small surgery center, physical therapy, an extremity MRI and some other ancillaries. Again, you cannot really maximize this size unless you all are practicing in one building. The downside to this is the practice is too small to really make a major impact in your market and gain the benefits of being in a super group model.
Is The Super Group Practice Model Right For You?
When it comes to the super group model, I am obviously biased since I have spent 20 years trying to perfect this model and have personally seen the pros and the cons. A super group model consists of a group of at least 20 to 30 physicians. This is not an independent physicians association or a group practice without walls.
When you are able to get everyone to work in an environment that embraces one set of core values, you are on to something amazing. You can truly leverage just about every ancillary possible. You can leverage your balance sheet and not have to personally guarantee debt. You can also leverage your size to obtain the best managed care contracts. The advantages go on and on. In addition, if you structure the model in a way that allows non-physician investors to infuse capital into your company, you have now just created a great exit strategy for yourself and your other partners. I have written many articles and given many lectures on how this model is the best equity-based and asset-building model for physicians.
On the downside, this model does require a much higher level of management with more costs initially until you get to about $50 million or so to minimize your corporate overhead. In addition, at this size, you truly are a big business and have to run like one. Many physicians have a hard time adjusting to this size of a practice structure. You lose your autonomy and rely on a board of directors, which the shareholders vote in to make decisions on your behalf. This is a more sophisticated and complicated model, and it takes both a financial investment and emotional commitment to be successful. At this size, you start attracting all kinds of outside investors and have to be very skilled or have very skilled advisors to deal with these individuals or institutions.