Anatomy of a Democratic Group Practice - Finance
Mike Drinkwater, CEO of Gottlieb, presented the best practices that Democratic Group Practices should follow to strengthen their financial health. Topics covered included enhancement of revenue generation, creation of cash reserves, approaches to deal with startup costs associated with new contracts, appropriate leadership compensation, and partner buy-in.
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- [Mullen] Well, hi everybody. This is Jay Mullen, I'm the Chair of the Democratic Group Practice Section. I wanna welcome everybody here to part two of our "Anatomy of a Democratic Emergency Medicine Group." This webinar will be talking about finance. The governance webinar which was part one is on our section website. These are somewhat asynchronous though so you don't have to watch part one in order to watch part two. But I think that you'll find that the content is really great and we've got a great speaker with us tonight, David Singly who's gonna introduce himself and chatting with him. He's experienced a lot of different angles of physician management groups. And so he's... As he describes it has war scars from his experiences and that really brings a lot of wisdom. And you'll see in the comments that'll he be making tonight, how that holds up. Before David introduces himself though, I wanna let everyone know that this is being recorded. So in the recording, the chat also gets in there for the public chat. So anything that you put in there will be visible when we show the recording. The format for tonight is gonna be roughly 15 to 20 minutes of presentation followed by an opportunity to have some discussion. And as everyone who went to part one knows the discussion is one of the most meaningful pieces. Our presenter kinda sets up the content, is our content expert, but then we wanna really hear from each other as well. That makes it a much more collaborative and rich experience. Please use the chat section I'll be monitoring that. That's where you can raise questions also where you can put in a perspective and I'll see those and I may interrupt David to kind of tease out a little bit more. So I may call on you to tease out exactly what you're talking about. That's worked out really well in the past. Please also in the chat put in just a brief introduction of who you are and where you work. So for example, you can see mine in the chat. And then lastly, just an antitrust reminder, we are all friendly competitors so we have to be very careful that we're not sharing pricing information, we're not sharing anything that would be anti-competitive. And if somebody does stumble in there, one of us will try to jump in and say, remember we're not supposed to be talking about that kind of stuff. Really important but I think everyone's pretty used to that. So with that, I hand it over to you, David.
- [Singly] Great, thank you very much, Jay. And hello, everyone. And real pleased to be here. Just a quick bio on me so you know where this is coming from. I am not a doctor but I think I've spent my professional... Entire professional career working with physicians. I got an undergraduate business degree and then I got a master's in health administration which normally is a hospital administration degree. I didn't like that early on and so I got onto the physician side and worked with number... Numerous... I kinda cut my teeth or learned my skills on the contract management group and that's where the boos are, boo. And you gotta learn your skills somewhere, right? So did that for a great number of years. And again, how many contracts can you run by one group by a business organization just ended up not appealing to me and so I ended up leaving. That was... At the end was Mcare and just as Jay alluded to I got sued over a non-compete. They caught me thinking about emergency medicine when I wasn't supposed to. So got through that and then ended up understanding that if you look at most physician practices, the doctors own the practices and they hire their management. And I think of the internal medicine practice that hires practice manager. And so that's really a model that my business partner and I, Frank Adams started in a company called PSR and it was one of the first companies to do that and we ran in a good number of years. Much like other privately owned groups, we had a couple of owners that didn't wanna continue on so we ended up having to sell it to a billing company called Intermedix and then it gets kind of into the same exact story that we all know on the clinical side. Intermedix got bought by R1. R1 didn't like what we were doing and so a year ago in March, they let Frank and I go and we promptly held out a shingle and opened a new company called Praxi Management. So we've been doing this in for about 30 years, ultimately we had about 65 different groups and that saw about 4 million patients and pretty diverse group. One of the things that a company like ours do it's a craft shop. We do everything the way the doctors want because you guys are the owners. And so that's my perspective that I'll come through this. And so there's probably a set of four or five or six slides and then a place to stop and talk and discuss and then continue on. So I'll go through that and please interrupt me and I'll move kind of fast 'cause there's a lot of information as you all know and it's complexity on how to run a business. So this will be a little high level but really like to get into some of the stories and the vignettes about this I think that's more important. You've already covered this. So the only thing I'll say about the governance is it's really about how do you control your practice? The fact is in democratic groups the groups control the practice. And as you talked about before, you have a representative form of government and people have decision making and that type of thing. What's really key is that your operations people, those would be your medical director and then the business side reports up through the organization and does so regularly. So you really stay in control of your practice. That's really key and that allows everybody to understand what's going on and it allows control in the decision making. What also this kind of in putting this together, these are some the kind of key issues that were presented. And so talk one of them is how much money do you have to keep? If you're... When you have a group of owners, what we believe is that the money in the practice should be in the owner's pocket. It really doesn't do any good to sit in a bank account. You guys own the practice and if there is money it should go to you and you do with it what you wanna do as opposed to sitting in a bank. But conservatism says you have to make payroll next month and this type of thing. So if you're in a mature practice, at least keeping one month of all your expenses in reserve makes a whole lot of sense. The fact is if you can get a bank line of credit which makes a lot of sense, if everybody's willing to go through it one of the issues with the line of credit is everybody has to give their personal information. It's very hard to get a line of credit just on the virtue of the business, operating as a business. They like that doctors have a lot of money and they want you all on the note. But if you do have it, you certainly can keep less money in the account. Next up is... And we've had this come up several times is that with all the Russians and the money and the tampering and the hacking, where do you keep your money. Not under your bed, do we spread it out over multiple banks 'cause the FDIC regulations. The fact is the answer is no. Number one, you can... If you have a lot of money in your account you can... We talk about... Just what we talked about rather is distribute it to the owners, it's their money. The other side is is working with multiple banks is very confusing. Working with banks is very confusing these days. They try to have as much security as they can and it really limits the ability to work with them. But the point is is the more business you do with one bank, the better deal you can get in terms of bank fees, credit card fees. You wanna use your buying power to keep those kind of costs at a minimum. And so we see working with one bank and having a good relationship and getting a good deal is really important. In terms of, this is always a good question and the question is do you reserve for a tail? And so you're working along there and everyone knows you're gonna have this tail someday come due. It's actually... Hopefully the group is buying the policy and hopefully the group is buying it on a per visit basis which is a really good opportunity for emergency medicine. If you think about your risk, your risk really is on an episodic basis. And so being able to buy malpractice insurance essentially on a risk basis in that form is really pretty good. The point is, is that the tail will come due if the group ever goes out of business. Even if you change malpractice carriers, the next carrier will pick up your retro date, which may be 3, 4, 5, 10 years ago. And so really there's this pending liability out there, if you will. If you simply take cash and start funding that you just have cash sitting around that's really not being put to use. If you look at a balance sheet of an emergency medicine practice over on the asset side, really the only asset they have is accounts receivable and it's usually substantial. So if you think about your business going away at the end of a month, you still have that total over wash of all the AR that's been built up over the many months that's still valid. So you're gonna be able to make your last payroll and then you're gonna be able to pay your tail. So it's important to understand the cost of malpractice and essentially accrue it or account for it on your financial statements but not... We don't ever recommend really putting the cash away. And then next came is startup cost. How do you start up a group and what does it cost. Again, back to the asset that we just said we had when the company ended, you really are trying to build up the accounts receivable. You bill a patient today, you get your money in, 30, 60, 90 days, sometimes 18 months. And so what you really need to do is build that up to a mature state and that's usually somewhere for a startup somewhere between three and six months and the real reason... It could take a lot shorter it could take longer. And actually if you have a hospital subsidy and it's of substantial, there's certainly ways to negotiate the startup of the contract that you even get the subsidy at the beginning of the month at the end of the month 'cause if you figure if you start a contract and you all start working you may not get paid till 50 days after you've started it up. Well, that's actually a form of financing to be delaying that pay. If there's support, you get that that'll be in your coffers. Malpractice you can essentially buy on financing. Billing companies should be and management fees can be on a percent of collection. So that essentially finances it. So there's really... And quite frankly, this should be no surprise to anyone is that if I'm telling you how easy it is to start up a practice from a finance standpoint, why do you think all these major, major, major corporations and equity people are in it, right? It's a cash churn business, doesn't take much to invest and you just operate it. And that applies to the little guy too. You have to pull some resources and then there's certainly the equity financing as well that the owners take less pay for a while until the AR ramps up. Again, it depends the more lead time you have to start up a group and a contract the better. Enrollment takes a while. You wanna have as much lead time as you can for a new group. But what's really key is putting a proforma together and that's really just a business plan. Is that, okay, I've got an ED that's got 45,000 visits. I'm gonna start it on January 1. When do I think my enrollment's gonna be in, when's Medicare money's gonna come in, what are my expenses, what do I have to pay. So a complete business plan will show you whether it's viable from a big picture and then on a minutia basis on a month to month basis, how much cash do you have, when does it turn positive, and what can you expect moving out in those months. And then this is just really a repeat. So now you're a group and you got a great contract and another one comes up or the system says we just opened a new hospital. What about a new contract? Same thing. First thing we need to do is do a proforma. And especially with a new contract, if you're in a system, this is always a little... This is always scary and especially when we talk about, how do you protect yourself from big groups at the end. A big group will come in and say, I don't need any financing at all, I don't need any subsidy. I'll start it from patients equal zero and I can withstand it for a year or two till it's in a good zip code or the hospital wanna build it there. And so I can withstand that. That's really tough for a smaller independent group. However, I will tell you if you got a great relationship with the hospital and they will help you some with the startup or maybe the startups and even in forming a loan, you can pay it back, it's all doable. But again, the proforma is key. What are doctors gonna cost? How many patients can I expect and planning these expenses really allows you to get into more business. You're already in a business that can actually fund this next new business, but you need to know the timing and need to know what you're getting into. So that's kind of the... That's a smattering of kind of key questions for some groups. There's kinda three parts to this and next is coding managed care and professional billing. I can press along, but I'm gonna take a breath and see if anybody's got any questions so far.
- [Mullen] So you should be able to unmute yourself if you have a question or you wanna share a story. I'll get the well primed here. Some of the hospitals that my group works with insist on keeping the coding and billing for themselves and they pay us on a monthly basis. So in a setting like that it seems like it makes sense to actually reserve for some fail because there isn't really the AR coming. What do you think about that, David?
- [Singly] Yeah. It's interesting. On one side I wonder how well they're doing on the billing and collection. You'll see when... You'll see when I get into this later I've run into several groups, in fact, we have one that gets paid on an RVU basis and it's actually a great deal for the group. I mean, you don't have to... You have no finance startup costs. So in that sense you may... You will get your last payment from the hospital, but then you'll also have your last payroll. So that may be a situation that actually I don't think of because hospitals usually don't wanna do that 'cause they see it can be done better elsewhere. But I probably would. I'd have to think about that a little longer. One of the problems is that you get to the end of the year and you gotta get all the money out of the company 'cause we actually did do this at this group is that we built up the reserve for the tail for the 12 months and then we got to the end of the company we'd have to pay it all out because you don't wanna get taxed on and inside your company and then we'd start it all over again. So it was really funny because we'd have a reserve as you say, but it's like the guy climbing the mountain and he can't ever make it to the top. We fill it up and then we gotta get rid of it. So that's probably a reasonable method. You certainly don't wanna hold onto it and get taxed on it 'cause it's sitting in the company.
- [Mullen] So that probably only applies if you're a sub chapter S or a C corp, right? So an LLC doesn't have that same tax treatment.
- [Singly] I think the LLC is a flow through entity so that money's either gonna end up in the company or really go out to the owners. So I still think you have to get it out of the company, but I'm not a tax guy, my partner is, that's why he's... That's how we got together. He was the quantitative guy and I'm the qualitative guy.
- [Mullen] Great. So the participants any of you doing anything different as far as either startup... Handling startup costs or managing your cash reserves? If not, let's forge on.
- [Singly] Sure, sure, I'm glad to. So this is where really have a bias to professional coding and professional billing. I've run into several groups and helped groups that we helped shut down their billing company. It just... There's a sense that it's so all over the place and it's so wild and it's so whatever, I'm sure I could do a better job. It's just a gestalt, but we have gone in and seen coding alone be a 15 to 20% swing on. And I'll say what a hospital does 'cause when a hospital does the coding, they may have a coding department that codes OB and codes practice and may code a whole lot of things. And the one thing that I always focus on is that and we know in emergency medicine, it's changing all the time. Whether the rock is trying to take our money away and change the codes or the payers are trying to change the codes or... Just general Medicare's adding a code or... To stay current on that is just tremendously difficult. So if you think about a professional coding department, whatever, they have to stay up on that. I mean that is their business, they have time, the infrastructure and resources to really stay on top of it. So I really think the professional coding is key in situations like your Jay, if we see that we don't think what they're paying us makes sense to try to get a chart audit or a revenue projection based on what they're doing and showing them the gap. The next step is getting the hospital to hire a professional coding rather than do it... Anything but them having people do it themselves, but we really think it can make a huge, huge, huge difference in what your practice revenue is. And again, that really get... It's really before you get to the other things, it's like, well, what are your managed care contracts and those types of things. I certainly have seen hospital, the whole idea of the utopia is what a hospital wants is it wants to be able to send out one bill to a patient. As you know you get a bill from every provider, from every professional, everything else and the idea that they could code and bill for you as the emergency practice then they have that ability to do that. The question is what are they leaving on the table? They also wanna do that so they can really have the manage care contracts and as we know, one of the tactics is, is the hospital has to contract with all these payers and if they promise that the professional groups or the emergency group will contract with them and then put it in our contract, that they demand we contract, we really have one hand tied behind our back. And so in the instance where you have your own contracts, there're very, very difficult. There is no... I don't have 20 slides on how you can win that. It's very difficult. The payers are getting more and more power every day, quite frankly. Great concern over the balance bill legislation that suppose well was passed but we don't know how it's gonna be implemented next year. We have groups in Texas that already have balance bill legislation and there's an arbitration process that we help our groups with and it's very, very complex. But what I have seen is if you have your professionals do all the math if you will, and then the doctor leaders actually get involved, I find sometimes that's helpful in that managed care people are people too, they're laid people. Doctors are very intimidating and very professional and to the extent I've actually recommended that we have a meeting with one of the payers and asked them to come into the emergency department, have the meeting in the emergency department. And I implored the physician manager to wear a lab coat with blood on it because I just wanna get an angle on these people to say, this is not numbers and this isn't yes and no, this is care and we're trying to keep our people and retention and everything else. So again, I think the secret is, is study it, stay on top of it, but have the physician. Don't turn it over blindly. They can do a lot of legwork for you, but I think when it really comes to the important part, having the physicians involved is your best bet. You still may get a no or you still may get a half a percent increase, but I think that's the best bet on that.
- [Mullen] And so David, when you talk about, on that slide, when you talk about experienced professionals helping in the negotiating team. Are these typically outside consultants?
- [Singly] So there's a couple of places for that. If you outsource your billing, there's a great chance that the billing company has managed care resources to help you negotiate. Absent that there are absolutely independent consultants that can help do that. There's less independent consultants specifically for emergency medicine but they are out there and again, back to your situation, Jay, as if you'd want to offer the hospital some help. Because the better they do the better you do on your payment. And so I know several that could... You could offer up that way. But what I'm most familiar with mostly 'cause there's an outsourcing situation with the billing is that the professional billing companies will have people experienced in that. Next, just touching on professional billing. If you're not getting the hospital or the hospital is not telling you that they're gonna do the billing and it's that simple, I do recommend professional billing. I call it required. I don't... As I said, my experience on people starting their own billing company and trying to make it work. The math on that is simply you need... It's a big fixed cost business. You need really sophisticated systems, you need technology and you need really smart people that are gonna doggedly, as I said, know the manage care, know the billing rules, know all these things. So by the time you put all these people together, you've got a big, big cost structure. The only way to pay for it is put a lot of visits on top of it. So the idea that you have a 50,000 visit ED and you're gonna start a billing company with four or five of the local people, it makes me shudder. It's really hard. I pick the number needing 500,000 visits. It may be a million visits. It's just that capital intensive to be interacting with all these hospitals and all their hospitals compliance issues on how you can connect and everything else. It's very, very difficult. There's a lot of really good billing companies out there. I would not have said that 10 years ago. In fact, part of our practice management pitch is overseeing the billing company. Billing company's supposed to do a good job at who oversees it. You guys are working clinically, you really don't have time to get into that, and so we have a real sophisticated analytical, what are you getting paid on every patient? What's your percentage no pay? Just a whole lot of things and that's where professional management comes in to oversee the billing and that's really critical even when you have professional billing.
- [Mullen] So if a group is outsourcing their coding and billing and they don't have that expertise within their group, how do they develop that expertise in order to keep an eye on the billing company or hire it out?
- [Singly] Yeah, so this sounds awful, but they could hire us. That doesn't come to the end when you told me to put my name on the slide. But, again, it depends who you have as a practice manager. If the doctors are internalizing it, there's a ton of what I would call really good information like the ASAP billing and coding seminars . The only problem is, is that you have to take your time away from your clinical work, which I would tell you from a business standpoint is your highest and best use. I've had multiple physicians tell me, I can do the payroll. I mean, I really can. You say you can offer the payroll and you kinda at some point go, okay, great. You're making somewhere between 300, $400,000, and you've just told me you can do a $60,000 job that is not the best, highest and use of your time. So what I get to is that who's gonna do the practice management? Can you hire someone internally to do it? Could you hire an MBA for instance to do it? And the answer is absolutely. The question is, is can they have enough broad enough skills across all of these areas to be really impactful or do you have to plug into someone like for instance, they're a good consulting company. And can you do that on an episodic basis so you don't need it all the time. So there are absolutely resources out there to help the independent practice. It's hard to build the infrastructure if you just don't have a lot of visits and we'll get into that in the finances is that as the finances get tough, how do you minimize your expenses to make your yourself. And we're right there now. Anyway good segue. So I'll just keep going on managing cost. With the volume thing, what a wake up call we all had, who would've ever thought. I can't remember all the years of emergency medicine volume always went up 2 or 3% no matter what you could count on it. And plus in the face of all the payers trying to dissuade their patients by whether high copays or penalties or no coverage, everybody's been trying to move patients away from EDS. And then all of a sudden it happens. And it was basically saying, if you go to the emergency department, you're gonna get COVID and so nobody showed up. So really frightening. I think everybody overestimated how people would stay away and thank goodness it's coming back. What I do think it gives us an opportunity to and look in these practices is that, what is the optimal staffing? I mean, to keep your staffing where it was when the volume went down was really probably financial suicide. And so you start looking at these practice coverage models. The biggest cost in the practice is of course, the providers. So really trying to figure out how you blend the cost with the revenues that's gonna come in is almost a do over. You get to start over again to say, okay, we need to right size this practice with volume and cost and I'll go back to my proforma. Everything should be able to be put on a proforma to say, okay, if I run a mid-level shift of 10 hours instead of 12 hours, is that gonna work? What's the patient experience gonna be? But I think this kind of, oh my gosh, it gives us an opportunity to look at the cost and see how... And see exactly how we built it on, let's face it. For a long time emergency medicine had increasing volume and quite frankly increasing compensation. So there's a lot of money around. And so you got to say, it would be great to have scribes, it would be even be greater to have the mid-level have scribes and on and on and on. And so then you wake up one day and you have this cost structure that's really expensive and that you have a revenue blip and a volume blip and now you're in real trouble. So kind of taking a real self assessment of where your practice is and what you can do is kind of this interesting opportunity. This is a little try to make lemonade outta lemons. One of the things that we've worked with of all the practices that we've worked with, 99% of them are on some sort of incentive comp. And what that does is it really at the individual provider level allows a physician or a mid-level really to have their own practice of emergency medicine. In other words, the harder I work, the more I make. What it also does is it self regulates how much coverage this is because if you're sitting in a practice and quite frankly, the volume's at a place and their mid levels are there, the physician going to tell the mid-level to sit down because I need to see that patient in order to get paid or I wanna get paid more is not good. So the idea that we can have doctors understand the outcome of how many patients they see and how many they don't see and what they get paid and then looking at and saying, well, the group has to pay for mid-level coverage if we cut it down. Quite frankly, we can handle it and we can still provide good quality care with good patient experience but we can all make a little more. That probably is kind of a groundswell of what needs to happen as opposed to especially like a lot of really big group contract manager groups. Hey, here's your new coverage pattern you're stuck with it. So that... We think that's one of the real best practices that we've seen over all the years.
- [Mullen] And what percentage do you find works best to have 100% eat what you kill versus 80% hourly, 20% incentive or somewhere in between?
- [Singly] I would tell you 100% and it doesn't look like 100% if you... For instance, let's just say we're trying to hit a target income or the practice supports a target average income of $200 an hour. You can pay $100 an hour out on the 15th and then at the end of the month, you essentially... The $100 an hour is essentially an advance on what you're gonna get paid. And so with that, there's gonna be a swing. Maybe you're only making 180, maybe you're making 225, but essentially by using all the data makes the outcome more responsive. We've certainly seen models where, okay, in that same situation, let's pay $175 guarantee and a $25 RVU incentive depending on how you do. It's like anything else, it just doesn't have that bang for the buck. The nervousness on having the whole amount is of course the fear is, is that, well, if I'm 100% on incentive comp, I might go to work and not get paid. And what comes back is emergency medicine, arrival distributions or actuarial and the patients are gonna show up. Yes, you may see 15 patients one night and 25 another, but in general, it really kind of hovers around a mean that everybody can kind of count on. Once they see enough data and they believe enough data. All right. Kind of move from kinda clinical comp to leadership comp and this is always a fascinating subject within all the groups. And we basically looked at it this way and it feels right. I mean, this is.. At least now we're getting into the effectiveness and leadership and things that are more soft, but in general, what we've seen groups do is say, look, a medical director needs to spend 10 hours a week being a medical director. With the meetings and you can kinda figure this out in a pretty good estimate and the business manager of the group or the EMS or whoever. And then you really look at it as if anybody's gonna spend non-clinical time there's really an opportunity cost of them not being able to work clinically. And I've actually heard a whole bunch of arguments that, oh, the administrative job is easier. You don't have the malpractice risk. And I've heard it all. The other side is, is that, yeah, when you go home from work, you're not thinking about the administrator calling you and you got that hanging over you. So bottom line ups and downs, ups and downs. If you really look at it generally the average clinical rate. So 10 hours, 10 hours a week is 40 hours times 2,000 that's an $8,000 a month stipend for your medical director. And is that the right number? Is it? The other way to look at it is go to the market. I mean, you have to have a medical director and you have to have people doing certain jobs and what is the market paying. 'Cause if you wanna get a 10,000 a month talent for 5,000 a month, you're probably not gonna be able to do that. But I think that methodology is a good place to start and then if someone's working too much, they can come in and say, "Hey, here's my hours I'm actually spending 15 hours a week. "And we got this going on with the hospital and this "and a joint commission survey, and you can adjust it but." That's kind of how I've seen it work fairly well that everybody can kinda get an input in it. I think keeping hours it's almost offensive and it's hard. It's hard for people to wanna do that and when it comes to that we're probably not having a great discussion about the administrative comp. So you're gonna pay them this much money how do you know if they're doing a good job? And so the way... The way we've really looked at it is the... Especially a medical director that is the most key contact to the contract. And so the easy thing to do is okay, in terms of a performance and evaluation, what does the hospital think of our medical director? I mean, how are they doing? And sometimes you don't need to ask, they may tell you. But I can tell you that is critical, that is where a huge, huge relationship is. Another way to do it is certainly ask the other key people and you know who they are in the emergency department, the head, the leadership in nursing. That's a huge important interaction. What is the perception? What does the group think they're doing? And then I look at... I put in the other presentation but a group really needs to look that they have two businesses to run. They've got to run the emergency department well. That is what they've been hired for. We need to have a good efficient running emergency department. The hospital's hired the group, the group hires a medical director and so you have to run that operation well. The second business you run is, okay, we have our own business to run. In other words, when we run that emergency department for the hospital, we need to make sure that we're making money or we're surviving and that type of thing. And so when you think about it that way, kind of the business and the group side of the organization needs to look at how they're staffing, running this emergency department and is it doing well? It's tough to make a change, it really is not pleasant when you have a medical director change over whether they leave or whether the hospital doesn't want him anymore or you need to change it over. Finding somebody else is always difficult but it's really the relationship upset that is really key. And so you really need to stay on top of it in terms of evaluating how they're doing and what they're doing and staying in touch, keeping your pulse on what's happening as opposed to, well, Joe or Sally's the medical director and we're not sure but it's kinda taken care of. Next thing kinda moving off of that question came up about profit sharing and how does that work within groups. The easiest one from a math and everything else standpoint is if you're democratic group one share one vote one share of the profits. The method... The math is real easy. Profit is divided by a number of owners. The fact is, is that, that isn't very sophisticated and what we see with a lot of groups is that... Again, Joe is slower than Sally and so I'm really making more money for the group and... So all these things start tying in and then you have your hospital contract have patient satisfaction performance metrics and one person does better than the other and quality measures and then somebody they're an owner but they never come to the meetings. And so we have ended up with some groups that will have, okay, 20% of the money is gonna go on a per share basis and then 80% of the money is gonna be divided by what people's productivity is, how many patients do you see, what are your patient satisfaction scores, what are you contributing to the group besides working clinically. If you're owner in the practice, practices can go out and hire "labor" but you're an owner what are you doing to move the group forward. So the real I think message on this is that the group's got a mission to run the emergency department well, and the groups can pay itself any way it wants. So what incentives do you really want to put on yourselves to encourage high performance 'cause that keeps the business going and that's really what works and you can make it complex or really simple or something in the middle. Next is really important is we say defend from mega groups. One of the things that we preached... One of the things that I'll tell you that's just kind of a like a lot of things in counterintuitive. So when I was on the dark side, wearing the dark hat and had my whether it was coastal or MCare or whatever hat was is that, you were in charge, but you were always in this position of asking the doctors to do this, this, and this, and whether they liked it or not or not. It was a real tense relationship quite frankly. I always thought it bizarre that there was a business head and I was president and COO of Mcare 15 years ago. But it was always just very weird that I was a non doctor the head of a doctor group and that's probably why I've been doing this for 20 years because you go back to the doctors own the practice. And so what it's turned into though is that I'll go to the business meetings with the groups. And I don't mince words about anything. My job now is to help them keep their contract and so somebody comes in and says, well, they talked about this, this, and this and I think we just can forget it. And I'll start dancing and yelling and say, let me tell you what they're saying in hospital speak. Just so you're really, really clear about this and blah, blah, blah, blah, blah. And so I get to have these tremendously fierce conversations with all my groups, because if they mess up I go away too. So I'm very incentive to that. So my point of this is that one of the things that we would tell the groups all the time is they sign your contract and so you need to figure out how to become their indispensable ally. And that's a term... That's a really cool term on it adds strategy, everything you do, how do I... How can I do more for them. The second piece of that is is that how can I create stickiness and where really that term comes from is hospitals love the term engagement. And I've always looked at emergency medicine as the hospitals come and yell and scream and say, your group... They come in and they work a shift and they leave and they're not really engaged and blah, blah, blah, blah. And so they go and we'll put it in your contract. We put all these things to get this engagement. Well, the real thing they wanna do is the medical staff isn't engaged, but they can get us engaged by contracts. So what we look at is having members of the group especially when it's a democratic group you all are owners you should all be looking to how do I add value to what we have here. Everybody's on a different committee. You're showing up for the functions, you're doing the golf, you're doing... You're meeting... A lot of emergency medicine historically was outta sight outta mind. If I don't... If you don't hear from the hospital things are good. And they quite frankly don't wanna hear from the emergency department. So you have to force that structure. Can I have breakfast with whoever whether it's the CEO or if it's a monster system whoever the administration is. How do you force these structural interactions that keep discipline. And I think I say at the end is, look, if we really, really do a good job and they like us and we've created all this engagement, they don't wanna fire a friend. We we've seen a lot of and you probably have where tenant is gonna go bid out all their hospitals and give it all to let's bid it against team health and bid it envision or whoever you sex whatever. And we'll go to the hospital administrator and they go, I don't want that. I absolutely... That would be the worst thing. And so now we're working with the hospital on how they can get a carve out, how they can go to corporate and say, look, I do not do this. This group is best practice, best performance, best whatever. And it really helps when you, especially in these systems that your patient satisfaction scores are at the top of all these other people and if you looked at them by groups, you really are in tune to your business. So the number one thing is, do a good job and stay absolutely in tune. One of the techniques that we encourage our groups to do is have an annual planning meeting not only for themselves, but at their annual planning meeting they invite the hospital CEO to come at the beginning and simply say, hey, look, we're real interested in how the hospital's doing. We're interested in the direction it's going. And we're interested in how we can be aligned with that. This does a couple of things. One, most physician groups don't... I mean, hospitals love meetings, right? They love strategic planning meetings, they love retreats. And so all of a sudden you're telling that hospital administrator that you guys think alike. You're having the same kind of meeting, you guys are planning your future, blah, blah, blah, blah, blah. So you get all sorts of credit for that. And then you come in and they say what's going on and you pretty much know anyway. But it gets them a chance to stand in front of you and kinda be the hospital administrator. And so it's kind of a compliment they're invited. And then the last thing is, is that you sit there and listen to them and then we'll have a session afterwards and say, okay, what did they say? What did he say? What could we possibly do? And it's then creates opportunities for these new engagements or new stickiness. So I think that's really key and I think you can always be overruled at the next level up and out with the rascals or they're gonna come in and... Don't worry about it, you'll just work for envision. It'll be fine. It's like, oh my gosh, that's just the worst solution in the world. But anyway, I think it is really, really important. It's a day to day thing. It ought be on the agenda every time you guys meet, you know what, what's the next way we can do something like that. Then real quick, I only gotta just not very many. Question became about having a buy in your democratic group should have a buy in or not have a buy in and then do you have a buyout? I basically say nothing of significance is just given away. If you just say up, you're an owner day one and it's great. I don't know how that's any different, I don't know what you have at risk. And so whether you structure it as a little buyout or a big buyout or what have you, I think there's all sorts of ways to do. There's sweat equity models that... And I've seen groups ask for monstrous checks where people had to go get loans and I'm not endorsing any of them I'm more just saying that I think that being an owner in a business is a privilege and it comes with great responsibility. And I think when you carry that and create that expectation, people are thinking about, oh, I can be on that committee and I can do go to these meetings or I can play golf or what have you. And then you have something of value tied up. As it relates to buyouts, I always take the view that, yes, you ought to be able to get bought out but I think it always has to be in the group's favor. And what I mean by that is that you don't want a whole bunch of people buying out at the same time 'cause then all of a sudden you can't make payroll, right? I mean the current business is most important. If somebody wants to leave, that's fine. And we'll pay you over 12 months whatever it is. But we can't jeopardize the financial standing of the group this, that, the other, to have somebody get out of the group. And there's very appropriate ways to do that, that are fair and everything else. But if you think out of it, as you know, we have to preserve the group, you can do the buy ins and buyouts pretty easily. And then I can stop there on that section. There's just a couple of more on what I think about the world going forward.
- [Mullen] Yeah, so any questions anybody or perspectives? We've got about seven more minutes, David so maybe we should forge ahead.
- [Singly] Yeah, I'll go real quick. So we're... The world's opening up, it's so exciting. Volumes will continue to come back is what I see with our groups. There's no doubt inroads have been made. As we said, people have been trying to get people out of the emergency department especially people who pay for the care forever and it's really never worked. I think this time they have made some inroads, convenient care, urgent care, and telemedicine have made some. But as I've always said in this business, when you don't feel bad it's an emergency to you. It may not be an emergency to some coder somewhere a month later, but it's an emergency. And even more than that and really coming out of, a lot of experience in Texas where they opened up 2, 3, 400 freestanding EDS. There's still this sense in our country that the lighthouse of the healthcare system is the hospital where the ED is. So I think the volumes are coming back. In high growth areas they've already exceeded where they were. In other areas I think we'll start a slow growth curve and it may take a couple three years to get back where we are but I don't think we're gonna, miraculously the volume's gonna turn around and go south. And again, I've already said this thing when we were talked about staffing. I think the lower volumes are actually an opportunity to re-look at our staffing patterns to be more effective 'cause patient experience is always, always critical. But I think groups in the future do to the reimbursement gonna experience pressure, we're gonna have to use more extenders, try to use more extenders, figure out how to become more efficient. We're gonna be forced to do that. We still have a couple of groups that are physician only and they're just in really, really unique situations. And I told them about 10 years ago that they would ultimately have extenders and they... Every year tell me I'm wrong but I think when... Waves against the rock I'm gonna be right eventually. It's just where reimbursement is going. And then I think the last one is is that we have had so many groups say we love our business and everything else, but come on, there's gotta be something better out there. And so we've had groups look at wanting to buy office buildings. Let's set up freestanding EDS, let's go into home health, let's go into whatever. And what I would say is, is that emergency medicine is a really, really, really good business. Go back to why do you think there's so many vulture capitalist and everything else. So picking up that next one a lot easier for you and it's a business you know. Getting into a business you don't know has all sorts of risks involved. I go back to the rigorous planning, just like we're starting a contract, we need to do a proforma, we need to do a business plan if the group wants to get into an outside business and for actually an emergency group, it's really hard. You think you're doing the right thing. And you got the finances figured out and everything else and next thing you know, the perception is the group is taking medical staff patients. And that's one of the unattended cons. No, we're not. They can't even get appointments. I mean, doesn't matter. The perception is we're in the fish bowl, we're the ones that get to take the shots they come to the medical staff or they come to the CEO and says, these guys are competing against me. And you're really in a tough spot. So you really have to be careful some outside businesses 'cause it ultimately... If it was so on toured it could affect your base business, which means, hey, you don't have your contract anymore. So those take a lot of careful planning. And that's what I have and I'd love to answer questions or if you have questions after the fact, I think Jay, they could get sent this presentation or what have you. But I've really enjoyed sharing this, it is my passion. I really... As I said, the culmination was me, why am I the head of a medical group and guess what? Now I'm not. I'm the guy with the pocket protector and the numbers and sit in your meetings and to your group.
- [Mullen] Thanks, David. Any questions from any of the participants? If not, I have one more. So looks like is typing. So while he's typing, so we all saw a move towards consolidation of practices and hospitals starting to employ more and more physicians. And then it seemed like there was a wave of going with the mega groups. And I've heard chatter now that the romance with the mega groups is starting to wear off among hospitals. Do you think that's true or what's your perspective on that?
- [Singly] So I've heard a lot of individual hospitals say they're not happy with the mega group. So if you go to HCA or a tenant or a system and it's like, we're just not that happy. Part of... So at the service level, I feel that too and I'm very hopeful, I'm so excited. Throw the rascals out, that whole thing. The problem is is that it's like everything else, healthcare financing. If mega group comes in and says, give me all your EDS and I'll cover all the stipends for hospitals and half of the stipends for anesthesia, whoever the guy with the eye shades and the skyscraper is somewhere he's really got a hard time turning that down. He doesn't feel the service rub, he doesn't feel how bad it is. And so I'll be interested to see how long that lasts. I see it as you said. I think it's equalized a little bit in terms of, the big groups being that attractive. As far as groups go, clearly with the volume down groups earnings or profits are down. So getting paid for your practice is... It's just not anywhere near that it was. We had way too many groups that built a really, really fine practice and get bought by team health and envision and stuff. Just tremendously disappointing. I think that... The real issue is is that if a group's... If a buyer venture capital is willing to come in and spend enough money and this is a term that we use, and it creates life changing money, I think that the consolidation can happen. What's particularly hard for democratic groups is that if you start dividing things by 8, 12, 15, and 23, the number's really gotta be big because by the time you take a really big number and divide it by 40 or 50 people, then what happens is that, okay, maybe I picked up a year income or maybe I picked up a partial year income. Do I wanna work with these guys for the next 10 or 15 years and then tell me what they do. So I think that's also equilibrating. I hear bigger groups out willing to buy but I think it's more you ought to be scared your practice is gonna lose money just throw in for us. And I... There's no reason there's no reason for that. So I'm very hopeful, I really am. I think that the other side of it is on the supply side are there young new physicians willing to come out and take some risk and gather some people up. And I think your organization, the embassy thing and cursing that this can be done, and it's not that risky and there's help out there and you can be successful in this. Very, very encouraged by that.
- [Mullen] Great. David, great point to end on. Thank you so much, it was a really interesting talk. We've gotten some good feedback in the chat and everyone this will be recorded if you're a section member you can go back and watch it again or have somebody else in your group watch it. The last of the trilogy of the Anatomy of the Democratic Emergency Medicine Group is gonna be focusing on operations and that's gonna be taking place in September. With that we'll say goodnight to everybody, thanks so much.
- [Singly] Thank you very much.