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Growing pains: Weighing the costs of success

When your practice grows too much, you face a decision: Expand or decline new patients.

By Mike Norbut, amednews staff. Oct. 6, 2003.

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It's a situation that excites and exasperates a physician. It's a sign of success, but it also signifies an impending crisis.

The business goal of every physician is to be busy, of course, but what happens when you get too busy? When a practice reaches its critical mass, when it can't possibly handle any additional patients, it's time to decide whether to expand or close the practice to new patients.

Each decision has advantages and risks. Expanding allows you to increase revenue and see patients in a timely fashion, but it adds overhead costs and assumes there's enough business to justify the growth. Closing the practice to new patients, on the other hand, preserves efficiency and allows the doctor to continue his or her lifestyle, but it's risky to turn patients away under any circumstances.

Ultimately, the decision depends not only on the market and patient demand, but also on personal preferences.

"A lot of decisions like that come down to the personality of the physician involved," said Tom Gorey, president of Policy Planning Associates, a consulting firm in Crystal Lake, Ill. "It depends on their risk tolerance and how ambitious they are."

For some, the risk is hardly an issue, because patient demand dictates the physician's next move. Michael Fleming, MD, a family physician in Shreveport, La., started his solo practice in 1978, and new patients started flooding his office. By the early 1980s, "things got out of hand," and he started looking to hire another physician.

About 20 years, eight more physicians and three medical buildings later, the practice is still growing. Another physician will join the practice in about a year.

"We added when we thought it was time to add, and we were certainly willing to take the risk," said Dr. Fleming, who is also the new president of the American Academy of Family Physicians. "I don't want to ever quit growing."

From just right to too much

Not every practice can handle its growing pains with such resolution, however. Some physicians have a goal to add associates on a regular basis, but others can go from healthy and efficient to overcrowded in a matter of weeks.

Karen Weinstein, MD, an internist in Oak Park, Ill., has seen the ebb and flow of patient demand since joining her practice about 15 years ago. She and her partner hired a third physician in 1990, and they have spent the last decade refilling that position as doctors move away or pursue other opportunities.

While the current third physician is trying to build up a patient base, Dr. Weinstein and her partner often face growing schedules. Adding a fourth physician isn't an option because all the doctors don't have full schedules, but the two partners can't accommodate more patients beyond the weekends, evenings and early morning hours they already offer.

"Every time we take on a new physician, we pretty much say we're not going to take on any new patients," Dr. Weinstein said. "We make some exceptions. Some people are fixed on a name, but some are willing to try any doctor."

Closing a practice to new patients is a phenomenon most common to primary care physicians, who receive random phone calls from prospective patients who found their name in an HMO directory or phone book. As more calls come in, schedules back up, and pretty soon, patients are having trouble getting timely appointments, doctors said.

The decision to close the practice for any length of time is often made with a heavy, if not anxious, heart. Dr. Weinstein described it as a "recurring nightmare" that you'll wake up "and no one will ever want to see you again."

"It's a combination of a lot of things: when you feel like you can't fit any more patients in and you feel like you're being pushed," Dr. Weinstein said. "You hate as an independent practitioner to ever turn away business, but if you can't get [patients] in within two or three weeks, then you're having a problem."

Closing panels

Consultants try to steer physicians away from completely closing practices to new patients. They suggest closing to certain insurance panels instead.

"You can terminate some contracts with HMOs, if you're fortunate enough to have growing volumes," said Shannon Fiser, manager of health care services for LBMC Health Care Group LLC, a firm based in Brentwood, Tenn. "If Payer A is at 150% of Medicare and Payer B is at 120%, you can choose to stay with Payer A."

A detailed reimbursement analysis would reveal not only which insurers historically pay at the highest rate, but also how quickly they pay and how the overall revenues of the practice are divided, said Patricia McKinnon, manager of the health care consulting division for Berdon LLP, a New York-based accounting and advisory firm.

"What it will ease is patients coming to you for nonessential visits," McKinnon said. "By eliminating the insurance company that pays the least, it makes your practice a little less hectic. You still have a busy practice, but you're not losing money."

Closing some insurance panels is often a tactic for larger groups with leverage and bargaining power, and it's a way to streamline your practice if you're not ready to expand. It's also smart to review your contracts on a regular, if not ongoing, basis, Dr. Fleming said.

"If my administrator comes to me and tells me health plan X is slow, and if everyone agrees, we may close that panel to new patients," Dr. Fleming said. "We've made some strategic changes in the past. Because of our size, it's a very effective tool for us."

George Lange, MD, an internist and geriatrician in Milwaukee and past president of the Medical Society of Milwaukee County, said his nine-physician practice also closes off certain insurance panels from time to time, although the practice concentrates more on steering patients to the physicians who have more open schedules.

The practice started 11 years ago when seven physicians who had been working independently in the same building merged, and they've added two more physicians over the years. When you have the space, expanding is not costly, because another physician doesn't add much in overhead, Dr. Lange said. Growing is a way to help the practice adjust to the changing economic climate of health care.

"It's getting more and more complex to do business as a physician," he said. "At our size, we can bring together employees with the right expertise to help us."

Expanding is often a conscious goal for physicians, even as they open a solo practice. Still, there are lifestyle issues to consider when contemplating the size of your office. A physician in solo practice may be able to control his or her own hours and avoid much of the bureaucracy of a larger group, but the responsibilities increase as well, said Elbert Acosta II, MD, an internist in New Castle, Pa. A physician in solo practice has no one to lean on for calls, hospital rounds, or vacation coverage, but also no one to answer to.

"If I want to go play golf, I can clear my schedule and play golf. I don't need to ask anybody," Dr. Acosta said. But he's looking to expand his solo practice because "the quality of life is more important to me. My family is my priority."

Starting over

Dr. Acosta has experience with expansion. He started a solo practice in 1989 and quickly added two doctors before selling the practice to a local health system, which kept him on to run it and expand it further. A few years ago, however, the system went bankrupt, and the practice was broken up among the physicians, who are now Dr. Acosta's closest competitors.

"I had to start all over again," said Dr. Acosta, who owns Noble Health Medical Clinic, a facility that houses myriad physician offices and medical services. "I now have 5,300 patients. It's me and a physician assistant and a staff of six."

Dr. Acosta isn't waiting for a crisis to occur before acting, however. His desire to expand is pushing him to recruit physicians already.

"We're getting busy again," he said. "In six months, [a new hire] will work out really well."

Other physicians are methodical in their approach, especially when it's their first trip down the expansion road. Carol Kotzan, MD, an internist in Crystal Lake, Ill., was in solo practice since 1988 until hiring a physician last year. She started looking for more help about five years ago, when she started to realize her practice was getting too busy to manage on her own.

"The only way to really grow the practice was to add another person," she said. "It's important to have so-called new blood with new ideas. I like having somebody else here. It's kind of nice."

But Dr. Kotzan, who at times had to close her practice to new patients, said finding the right physician fit was more important than responding to the growth quickly.

"It's almost like a marriage," she said. "You want to make sure they're good."

The five years she spent looking isn't common, but consultants agree that, considering the importance of the decision, it's important to take your time in expanding -- or in implementing an alternative plan.

"I've seen a lot of physician entrepreneurs who have the primary goal to grow rapidly, and in just as many instances, there are physicians that are not into growth like that," consultant Tom Gorey said.

"You should evaluate it on a year-to-year basis. The ultimate answer requires a business analysis, and like with any business decision, you need to get good advice."

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