OBSERVATIONS ‘07

Q&A OF BLUNDERS, CAUTIONS AND STRATEGEMS IMPACTING THE PRACTICE SALE THROUGHOUT 2007 (PART II) 

by Sam Reader

Compliments of S.G. Reader & Associates, Inc.

Q:  How do I know that this is the right practice for me?

A:  Doctor A had always dreamed of owning a big clinic.  He had been practicing for 15 years in America’s heartland and honestly felt that if he could relocate to a bigger city with a stronger economic base, he would realize his dream of a “hitter’s” clinic.  He spent several years cautiously looking and exploring buying opportunities in upper end communities on the East Coast.  He counseled with family and friends about the do’s and don’ts in making the move.  His friends encouraged him to take the leap and go for his dream.

Doctor A found his clinic.  This was no ordinary clinic.  The clinic had been around for 30 years – a generational practice, well established within the exclusive and high end suburbs of the Washington, D.C. Beltway where the powerbrokers of the world resided.  This was pretty much a straight forward, diversified and physiotherapy practice with annual collections of $800k.  Even more impressive, one-third of the income was cash!

Doctor A felt it was the sure sign that this community had the financial freedom and the educational sophistication to create such a mighty clinic.  He also learned the average employment period among his soon-to-be staff was no less than 12 years.  He knew he could not fail with such a talented team behind him.

Doctor A moved forward on his dream come true.  He was impressed with how quickly he could sell his own practice and the relative ease of purchasing a new one.  He wasn’t too concerned about his home he was trying to sell – with a “hitter’s” clinic, he felt he could afford several house payments.

Doctor A was now concluding his fourth week of transition.  He had to pinch himself many times throughout the day in disbelief.  Was this real?  Could all this be happening to me?  How could I be so lucky?  I have waited a long time for this!

Approximately six weeks into his retirement, Doctor B, the seller, received a call from one of his previous office managers.  Things were not good!  The office manager said Doctor A was not the same happy, upbeat optimist she knew him to be during transition.  Furthermore, the staff was unhappy and the numbers were dropping.

Doctor B took action.  He left his full-time retirement post and spent more time with Doctor A, rehearsed all the protocols, and tried to identify why Doctor A was slipping into a mental abyss.  Over the next several months, Doctor B tried to coach, encourage, persuade, counsel, analyze, and motivate Doctor A with the can-do attitude.

Doctor B was perplexed.  Doctor A was an ideal candidate for his practice.  He was a fine adjuster, had a great sense of humor – a kind of “winning friends and influencing people” personality.  During transition, the patients and staff members loved him.

Doctor A was now 10 months into his dream practice and never felt more miserable.  He tried hiring another associate to help him revive the attitude and numbers in the clinic, but to no avail.  He tried to find a management company to take over with their own team of doctor(s) – to no avail.  Twelve months into Doctor B’s off-and-on rollercoaster retirement, he received a call from his office manager.  The office was closed!  The one time 30-year ”hitter’s” clinic was now dead in less than 12 months.  Wow!  Apparently Doctor A had packed his bags one evening, never to be seen again.  This was all so abrupt – almost surreal.  Doctor B was sick, but not nearly as sick and dazed as Doctor A.

What happened?

Doctor A eventually called and confided in Doctor B about his anxieties, fears and apprehensions, which all lead to his implosion and the fatal derailment of this one-time magnificent practice.  Doctor A felt that it might have been a concert of events happening all at once, such as the stress of not selling his home in a down market and the financial hardship spurred by having two homes and the adjustable rate mortgages increasing.  Maybe it was the loneliness he felt in not having his family with him during the week.  No doubt, the running back and forth between his Midwestern home and his new East Coast practice on the weekends caused extreme exhaustion.  Perhaps closing the clinic on Fridays and half the day on Mondays (the clinic’s most profitable days) allowing for drive time each weekend, may have been a contributor.

As Doctor A felt himself slowly sinking into the quicksand of troubles, he found he could no longer sleep, eat and exercise – literally doubled over in pain from stomach cramps during the day.  Perhaps he initiated the clinic’s final death blow by authorizing the staff to cancel and reschedule patients often.

Although these were all contributors to his demise, Doctor A felt the defining moment or catalyst to the real problem was found in Doctor B’s patient retention.  Doctor A knew he had identified a major conflict as he sat in Doctor B’s Report of Findings during the transition period.  Doctor A could feel the sweat beading up on his forehead and back – becoming nauseous as he listened to Doctor B pressing his new patient to choose and/or accept a long-term reconstructive care program.  Doctor B would not let go until the patient made a verbal agreement to some form of care.  Doctor A also realized he was in trouble when Doctor B continued to press the patient on his/her commitment to care during treatment.  This was all too much – way out of the comfort zone for Doctor A.

Doctor A concluded that although he and Doctor B had so much in common, particularly in personality and salesmanship, their approach couldn’t have been more opposite.  Doctor B was direct.  Doctor A was indirect – maybe passive.  Unbeknown to Doctor A, the direct vs. indirect translated into patient retention.  As Doctor A would later learn, Doctor B had a patient retention of 41 visits (on average) @ $75.00 per visit, compared to Doctor A’s 15 visits (on average) @ $30.00 per visit.

As Doctor A scrambled in his mind to correct a potential problem, he felt confident that he could win over Doctor B’s patients with his “good old boy” Midwestern heartland charm.

It did not take long before Doctor A realized that his indirect approach and his Midwestern charm were a recipe for disaster in this high horse powered clinic within the DC Beltway community.  The recipe called for value padding.  In other words, Doctor A would justify the uncomfortable $75.00 visit by spending more time with patients.  He was a master story and joke teller – revered in his small hometown for being the best.  In fact, he was so good, patients didn’t mind holding out in the waiting room for 15, sometimes 25, minutes to experience the ultimate treatment.  And according to Doctor A, although an average office visit would take up to 50 minutes – each and every visit was a million dollar production – well worth the time and visit.

The value padding would also mean going easy on the patient during the Report of Findings.  In other words, Doctor A had discovered years ago that patients much prefer creating their own treatment program, much like creating your own burger at a classy burger shop.

In summary, Doctor A had come to a dreadful awakening that he was uncomfortable and intimidated by the patient personality base of his new clinic.  Doctor A was used to the easygoing, kickback style of his patients back home – mostly farmers and factory workers.  In contrast, Doctor A felt that he could not acclimate to the energy, speed, and ferocious demands of the “Type A” driven personalities of the DC Beltway community.  A meltdown was inevitable.

Epilogue:

One less bank to fund chiropractic clinics.  Financial hardship for buyer and family.  Many lessons learned.

Be Smart.   Be Strong.   Be Helpful.   Enjoy!