fix this practice

The Case of The Absentee Owner

Unfortunately, money can't fix management problems.

RICHARD S. KATTOUF, O.D., D.O.S.

Q I own three independent practices and a separate corporation, the latter of which services 11 nursing homes. I oversee the nursing homes, and three associate doctors see patients at the independent practices. To keep the practices afloat, I must constantly fund them from the nursing home profits. Any suggestions as to how I can put an end to this situation?

Dr. L.A. Sullivan
via e-mail

A: Dr. F. A. Martin exhibited a similar situation — three independent practices with associate practitioners. Dr. Martin didn't see patients at any of the practices because he had an outside business that consumed his attention. When Dr. Martin called my company, he complained of the high cost of employee salaries, accelerating salaries to associate O.D.s (as a percentage of salaries to gross) and the high cost of goods.

Priorities out of whack

When I visited with Dr. Martin, it was evident his priorities weren't in tune with overseeing multiple optometric practices. His priorities:

1. Outside service projects
2. Side business (not optometric)
3. Independent practices

Because cash flow at his practices was a constant problem, causing the lateness of paid lab bills and vendors to require collection on delivery (C.O.D.), Dr. Martin was required to constantly take money from the side business to cover these issues as well as the salaries of his staff and associate doctors, which was 58% of the gross (collected income) from his side business.

Also, staff morale at the practices was horrible, as they spent a great deal of their time handling collection calls. And, upon further investigation, I discovered that some of his staff members were embezzling money, product and time — in excess of $100,000.00 in a two year period.

The problem: Dr. Martin had the misguided perception that the three offices could be profitable with an absent owner.

Problem solved

To get his practices financially healthy, I provided Dr. Martin with the following directions:

► Spend at least two hours daily administrating the optometric practices to stay in the loop.

► Assign associate doctors management tasks, and compensate them for additional responsibility. The amount of compensation was directly related to an ongoing financial analysis. Net and gross income cost of goods and percent of salaries to gross were the tracked and measured benchmarks.

► Teach doctors how to read, analyze and track the data to control and grow the practices.

► Require embezzlers to sign legal agreements to repay the money plus interest or face prosecution.

► Place staff on a commission system based on monthly financial targets.

► Install a computer system to track all schedules and financial transactions from his private office.

► Install checks and balance systems, to prevent all three forms of embezzlement.

► Visit each office weekly to further administrate.

Six months after my consultation, Dr. Martin's finances were in the "black" for the first time in years. Two years later, he was earning 7% of the gross income. This was a positive shift from 17%.

This case reinforces the importance of developing techniques to control your own practice(s). OM