“If you don’t do well, you can’t do good.” Throughout my career, I’ve found that this often-quoted concept rings true. A practice can’t provide the best care for patients if it isn’t successful as a business. However, success as a business isn’t easy, because medical practices don’t operate like traditional businesses. While facing the challenges that other businesses face, such as competition, industry consolidation, increasing costs, and creating value for stakeholders, medical practices are severely limited. They’re entirely regulated, and payment for services is determined by a government price structure that is consistently decreasing. Actually, the more efficiently doctors work, the less they get paid. Imagine trying to apply such a business model to plumbing or car repair or any other typical business. It wouldn’t be accepted. In reality, medicine is a noble profession, but a terrible business.

To me, this means physicians must think like entrepreneurs and find ways to build true businesses alongside the medical practice, which is what we at Retinal Consultants of Arizona (RCA) have done — and continue to do. Because we have an entrepreneurial practice, we have assets and passive streams of income. We’re able to practice how we want to practice, provide our patients with the best care available, attract the best and brightest new physicians, and lead fulfilling lives outside of our practice.

TURNING POINTS

I have always had an entrepreneurial spirit. If I touch something (i.e., use it), my preference is to own it, if possible. I put this idea into action when I left academia for private practice more than 20 years ago. I was among the first retina surgeons to partner with anterior segment surgeons to perform my surgical procedures at an ASC. At the same time, I was working to establish an academic private practice, which was the reason I made the difficult decision to leave academia in the first place. It was a time when the retina field was on the precipice of enormous advancements that had the potential to revolutionize how we treat our patients. It became clear to me that collaboration with industry, outside of a purely academic setting, was going to be the best strategy to bring this wave of progress to fruition. I envisioned an academic private practice that would be nimble and adaptable enough to work with industry in running clinical trials and developing drugs and devices. Although it required more work and time than I expected, RCA emerged as one of the most productive academic private practices in the country.

Ten years later, as my partners and I were looking toward further growth, I knew we’d need more bright, young physicians to join us. Indeed, several had already asked about buying in. I thought to myself, “Why would they want to buy in?” Given the severe and unprecedented regulations and relatively limited potential as an investment — which is true of any medical practice — why would they want to buy into ANY practice? At that point, I realized that as a medical practice, we touch a great deal of products and services. I saw no reason why the practice couldn’t own companies that provide those products and services and run them outside of the medical practice like true businesses. So, that is what we set out to do. Since then, RCA has established 10 businesses that are owned by the practice but operate as separate entities.

OUR CURRENT ENTREPRENEURIAL PATHWAY

The first businesses that sprung from what we do at the medical practice were our ASCs and our research company that conducts clinical trials. Also, we prescribe ocular vitamins, so we have a separate vitamin business that offers patients a lower price than they could find elsewhere. We buy our real estate, so we have a separate real estate business. We could rent our buildings as medical practices often do, but at the end of the day, we would have only an expense, not an asset. Instead, our separate real estate company buys buildings, and the medical practice rents from that company. We finance ourselves, so we also have a separate financial business. Our doctors and staff travel daily throughout the state to provide care at our 35 locations, transporting medicine and equipment with them, so we started an aviation business that has two planes and employs five pilots. Also among RCA’s 10 companies is a triage business that manages hospital inpatient services and emergency rooms.

Each of our 10 companies has its own employees — who are not employees of the medical practice — such as the pilots who work for the aviation company and the 12 clinical coordinators who work for the research business. For nearly all of the businesses, the medical practice is the only customer. As is the norm, doctors new to the practice start out as employees. However, when they become partners, they have the opportunity to also become partners in all of the businesses the practice owns.

BENEFITS OF AN ENTREPRENEURIAL PRACTICE

One of the most satisfying aspects of the entrepreneurial approach is that for young doctors, it increases the value of buying into the practice. They can buy into a portfolio of businesses that have historically performed very well and will provide them with a dividend income like a true business should. Other benefits include the following:

• More control of care. Because the medical practice is the sole client of most of the businesses it owns, it, in effect, has a stable of handpicked companies it can turn to for services, delivered exactly the way it desires. We can manage each company however we see fit to contain costs, maximize efficiency, innovate, and so on. This greatly enhances the practice’s ability to provide the highest level of care at the greatest level of efficiency.
• Additional sources of revenue. The other businesses aren’t regulated in the way a medical practice is with regard to income. There is no government-set pricing arrangement. They are business in the real sense of the word. They can be as financially successful as we can make them.
• Financial stability. Ownership of outside businesses affords the partners in the practice a passive stream of income that each of us can use in any way we wish. Some people like to play golf or fish. I enjoy traveling to meetings, working with companies in the ophthalmic industry, and doing international humanitarian work. With the extra income stream, we don’t necessarily have to worry about missing time seeing patients. We have flexibility to do things that make life more enjoyable.
• Safety net. The income that is separate from the medical practice, to a great extent, helps cushion the partners from the unavoidable ups and downs of reimbursement and changing government regulations.

All of our practice partners are encouraged to think like entrepreneurs and present ideas about additional new businesses we can create. Similar to any other business venture, we consider the upsides and downsides of each idea and perform due diligence in deciding whether to proceed, utilizing outside experts when necessary.

CULTIVATE YOUR ENTREPRENEURIAL SPIRIT

Every medical practice requires a long list of services that can potentially be spun off as businesses. The type of business depends on the practice and its culture. What works for one practice in one city or region may not work for another. What counts is having the entrepreneurial spirit and the courage to put it into action. Not every idea is a success, but every experience is an opportunity to learn and help fuel the next success.

For centuries, physicians have been discouraged from thinking in an entrepreneurial fashion. It was deemed unethical or improper. I believe this is now gradually changing, partly due to necessity. This is an opportunity for ophthalmologists to embrace their inner entrepreneurial spirit for their benefit and, most importantly, for the benefit of their patients … the ability to “do good by doing well.” NRP

Dr. Dugel is managing partner of Retinal Consultants of Arizona, physician executive director of the Banner University Medical Center’s Banner Eye Institute, founding partner of Spectra Eye Institute, and clinical professor at the USC Roski Eye Institute, University of Southern California Keck School of Medicine.