Is Bigger Better?

Bigger is Not Always Better

 

We have observed a recent trend of health insurance plans, hospitals, medical groups and even O&P entities expanding in size. Organizations are merging, acquiring smaller entities and hiring additional professionals. They often explain their strategies as wanting to be “too big to fail,” or they believe only the largest and strongest O&P entities will thrive in the new healthcare environment of accountable care and value-based payment.

However, we see a different picture in data: that bigger might not always be better, which could surprise those who believe that a sale or merger is their only survival option. As you will see, larger practices might be able to gain economies of scale in business office operations and administration, but can lose economic advantages gained when they expand their physical footprint and duplicate services in multiple locations and facilities. Before embracing this “bigger is better” strategy, we encourage members to look at their actual practice performance to see whether there truly are economic benefits to expansion. Perhaps you will find the expertise you need is right here among your peers in the Choice Network.

The impact of size on viability is not unique to healthcare. This view is echoed in today’s local movement. Restaurateur Judy Wicks, a pioneer in the use of ingredients from local farmers, touted the benefits of being small in nearly identical terms to the healthcare business owners: “I realized that when we grow in physical size, we give up something very important-authentic relationships with the people around us and those we do business with,” she said.

If you think about the delivery of healthcare, and in particular O&P care, when it comes to the
business of providing care, your market is fairly small. You may control a city, or a region, but from a national perspective, you are still operating in a small market. The factors that influence your relevance in your market are likewise local. There may be “national” policies, but by and large the decisions about who gets the job are made at the local level. Economist Friedrich Hayek recognized the value of small, decentralized decision makers, especially as they pertain to gathering and responding to information that is also decentralized. He said: “Circumstances of time and place cannot be fully understood by central planners, and decisions based on such information should be left to the ‘man on the spot’.” Being able to communicate your value and make decisions in that small market is essential to your viability.

In the future value-based payment environment that many medical groups cite as the reason for expansion, it will be critical to have good patient outcomes and it is imperative for health care professionals to focus as much attention on managing care delivery and improving patient outcomes as they do on minimizing overhead. This is why we strongly encourage participation in the Quality Outcomes Patient Satisfaction Tool and why we will continue to add outcomes tools to help you in this arena. It’s also important to note that clinical statistics only reveal part of what happens in your practice. Some O&P practices in each size category demonstrate good economic performance, which suggests that any economic benefits derived from size are relatively small compared with the impact of good clinical and business management.

Authentic relationships in our world are built on accomplishments, but that is just the beginning.  Every care provider in every field can tell a good story about a person who is better off because of the intervention provided.  But can they back it with data?  Can you?  That is going to be your
key differentiator.  Now as you start to think about growing or selling or staying the same, you need to think about your value.  You value as a business, your value to the community, your value to the patient, your value to the healthcare system.  Then, in order to truly understand what business strategy you should pursue, it is vitally important that you understand and objectively measure your business. We talked about Patient Satisfaction and functional assessments, but patient outcomes only tell part of the story. How are you doing when it comes to running your practice? The tools made available to you though your Choice membership, specifically the Dashboards that pull data from your OPIE system, were designed to give you the “rest of the story.” When you correctly and consistently use the features and tools of the software you have, the wealth of knowledge that can be created from the data is immeasurable. That data and the resultant knowledge will help you make the next big critical decision you have make.  And that data and knowledge allow you to have very authentic discussions with the rest of professionals on the health care team.

So is bigger better? We can answer with the simple statement: Yes, for some organizations, but not for all. It might be advantageous for some practices to expand their operations, so we encourage those of you considering mergers or acquisitions to evaluate how increasing the organization’s size would affect its total operation. It’s easy to be swept up in what looks like a wave of consolidation only to find that a merger was the wrong strategy. Sometimes, all you need is a good network. According to Adam Small, the founder of Strategic Business Network, “networking is the single most powerful marketing tactic to accelerate and sustain success for any individual or organization!”  The Choice Network operates as a catalyst to ensure you meet the “right” people to include in your network and have the conversations you need to have to be recognized as an essential part of the clinical care team for the patient populations we serve. You don’t need to take drastic steps when you have options.  Once you take a look at your own performance using the metrics described above, you will be better prepared to determine the right course for your future.

 

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