September 3, 2022
CEOs and CFOs of independent medical groups will generally agree on one thing: it is a full-time job to run a profitable practice.
That said, physicians are investing millions of dollars in their medical buildings and expecting those same executives to manage and coordinate not only the operation of the practice, but also the property. And not just items impacting the practice as tenant, but also all the issues related to ownership and even new construction. When those executives are faced with a decision as to where their attention is needed most, it correctly turns to the practice. After all, that’s what brings in the money and pays the rent.
Subsequently, the real estate investment often does not get all the attention it deserves and, for any number of reasons, underperforms. That’s not to say it doesn’t make money, but it could provide a greater return on the doctors’ money and do better at establishing important intangible benefits such as the creation of practice glue and improved recruitment. The bottom line is that with millions of dollars being invested in the real estate by the doctors, they cannot afford to let that happen. Particularly given these investments can act as a source of phenomenal wealth generation for the owners and may be regarded as one of the best potential perks afforded to independent physicians.
That said, C-Level executives have only so much bandwidth which must first be devoted to the practice; the engine that is driving the train. Is acceptance of the status quo an acceptable solution? Focusing on what makes you the most money might be the best management decision.
Let’s look at Amazon for a possible solution. Despite its extraordinarily high employee turnover, it is often listed as one of the best managed companies in the world. Just because its online stores are the greatest revenue source – totaling ~$66 billion in Q4 of 2021 – doesn’t mean it neglects its subscription services which totaled just a measly ~$8 billion in the same quarter. Amazon has managed this segment to its optimal capacity. The fact is, there are intricacies between the ownership of the practice and its real estate facility that will directly impact the practice performance and must be managed as much as the practice itself.
It takes not only time but also expertise to devise a strategically engineered entity and operating agreement to function for the maximum benefit of the practice, generating attractive returns and sustaining itself through properly planned and funded buy-ins and buyouts. So, while it’s possible to let these investments keep ticking along in the background, why receive a 5% return on your equity when you could be receiving 15%? Why build up equity if there’s no way of easily accessing it upon retirement?
Yet executives generally don’t have the bandwidth to analyze and implement the corrective actions necessary to enhance these investments for the physician-owners. This is where outsourcing items that aren’t your core competency can come into play. Many groups have the misconception that working with an outside expert advisor, such as CMAC, will take a substantial amount of time. The reality is that a good advisor understands that their role, in part, is to make sure that the executives don’t take extra time away from their practice, while bringing the added bandwidth that’s needed, in this case to the real estate.
CMAC has found that practices that are willing and want to ensure their real estate investments are the highest performing assets only need to invest a relatively small amount of time to provide us enough information. We take it from there, providing and implementing a set of solutions unique to the practice.
After working hundreds of practices from across the country, we have developed solutions to challenges that many practices face, avoiding the need for groups to reinvent the wheel. It really is no different than bringing on a new employee.
While it may initially take time to bring them up to speed, it shouldn’t take long before they’re reducing your workload and improving your output. When you work with CMAC, you get the extra bandwidth to enhance your practice’s real estate investments.