Medical school teaches medicine, but not the business of medicine.
“Business literacy is an emerging competency that’s necessary for physicians,” says Jeffrey J. Miller, M.D., M.B.A., chair, department of dermatology, Penn State Milton S. Hershey Medical Center. “Key business principles will help us take better care of patients, better manage our practices and will help us sleep better at night.”
Dr. Miller, who chaired a panel discussion at the March 2017 American Academy of Dermatology (AAD) Annual Meeting in Orlando, Fla., says that being good business people and good physicians are not mutually exclusive; rather, they’re intertwined. He offers four must-use business principles for dermatologists.
Among the most important business principles, according to Dr. Miller, is the art of teaming.
“In medical school, we don’t spend a lot of time on learning about how to create effective teams,” he says.
The dermatologist cites a New York Times’ article by Charles Duhigg as a reference for what M.B.A. students learn are key teaming elements.1
Two important principles for creating a successful team are: Give each team member a voice. And, recognize how others feel.
“What I’ve learned from working with many teams is that the best solution often comes from the person you least expect,” he says. “It’s often a frontline person, who might not have a leadership role or title in the practice organization, but they know what’s going on.”
A practice tip for giving team members a voice is to try “brain writing,” rather than brain storming. Instead of verbally communicating ideas at meetings, each team member first writes his or her thoughts; then the leader of the meeting asks individual team member to share his or her thoughts with the team, according to Dr. Miller. That way, no one person dominates the discussion and the introverts, who often need quiet time to gather thoughts, contribute.
Creating a successful team also requires that team members recognize how other team members feel. If a team member seems off, one would recognize the cues and ask if everything’s ok, or why that person seems uncomfortable with the meeting’s topic, for example. Recognizing other’s feelings also means detecting when things are going well and congratulating teammates.
“Seventy percent of communication is nonverbal. So, effective teams will be in tune with the nonverbal communication of their team members,” he says.
#2 The break-even analysis
Dermatologists who make investments in their practices, like buying a new laser, want to know if they’ll be getting a return on that investment. One of the easiest ways to calculate return on investment (ROI) is by doing a break-even analysis, according to Dr. Miller.
“With the break-even analysis you have to understand what your fixed and variable costs are. Your fixed costs stay constant despite the number of patients you see — your rent, personnel. Variable costs will change with the number of patients you see — for example, supplies. The technical definition of the break-even analysis is fixed costs over net revenue, which requires an understanding of your variable costs.”
A simple formula is: How much did this investment cost (numerator) and what is my return (denominator). An investment’s return is usually net revenue which factors in your costs.
“For example, we have a new excimer laser in our practice and we know that the monthly cost for this new laser is $2,000. So, I need to know what my net revenue is per treatment to at least break even. We have a net revenue of $140, so it was about 14 treatments per month that would allow us to almost break even,” Dr. Miller says.
The analysis lets dermatologists know if they’ll be able to cover the cost of an investment, in effect creating a “margin of safety.” The analysis also works on helping dermatologists decide whether to purchase advertising, add a new staff member or if it’s worthwhile to get a practice electronic medical record (EMR), he says.