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If we do not evolve ... we will soon be an extinct species of medical practitioner, Dermatology Times Editorial Advisor says in his column this month. He shares his experience and considerations with negotiating the sale of his practice to a venture capital backed firm.
In a recent editorial in Dermatology Times, my friend (and one of our most outstanding former residents), Dr. Zoe Draelos cautioned against the onslaught of the emerging paradigm of practice management, venture capital-funded dermatology practice acquisitions.
She bemoaned the fact that this business model may lead to a loss of control over the humanitarian goals of medicine because of the profit-driven motivation for forming these business relationships. She cites examples of dermatologists being recruited to join medical spas as proof that corporate America may change the way that traditional dermatology will be transformed.
I have a different view of the state of dermatology and its rapidly evolving landscape:
First, the profit motive took center stage in our specialty long before venture capitalists entered the medical arena. The emergence of cash-only businesses, such as cosmetic dermatology, and the advent of sophisticated advertising demonstrate a shift from humanitarian instincts to business interests.
Second, entrepreneurial physicians have been starting medical spas and other entities not previously considered within the realm of dermatology.
Possible control over our professional lives is a real issue. One of the joys that I have experienced in the years since leaving an academic environment is that I am now responsible for myself, and I do not have others dictating how I run my professional life. However, times are rapidly changing.
In a recently published book, “Thank You for Being Late,” Thomas Friedman argues that because of the incredible technical innovations occurring in the past 10 years, those who do not “run faster” to adapt will most certainly be left behind. For example, car services such as Uber and Lyft which own no cars, but are in the process of making taxi cabs obsolete because of their use of advanced internet technological innovations.
Medical practice has evolved significantly in the past decade. New and complicated insurance plans, regulations and rules have made American medicine almost unrecognizable. Who could have imagined the need for insurance approval to prescribe fluocinonide cream, regulations that mandate the use of electronic medical records, or requirements for additional reimbursement to be dependent upon one taking the blood pressure measurements of dermatology patients.
As the owner of a small practice, I am close to being unable to navigate these changes.
Enter venture capital-backed entities interested in buying my practice. Several months ago I began conversations with one such company. They have offered to purchase my practice and I will eventually become an employee of the new firm. I will be able to continue to practice in the same way that I always have. It will not insist on my adding revenue-enhancing procedures to the list of services I offer, and it will not change which insurance carriers contract with my practice (it will, however, try to negotiate more favorable terms). I will be able to refer my patients to Mohs surgeons and dermatopathologists of my choosing. My employees will all remain, and this firm intends to hire additional ancillary personnel to streamline the practice work flow. At my suggestion, it plans on leasing additional space adjacent to the present office to expand our operations.
I fully understand the company is buying the practice as a means of generating profits. However, my sense is that the business model is one where it can increase the value of a practice by promulgating an environment of medical excellence and efficiency. It will likely attempt to acquire additional practices in our community to achieve economies of scale to increase profits further.
After performing due diligence, which included talking with dermatologists in other practices which have been acquired by the company, I feel very comfortable moving forward. As of now, an almost incomprehensible contract is in the hands of our lawyers. If the details can be resolved, I will likely sell my business.
What am I sacrificing? I will lose some independence in decision-making. No big business change will take place without the direct involvement of a practice manager who will answer to the company rather than to me. However, I will also give up many minor hassles that are an integral part of running the operation - everything from being called during the night after the burglar alarm sounds to dealing with the theft of toilet tissue from the bathrooms. I will acquire a measure of security in the rapidly changing medical delivery landscape. Presumably this larger enterprise will have the experience and expertise necessary to survive changing times.
There are many uncertainties facing small private practices. However, there is one absolute certainty, if we do not evolve with the times, we will soon be an extinct species of medical practitioner.