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The coronavirus has created a challenging environment for all dermatology practices. Todd Petersen, CEO of VitalSkin Dermatology, discusses how to make the most of a bad situation by using telemedicine, making plans to reopen and performing a strategic review of your practice.
Todd is the Chief Executive Officer of VitalSkin Dermatology, a world-class dermatology and aesthetics practice management firm., Mr. Petersen has over two decades of C-suite experience, including CEO, COO, CFO, and CHRO roles. He is a growth expert with a passion for new entrepreneurial challenges, revenue growth, improving operations, and building teams and partnerships.
The coronavirus has created a challenging environment for all dermatology practices. After all, most are suffering through significant patient visit declines, or have shut down altogether. The adage by Sir Winston Churchill, "Never waste a good crisis," applies to our current situation. But to come out of this crisis stronger, we’ll discuss how to make the most of a bad situation by adding telemedicine, getting prepared to reopen, and performing a strategic review of your practice. Let's create a checklist you can use to explore all aspects of your dermatology practice.
Add Telemedicine to Your Practice
Embrace telemedicine. Many practices have already made a hard pivot toward telemedicine. Indeed, some have converted as much as 30% of their schedule to telemedicine visits. During this period of social distancing, telemedicine allows a physician to provide care for their patients and still keep the "lights on" in their practice. Since adding telemedicine will help you serve patients now, and to keep revenue flowing to the practice, we suggest this being your first priority.
In mid-March, the Department of Health and Human Services Office of Civil Rights and the Centers for Medicare and Medicaid services relaxed privacy and payment regulations to encourage telemedicine visits, now reimbursing them at the same level as office visits. Taking a longer-term view, many believe the COVID-19 pandemic will permanently transform the health care delivery system, and telemedicine will become a permanent mode of treatment. Telemedicine can also help you connect with your patients in a way that might make your practice more inviting, allowing them to feel more comfortable with you and your practice in the future-both of which are good for business.
Get Prepared to Reopen Your Practice
Focus on supply chain management. To reopen your practice, you’ll need to procure new supplies of personal protective equipment (PPE) to safeguard you, your staff and your patients. Supply procurement may be the most significant limiting factor that keeps practices from reopening. As you look to secure needed supplies, you may find your old sources are no longer sufficient, and you need to spend time finding new suppliers. You may also find the costs for PPE have dramatically increased. Larger practices have teams dedicated to supply chain management, and are currently solving this constraint. For smaller practices, we suggest getting to work on this issue early by contacting your current supplier, connecting with competing suppliers, and networking with other physicians on the topic. Checking with other physicians may help you to find new sources for PPE, as some practices have found new sources of PPE in China.
Replenish working capital. Your practice will need an adequate amount of working capital to restart or ramp your practice back up. If your practice is like a lot of others, you lost money during this extended slow-down, and the financial loss has depleted your working capital. Working capital is the difference between current assets and current liabilities. Current assets include assets like cash, accounts receivable, inventory and supplies. Current liabilities include accounts payable, payroll payable, short-term loans and the portion of long-term bank loan payments that need to be paid over the next year. If you are like many practice owners, you moved quickly to furlough some or all of your team members to conserve your working capital. However, this by itself will not preserve the critical assets.
As your accounts receivable are paid down from Medicare, payors and patients, you probably have been able to keep up with most of your overhead payments in the past. However, depending on your practice location, you are now 30 to 60 days into the slow-down caused by the pandemic. This means future cash flow from your accounts receivable will be minimal until your accounts receivable balances are built back up, and a normal cash cycle is reestablished. Therefore, your primary source of cash is coming to an end for a period of time. However, as your practice begins to ramp back up, it has to have the working capital from other sources to meet your short-term obligations like rent or mortgage payments, payroll, standard accounts payable, etc.
Fortunately, there are multiple sources to obtain additional working capital. First, start with the new Coronavirus Aid, Relief, and Economic Security (CARES) Act, which provides five different sources of additional working capital for your practice. These sources are as follows:
Second, practices can reduce or eliminate draws or payments for their partners for a reasonable period of time. Usually, these payments are a practice's most significant use of working capital, and by eliminating or reducing these payments, the practice can substantially reduce the loss of working capital.
Third, lease payments are often the next biggest expense for a practice behind owner and staff compensation and benefits. If you lease your practice location, we suggest negotiating new terms with your landlords. In this environment, landlords appreciate quality tenants with historically successful businesses. Finding new, quality tenants is difficult and risky. Approach your landlord and propose a three month rent abatement while your practice is closed in exchange to a lease extension. This can be a win-win arrangement for both of you.
Fourth, practices can make a capital call from its owners/partners. An injection of new capital from the owners'/partners' personal savings can be an immediate source of new working capital.
Fifth, successful practices can approach a commercial lender for a line of credit secured by the assets of the practice or a personal guarantee of its owners/partners.
Evaluate the quality of your team. This is a perfect time to evaluate the quality of your team members. We recommend you use a tool like "nine-box matrix" to help you to evaluate each one of your staff members. The bottom axis of the matrix ranks each employee's performance in three boxes; high performer, average performer, poor performer. The vertical axis of the matrix ranks each employee's potential in three boxes; high potential, average potential, and low potential. Employees in the upper right quadrant are your most valuable employees; they are high performers with high potential. The employees in the bottom left quadrant are your least valuable employees; they are low performers with low potential. When considering who to furlough or who to bring back when the business starts to pick up, this evaluation will help you prioritize your decision.
Focus on your organization's culture. While there is no one right way to build organizational culture, the best organizational cultures are nurtured every day. This shutdown can be an opportunity to step back, and with your team determine what cultural changes you should make. In order to remain connected with team members during this period, consider setting up a private Facebook group, group text message, or similar communication medium. Perhaps you could consider hosting a regular, virtual happy hour with your staff to stay connected and have fun during these stressful times. Facilitating such communication will allow you to develop culture further and engage more. When it’s time to ramp up again, your people will appreciate the connection you kept with them, and be more likely to return and rally around you.
Complete your annual CME. If you still need to complete your CME requirements for the year, we suggest you use this downtime to find virtual CME courses to satisfy your annual requirements, and continue to build your skills. When it comes time to ramp your practice back up, you won’t have to take the time to complete your CME. Instead, you can be laser-focused on rebuilding your practice.
Conduct a Strategic Review of Your Practice
Revisit your mission statement, vision statement, and values. Any strategic review of your practice starts with a review of your practice's mission statement, vision statement, and values. Your mission statement should help you identify your core customer, define your business, and articulate your practice's purpose. Your vision should help define your long-term objective to help with internal decision-making. Your values should help you determine how you achieve your mission and vision. Together, a well-considered mission, vision and values statement help you select and retain like-minded team members and improve their commitment.
By way of example, VitalSkin Dermatology's mission statement is: "VitalSkin Dermatology is a world-class dermatology and aesthetics practice management organization built from the ground up to align with the clinical, financial, and lifestyle priorities of its partner physicians." The mission statement identifies our core customer, our partner physicians. It also defines our business as “ A dermatology and aesthetic practice management organization.” And it represents our purpose: “To align with the clinical, financial, and lifestyle priorities of our partner physicians.” VitalSkin Dermatology's vision statement is to support 150 partner physicians by December 31, 2030. This provides us with a simple, long-term focus to guide our internal decision making. Our values statement is: As a company and as individuals, we serve our partner physicians every day by having fun, being a team, being resilient, being accountable, being courageous and being entrepreneurial.
Revisit your strategic plan. A strategic plan should be developed every three years and revisited and tweaked every quarter. McKinsey Consulting defines strategy as a set of integrated, hard-to-reverse decisions made ahead of time in the face of uncertainty to create and capture economic surplus. Before embarking on a strategic planning process, spend time framing your problem statement. When VitalSkin Dermatology embarked on our strategic planning process we were wrestling with the following problem statement: "The challenge at hand is to define a market penetration strategy in the dermatology and aesthetic practice management space that differentiates us from large physician-owned and private equity-owned group practices, and provides a compelling value proposition to our partner physicians."
After you develop your problem statement, start to identify all your strategic choices. To organize your big decisions, start by asking the following questions:
In Jim Collins' book, "Good to Great," he suggests that a great strategic plan answers the following three questions:
If the answer to these three questions converge, then you have a compelling and winning strategy. He referred to a company's answer to these three questions as a company's Hedgehog. At VitalSkin Dermatology, we believe we can be best in the world at aligning with our partner physicians, we are passionate about serving our partner physicians, and the number of partner physicians we serve drives our economic engine. The answer to these three questions all converges and focuses on our partner physicians.
Marketing Strategy. A great marketing strategy requires you to define the market segments you are going to serve. Market segmentation requires you to divide the broader patient group into subgroups or archetypes based on shared characteristics. The best market segmentation considers the behaviors and attitudes of patients. Unfortunately, this level of insight requires sophisticated research methodologies that many practices cannot afford to conduct. As such, many practices segment their patient populations into more generic patient segments like age, gender, payor (Medicare, FFS, Medicaid, etc.), geography, etc. No practice can adequately serve every market segment, because each segment has competing needs and desires. Therefore, you must pick and understand the market segments you are going to serve.
Once you choose those market segments, you can develop a comprehensive marketing plan. Now, with your market segments defined and selected, consider revisiting how you are currently marketing your business, and where marketing other aspects of your business-or marketing via different channels-may create more value. If you haven't embraced social media, now could be a great time to refresh your profiles and plan content for the coming months. With patients most likely quarantined too, you can imagine they are getting lots of screen time, making it the prime time to step up your social game.
One word of caution: in these difficult times, it can be easy for businesses to forget just how their communities are hurting. If you sell too much, you'll likely alienate your audience-including patients who have previously been supportive of your practice. Instead, focusing on positive things your practice is doing or can do for the community is a more effective tactic.
Update your digital footprint. Your website, Google Business, and Yelp listings are great places to start, but you will likely also want to review your social media pages. Ensure that if COVID-19 impacts your services and hours, you make those updates. It's also essential patients know how to contact you if they have an emergency. Consider sending an email to your patient base or including a separate statement on your website with instructions for emergency contact. Making contact seamless as possible for your patients while closed will help you remain engaged with your patients.
Focus on building community. Use this time to focus on building community connections around your practice. With record unemployment, people notice businesses that are there for them instead of merely there for their money. Look at ways you and your team can help in your local community, and you may be surprised at the rewards your business receives in the future. Patients come to you for many reasons (such as the services you offer or your price points in comparison to other service providers). However, there are likely to be more patients who want to support businesses that are part of their local community. Not only is being there for your local community the right thing to do, but it's good business practice, too. There's no better time to rededicate your practice to being a community partner than in times of crisis like now.
Let's not waste a good crisis. Let this list be a starting point for you to reflect on what you can do today and tomorrow to ensure that you are in the best shape possible. And don't be afraid to ask for help - we‘re all in this together!
Over the next several weeks, Todd will continue to share valuable insights as to what dermatology practices can do to make the most of this unprecedented time. He invites you to register for VitalSkin’s newsletter and to visit VitalSkinDerm.com regularly for ongoing information directly relevant to dermatology practices during this unprecedented time.