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Cover Focus | May 2016

Medical Practice is Not Business as Usual

Physician leadership is vital to patient care.

Profits are the lifeblood of every business—and medical practices are businesses. Medical practices provide services and receive payments for doing so. They make profits and rely on those profits to survive. (Practices in government-run medical systems also rely on profits, even when some of the revenues come from government subsidies.) But, although they are businesses, medical practices are fundamentally different from most other businesses: They exist to provide a structure that allows committed, highly trained professionals to deliver services to people who need them.

AT A GLANCE

• Physician-CEOs create enterprises to serve patients first and see profits as a means to further that mission.

• Physicians recognize they work in inefficient systems, but many feel they do not have the time or power to change it.

• The reality is that business training is accessible, and physician leadership in medicine is desperately needed.

The raison d’être of a medical practice is to deliver care to its patients. Profits are not the primary goal of medical practices—rather, profits serve to provide resources that enable the professionals to offer more and better services to their patients.

Conversely, profits are the primary purpose of most commercial businesses. Investors provide money to businesses in hopes of generating return on their investment. If these businesses do not provide profits, investors take their money elsewhere. In these types of businesses, the nature of the business activities is of secondary concern. In fact, commercial businesses often modify their products and services to drive profitability.

THE RIGHT LEADERSHIP

In medical practices, profits support the purpose. In most other businesses, profits are the purpose. This difference is fundamental and profound. It is important that those who work in medicine understand it so that they can establish the right business model and select the right leadership to support their goals. Because medical practices require leadership with expertise in both business and medicine, these businesses should be led by physician-chief executive officers (physician-CEOs).

In many ways, physician-CEOs and nonphysician CEOs are alike: Both are trained in business and understand leadership, strategy, marketing, operations, and finance; both lead rather than manage by setting the vision, defining the brand, establishing the culture, and setting expectations; and both oversee their managers, set strategic alliances, and guard the futures of their businesses. But physician-CEOs differ from nonphysician CEOs in one crucial element: They are physicians. As physicians, they put patients before profit, and they are attracted to their profession because of purpose.

This is not to say that physicians and others who work in medicine are not interested in achieving a good income. Nor does it mean that medical practices should not be profitable. But, unlike nonphysician CEOs, physician-CEOs create enterprises that serve patients first and seek profits second in order to further that mission.

THE Requisite SKILLS

Business training has been deemphasized in physician education. Consequently, most physicians do not have the requisite skills to be CEOs. Today, many practices have nonphysician leaders who may put profits above all else. This is to be expected; most business schools teach that profits are the primary purpose of a firm and that businesses should be run to maximize shareholder profits. Tragically, business people often run medical practices like commercial enterprises and ignore the reason why the practice exists. This can corrupt the practice culture, leading to diminished quality of patient care and services, particularly in systems in which patients are not the customer: that is, in which patients are not directly paying the bill.

Medicine has become big business. The health care industry in the European Union varies from country to country, but, on average, 8.8% of each country’s gross domestic product is being spent on health care.1 That is a huge amount of money. Many nonphysician stakeholders in the medical system—big pharma, manufacturers, hospitals, and even some payers—make greater profits when the industry becomes more expensive.

Business people respond to financial incentives. It is no wonder the medical system has become bloated.

PHYSICIAN LEADERSHIP NEEDED

Ask any physician why medicine is so expensive and he or she will cite bureaucracy, waste, algorithm-driven medicine, unproven technologies, unnecessary treatments, and malpractice risk among the reasons. Physicians recognize they work in inefficient systems, but many feel they do not have the time or power to change it. Physicians respect expertise, and their lack of business training causes them to cede leadership to those who have it. But the reality is that business training is accessible, and physician leadership in medicine is desperately needed.

Medical practices exist to serve patients, and medicine remains an honorable career path. That medicine draws talented and highly achieving students speaks to the purpose-driven professionals who work in medicine. Most medical professionals could have pursued other careers to gain more personal income with less effort, but they chose medicine. Therefore, it is the people who work in medicine that make perhaps the greatest distinction between medical practices and commercial enterprises.

Medical practices are different from purely commercial enterprises, but ceding control of medical practice to business people risks losing that differentiation. Physician leadership is needed if we are to maintain patient care as the primary purpose of medicine.

1. Overview of the European Union. Emergo Group, 2016. http://emergogroup.com/resources/market-europe. Accessed March 29, 2016.

Guy M. Kezirian, MD, MBA, FACS
• President, SurgiVision Consultants
• Member, CRST Europe Global Advisory Board
guy1000@SurgiVision.net
• Financial interest: Owner (SurgiVision Consultants), Founder (Physician CEO program, Kellogg School of Management, Northwestern University; Refractive Surgery Alliance)

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