When Democratic Physician Groups Fail

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Four common pitfalls for democratic EM physician groups, and the strategies you’ll need to survive and keep your contract.

Four common pitfalls for democratic EM physician groups, and the strategies you’ll need to survive and keep your contract.

Let’s start by defining the term “democratic” group. It is difficult to define since the term means different things to different people. For the purposes of this article I define a democratic EM group to be one in which:
(1) Every physician practicing full-time with the group is either an equal owner/partner or on the way to becoming one.
(2) All decisions are made by simple majority vote of the membership.
(3) There is no buy-in or buy-out for one’s partnership interest other than perhaps for a proportionate share of the accounts receivable.

The buy-in, if any, is typically managed through the sweat equity arrangement of a reduced compensation level for one to two years. By inference then, the practice is considered to have had no start-up costs, either economic or personal, no development or expansion costs, and no good will or going concern value. In other words, the practice, as distinct from its partners, has no value whatsoever. The newly minted emergency physician simply shows up with his stethoscope, is accepted into partnership, practices his profession for his allotted years, and departs. Nothing is invested; nothing is gained or lost. In this context the most successful democratic practices are considered to be those that minimize leadership and administrative costs in order to maximize physician take-home compensation without losing the contract in the process.

If this sounds too good to be true that’s because it almost always is! This democratic practice ideal exists, if at all, only in the minds of those who have never tried to create and sustain such a practice or for the brief period preceding the loss of the contract to a better led and-managed EM group.

This is not to say that there aren’t successful democratic EM group practices but rather that those that succeed and endure do so by recognizing the weaknesses of the ideal construct and devising ways to compensate for them. What follows is a discussion of the most significant of these weaknesses.

The Tragedy of the Commons
The greatest weakness of the democratic EM group model lies ironically in the one thing that most attracts the uninitiated: the equal ownership and power of the individual members of the group. This apparent strength becomes a weakness because it leads inevitably to the “tragedy of the commons” – a dilemma described in an article of that name written by Garrett Hardin and first published in the journal Science in 1968. The article describes a situation in which multiple individuals acting independently and rationally, and following their own self-interest, will inevitably destroy a shared resource even when it is clearly not in anyone’s long term interest to do so. When everyone owns something equally, each individual assumes to some extent that his or her co-owners will do the right thing and behave so as to protect the shared resource. Humans being human, however, means that while all will step forward for their equal share of benefit many will leave its protection and maintenance disproportionately to a few. The few, who by their personality makeup are driven to protect and maintain the resource, will gradually become resentful over working for everyone else’s benefit, generally without adequate recognition or compensation for doing so. Eventually they will burn out or passive-aggressively let the practice go to ruin to show the others the true value of their labors. Either way the asset is lost as the declining democratic EM group market share demonstrates year after year.

We see this phenomenon at work in democratic groups when individuals who are quick to call themselves equal owners or partners, but are slow to respond to e-mails, return phone calls or come to meetings. These same individuals typically avoid making other contributions to the group’s welfare such as service on a hospital committee, participation in nursing in-service education and meeting their minimum medical staff meeting requirement. We see it again when those who choose not to participate in protecting and maintaining the resource (the practice) then argue that those who do shouldn’t be paid the same hourly rate that they get to practice clinical medicine.

When the inevitable crisis arises, these “fair weather partners” have little interest in committing the time, effort or money needed to address the problem and wouldn’t know what to do even if they did. And so the contract management group (CMG) wins another contract almost by default. Worse yet, the hospital administration, having experienced the frustration, cost and complications of trying to work with a dysfunctional independent EM group, will not be willing to risk such a solution again for many years to come.

How to compensate for the “tragedy of the commons”.
-Give the practice some value so partners will have some “skin in the game.” Require a buy-in and pay it back as a buy-out. It can still be revenue neutral if necessary but putting money at risk means everyone loses if the contract is lost.

-Define partner/owner responsibilities, keep track of who is meeting them, and vary the owner distribution in proportion to who is carrying the burden of protecting and nurturing the practice.

-Pay your leadership at least as much as they could make practicing clinical medicine. There is no reason for them to discount their time when they possess a unique leadership skill set in addition to/on top of their clinical competence..Institute 100% productivity for all owner/partners. With a correctly structured productivity-driven compensation system the individual’s and the practice’s interests are aligned rather than opposed to each other.

The Tyranny of the Minority

The old doctor group joke says it best: “What do you call a vote of 9 to 1 in a 10-person democratic group? A tie!” The democratic group quite often can’t make a decision without unanimous concurrence. Or, the group changes its mind before the decision is implemented if someone has second thoughts. Such a situation means that it is often the least motivated or informed member of the group that controls the organization’s agenda and pace. The resulting loss of direction and momentum leads to the inability to respond appropriately to critical issues in a timely manner, thereby undermining the group’s organizational competence and putting its contract at risk.

How to compensate for the weakness of indecisiveness
-Adopt a shareholder agreement and by-laws that provide for tiered responsibility and authority. The whole group shouldn’t have to debate what to do/spend for ED nurse’s day as long as it is less than a pre-agreed amount. On the other hand, the whole group should debate and decide on whether or not to add a new owner or the definition of owner obligations and responsibilities to the group.
-Invest in helping your leadership learn how to more efficiently manage meetings and support them when they seek to limit repetitive or circular debate.
-Develop the ownership’s project management skills so that some portion of group leadership work can be done in small project workgroups with an action recommendation being brought back to the group as a whole.

Lack of Discipline

When everyone is equal who is to lead? Who’s to hold the other group members accountable for doing what they have committed to do? You can’t tell an owner what to do, right? Wrong! In every successful democratic practice someone has to be given both the responsibility and authority to lead, to make binding decisions on behalf of all of the group’s members, and to hold individual group members accountable for doing what the group has decided it will do. “You can’t tell an owner what to do” is a common democratic group refrain. Without the power to enforce discipline and the backing of a majority of the group when a hard decision is made the group leader’s job is made untenable and is both a waste of the leader’s time and the group’s money. Democratic EM groups are notorious for their failure to adequately discipline themselves.

How to compensate for a lack of discipline
-Establish a robust governance and discipline structure that supports the leadership and protects the group’s interests.
-Take the time to define and write down group owner responsibilities and behavior expectations. Whenever possible identify an objective metric to measure adherence to the established criteria.
-Define consequences for repeated failure to meet owner/provider expectations and enforce them evenly across the group.
-Put your money where your mouth is. Pay fairly for what contributes to the group welfare and penalize behaviors that are destructive to the group’s interests such as being late to work, failing to complete charts on time, refusing to follow group-adopted protocols, etc…
-Develop written policies with escalating consequences for not meeting them..Back up your leadership when they do what you have instructed them to do.

Being a “Knower” vs. a “Learner”

Democratic EM groups frequently suffer from two mutually reinforcing misconceptions. First, that all non-physician business administration is parasitic, and second, that intelligence is always a ready substitute for specialized management knowledge and experience. Too many groups use physicians in administrative positions that would be better and more cost effectively filled by non-physicians. The problem is not that physicians aren’t smart enough to be the best coder or recruiter or benefits administrator that ever was, but rather that they don’t know what they don’t know about the particular administrative area because they have no basis of reference and because they can’t devote their full attention to these jobs.

Fred Kofman, in his book Conscious Business, talks about the distinction between being a “Learner” and a “Knower.” All physicians are programmed to be “knowers,” probably from an early age. The pressure to deny your own limitations and know the right answer in medicine is at times near overwhelming. What makes us good physicians hampers us in business because good business management requires that you acknowledge your own limitations and seek help when it’s appropriate, and that you be constantly open to new ideas and change. Being a “Knower” means having all the answers or at least appearing as if you do. Being a “Learner” means publicly acknowledging that you don’t.

The best compensation for this weakness is to seek to utilize full-time non-physician specialists in each area of practice management to the greatest extent possible. Leadership requires that the leader “know” there is a better way and be able to communicate that vision to the emergency department team. Physicians should lead and delegate management tasks.

Management’s job is to maintain the status quo as inexpensively as possible while being constantly open to changes in the field and new ways of doing things. Leadership’s job is to anticipate change and guide the organization’s adaptation to it. The group’s leadership should be giving management new marching orders at least once a year following the ownership’s annual strategic planning session. Don’t fall into the trap of letting the EM group’s members shirk their leadership responsibilities because management tasks are so much easier and comfortable for them to do.

Mission, Vision & Values

Long term organizational success starts with clarity about your mission (your reason for existing), your vision (what you aspire to become) and values (the values you will uphold as you seek to achieve your vision). The second of Stephen Covey’s 7 Habits of Highly Effective People is to “begin with the end in mind,” but few EM groups, democratic or otherwise, take the time to define themselves and their aspirations. Is it any wonder that they then have trouble succeeding when they haven’t defined where they are going, why they want to go there, and what they will expect of their members as the journey unfolds?

The strongest EM groups take the time to define their mission, vision and values and work to keep them alive in the organization. This as much as any of the other compensating measures will keep your group from floundering in indecision and bolster you in making the hard decisions that assure the continuity of your business.

Ronald A. Hellstern, MD, FACEP is a principal and senior consultant with Medical Practice Productivity Consultants, LLC, Dallas, Texas. He can be contacted at rahellstern@earthlink.net

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  1. Ron i sent the response independently, but a great job and i will use some of this stuff in my Wellness lectures in our residency program at Cook County Hospital(Stroger) My wife Jamie Collings is likewise the director at Northwestern. And we discuss this tasteless and boring topic at nauseum since it effects and prolongs my career while others in the group , get “compensated”.And i am the “equal” partner. !!!!!

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