Top 10 Ways To Destroy Your Practice - DoctorsManagement Top 10 Ways To Destroy Your Practice - DoctorsManagement

Top 10 Ways To Destroy Your Practice

By Mark Lowe, CBHC, EA, Senior Management Consultant

The title of this article should get your attention. No one in their right mind sets out to destroy their medical practice. But over the years, we at DoctorsManagement have developed a top ten list of behaviors that lead to a practice’s near-certain failure.

Review these ways to fail and see how many of them could be attributed to your practice, to one degree or another. Be honest!

  1. Failing to establish and maintain appropriate boundaries with your employees. Often one of the major personnel problems in a medical office is caused by either failure to set appropriate boundaries or inappropriate boundaries with employees. Common examples include playing favorites and trying to be friends with staff members. A physician in the office is looked up to as a leader and, first and foremost, should be a boss. All other relationships should be secondary to the primary relationship. Another common problem is the “front” versus back” mentality. Because clinical staff members often spend more time with the physicians than office staff members, there is a perception that the clinical staff members are closer to the doctors. While this may be true, steps need to be taken to show the front office that there are no favorites in the office. One of the biggest problems concerning inappropriate boundaries relates to the development of inappropriate relationships between a physician and a staff member. Oftentimes these relationships begin very innocently and start as emotional affairs before progressing to a more serious level. These types of relationships are toxic in the work environment and can result in the destruction of a medical practice and in litigation.
  2. Failing to plan for payroll taxes/personal income tax. As most physicians are aware, the duties of an employer require that you withhold payroll taxes from your employees’ pay. As part of these duties as an employer, you must match the Social Security and Medicare tax withheld from your employees’ pay. This currently amounts to 7.65% for most employees. Because the money has largely been withheld from employees’ pay, the Internal Revenue Service essentially considers failure to remit these funds in a timely manner as theft. There are substantial civil and criminal penalties for not timely remitting these monies. One of the quickest ways, from a tax standpoint, to have your medical practice closed is to not pay your payroll taxes in a timely manner. Another common source of practice disaster is failure to appropriately plan for personal income tax liability. Your consultant or accountant should review your tax situation at least quarterly and make adjustments as needed. If your advisor does not discuss this with you at least quarterly, it would be recommended that you contact them to avoid surprises.
  3. Paying yourself first and bills last (or not at all). The most important economic reality of running a private medical practice is that bills must be paid first and that the remainder of income is what is available to pay physicians. Unfortunately, more medical practices than you would believe employ the exact opposite method. Physicians are paid first and then the practice scrambles to find a way to pay bills. Obviously this is a recipe for disaster and cannot be sustained on a long-term basis.
  4. Hiring the cheapest staff members you can locate. In generations past, medical practices often hired fairly inexpensive and untrained people to help run their office. Over time, with some training and good intentions, many of these employees became adequate. However, in today’s medical business environment, extremely smart and educated people are required. Your employees are your greatest resource and it seldom pays to try to hire the cheapest individuals you can locate. Many times your staff members will spend more time with patients than you will. First impressions are very important. It is extremely important to check references and perform a background check on all employees. It is also recommended that you consider performing a personality profile on the employee to see how they match up against the job description.
  5. Lack of planning for disability and/or death. One of the quickest ways to go out of business is failing to have appropriate insurance coverage. We recommend that physicians, as early in their career as possible, obtain the maximum amount of personal disability insurance coverage and overhead disability coverage. These coverages should be with a highly rated company and have an “own occupation” definition of disability. Of course, adequate life insurance is extremely important as well as having a good estate plan in place including a will and revocable trusts. A letter of instruction to your survivors is also recommended to ease this difficult time. While everyone’s needs differ, a general rule of thumb concerning life insurance coverage is a minimum of 10 times your annual income.
  6. Trusting all of your employees completely with no “checks and balances” built into your office routines. It is human nature to want to trust people. However, a medical practice is a business and must be run as such. Embezzlements within a medical practice are frequent. Background checks should be done on all employees and all employees should be bonded to cover any potential losses. The hallmark of a well-run medical office is a division of duties which would make embezzlement of the funds very difficult. No one can guarantee that embezzlement will never happen, as evidenced by frequent embezzlements suffered by major banks, but you can put steps into place that will dramatically minimize the risk.
  7. Failure to plan for retirement. Nobody ever saved too much for retirement. This maxim is very true. Another maxim states that you should never wait until you can afford to fund your retirement. The most important advice on retirement funding is it to begin early and fund as much as possible each year. There will be times when you do not feel you can afford to maximally fund your retirement. We highly recommend that you fund even during those difficult periods. You will be glad you did.
  8. Never updating your fee schedule or having financial policies in place. Surprisingly, many medical practices believe their professional fee schedule does not matter any longer because of their large amount of managed care business. While there is some truth to this belief, we have reviewed many practices where their fee schedule is actually below the managed care allowed amounts. This is simply giving away money. We recommend an annual review of your fee schedule and regimented financial policies on collecting funds to be in place.
  9. Having unrealistic work schedules. All work and no play will definitely make for a burned out physician. Conversely, too much play and not enough work will contribute to a practice that goes out of business. There is definitely a balance between work and play. Each person needs to determine the balance they want in their lives and structure their income to support this balance.
  10. Failing to take care of your physical/mental/spiritual health. Physicians are very good at advising others on how to take of their health. However, many physicians do not take good care of their health. It is very important to have your own personal physician. Being your own physician is not recommended by any expert. Everyone needs to understand their own goals and why they are working. What are you working toward? It is also important to have a close personal relationship with at least one or two people with whom you can talk about anything without judgment. Of course, the advice physicians give to their patients should also be followed, such as eating healthy diet, exercising regularly, not smoking and not drinking to excess.

If you see your practice following one or more of these steps, we would advise you to to schedule a meeting with your professional advisors to openly and honestly discuss these issues. Successful practices have made it their regular habit to avoid these basic but crucial mistakes in their business.

Mark W. Lowe, CHBC, EA ( The author is a Senior Management Consultant and Associate Director of Consulting at DoctorsManagement.