Join us as we explore the dynamic world of private equity firms and their foray into healthcare operations. While the focus is typically on the potential for significant profits in acquiring healthcare businesses, we must also examine the critical need to acknowledge and manage the inherent risks.
Continuing our conversation surrounding the ecosystem of private equity in healthcare, our expert guests – Executive Consultant Monty Pate and Vice President of Practice Operations, Angie Howard – delve into the intricacies of a scalable future state covering all the twists and turns in the “the future state roadmap” that methodically integrates people, process, systems, and technology.
With a focus on fostering successful and mutually beneficial partnerships, this episode – hosted by Rebekah Duke – equips listeners with the knowledge to better strategize for healthcare portfolios. For the healthcare professional, an investor, or industry enthusiast, this episode offers perspectives on private equity acquisitions in healthcare that you won’t hear anywhere else.
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Full Episode Transcript
Medical Advantage Podcast: Welcome to the Medical Advantage Podcast, where you can hear healthcare professionals, expert consultants, and industry thought leaders discuss the exciting new ideas and technologies that are changing the business of healthcare. Tune in to each episode as we hear from some of the most innovative minds in medicine about the future of healthcare and how your organization can stay profitable, efficient, and on top of industry best practices.
Rebekah Duke: Welcome back to the Medical Advantage Podcast, as promised we are back with part two of our private equity series. Again, I’m Rebekah Duke, your host. In part one, we discussed what the coming together of private equity and its medical business acquisitions looks like, what consultants are prepared to do to make ventures successful and all the many intricacies of full scale evaluation of healthcare entity being invested by private equity. When you have as much experience as our Monty Pate and Angie Howard, you have a lot to say about the interplay of private equity and healthcare. So what’s next? Today’s installment zeroes in on the future state. Welcome back, Monty and Angie.
Montgomery Pate: Thanks, Rebekah.
Angie Howard: Thank you, Rebekah.
Rebekah Duke: Thank you. So the roadmap for more valuable, scalable, future state. I think most people understand the concept, valuable. However, the term scalable is a word we don’t hear as much. Monty, please get us started. Can you elaborate on what the word scalable means in terms of PE in healthcare?
Montgomery Pate: Yeah, certainly. Scalable refers most often to the ability to grow from a healthcare perspective. This can mean the ability to accommodate more patients, more providers, additional service liners. And this is one component of a medical system’s value. And as we said at the beginning, private equity firms are seeking to increase the value of their business assets.
Rebekah Duke: Now, with regard to the more valuable and scalable future state and your experience, how have your teams helped medical groups get there? Angie?
Angie Howard: So a lot of times it’s partnership, so we partner with the medical group to help understand where they’re struggling or where maybe they need the assistance. A lot of times these folks just don’t have the time to take on new projects, you know, they’re busy in their day to day. So we partner with the medical group or we partner with the private equity group just depending on who are target is.
And then as far as to future, the future state roadmap. As it was previously mentioned, it’s an ecosystem that encompasses the human element., So people. In a manner in which they’re accomplishing their work, the process. And the tools they use in order to get the job accomplished. So systems or technology we call this our people, process, technology roadmap. And each of these elements are dependent to some degree on the other. Do you have anything to add?
Montgomery Pate: Well, certainly I would point out that wrapping around all of this is the organizational culture, which impacts a medical group’s ability to embrace the change. You can have a great plan backed by massive amounts of due diligence and capital investment, but it can quickly fail if the organization’s culture is not receptive.
Rebekah Duke: Elaborate on each of the elements Monty.
Montgomery Pate: Creating that roadmap for a more valuable, scalable future state includes, as we mentioned, the people process and the systems. Now, I’ll start with the people portion of that. This involves the number and alignment of staff or FTEs, which stands for full-time equivalents that are internal and external to the organization.
And to give you some perspective, a report from Kaufman Hall Consulting Group 2022 stated that 63% of healthcare systems have pursued at least one outsourcing solution, and the most common are within the revenue cycle. So the questions to ask when you’re looking at staff, when you do get to a place where you’re fully leveraging your future technology or even fully leveraging your existing technology at that point, what will be the true manpower needs?
And if you remember, usually when there’s a problem or an inefficiency, you tend to throw staff at the problem. So what will your staffing needs truly look like when you are at a more optimized state? How does the organization stand against national benchmarks? And also does it make sense to utilize in-house staffing or external agencies for each specific function? And I’ll say there’s no cookbook answer. Each situation is absolutely unique, and this is why a partnership approach with a medical group is so vitally important.
Next I’d mention defining and standardizing roles, responsibilities, and accountabilities within job descriptions. Over time as healthcare systems grow, you know, we talked about variance, process variance, previously the same happens with job roles and job definitions. They can begin to vary between clinic groups, geographic locations and the like. So it’s important that variance is minimized when it comes to how specific roles are defined in order to be able to effectively manage staff and measure performance.
Next I will mention a hardwired training cadence for providers and staff that is essential to ensure that the organization stays up to date on best practices, maintains compliant processes. Billing and coding are great examples of that, and to ensure that the enterprise culture is continuously reinforced.
I’ll also mention the need for provider and staff champions for each initiative. So for whatever you’re attempting to, you must identify and engage the stakeholders at the beginning of the process. Some questions to ask, who will be impacted? Who owns the process currently, and who has the subject matter expertise to help guide the decision-making?
These are all questions that must be addressed, but once the stakeholders have been identified, engage them by explaining the why behind the change and solicit them to really be partners who are needed to drive the process.
Now within the stakeholder group, you’re gonna find your initiative champions. And when I say champions, these are individuals who go the next step by engaging with their peers in a supportive way to explain the rationale behind the initiative as well as the anticipated benefits to the organization. And conversely, the negative consequences as a result of failure to act. So be sure your providers are included as champions for any initiative. Even if on the surface it may appear that providers will not be directly impacted by the change.
A word about process as we transition into the second element here, make sure that you are leveraging your data and your KPIs. This was mentioned in terms of current state and short term performance, but it’s also a part of a longer term strategy. It’s imperative that staff members not only have the visibility of their performance metrics. But the culture must be one that provides the latitude to the leaders at all levels to leverage the data into strategies needed to address performance.
That means correcting suboptimal performance or reinforcing good performance. Data is most valuable when it’s put to use, and I found from my experience that a real sense of ownership amongst staff members is essential to ensure that that data is translated into action plans.
Angie, what are your thoughts?
Angie Howard: I would add that the manual processes that practices pick up throughout, you know, time, oftentimes they become suboptimal, these processes because they’re trying to do a workaround, right? The system isn’t doing what they want it to do. Maybe they weren’t trained properly, so they start to create these manual processes.
Sometimes they don’t trust the data, so instead of using the system to report out, they’ll use spreadsheets and that sort of thing. So is the data trusted? Not always. And that’s why these manual processes come into play. Or maybe the legacy process is they’re using this legacy process because they’re failing to adapt the new automated solution.
And again, that’s a lack of training and trusting the data. So what we see is organizations require multiple sign-offs in order for the action to move through the system. And this is applying proper technology training and governance solutions. These can contribute to long-term success. Also standardizing the onboarding of providers and staff to lock in the enterprise way of doing business instead of allowing each practice to operate individually.
Like 100% across the board, you can’t do that, right? They’re individual practices, but at a higher level, especially when it comes to reporting and basic business operations, you want to make sure that there’s a standardized way of doing these things. So when you are onboarding providers and staff in a standardized way, this addresses the process variation that can occur as systems grow.
Montgomery Pate: Thanks, Angie. I think those are fantastic points and I think along those same lines, it’s really important that you do create that enterprise wide standardization for all business operations to the greatest extent possible. And this was mentioned previously as something you can do in the short term as a quick win, but it’s also a long-term strategy.
And going back to that common phrase when systems onboard a new practice where they say, don’t worry, we’re not gonna change how you do business. Over time, as multiple practices are onboarded each with their own way of doing things the variance in how business is conducted becomes substantial. So that enterprise of doing business must be established in order for business operations to be effectively managed. A well-managed change management strategy, which we’ll address in a moment is essential for this to occur.
Rebekah Duke: Change management strategy is certainly worth exploring further, Monty, thank you. Angie, you see how systems and technology play a major role in everything related to healthcare on a daily basis. So where do you start in regard to creating a systems platform that’s scalable and creates value for the organization?
Angie Howard: That’s a great question. Although every scenario is unique, oftentimes a starting point begins with an assessment and that is an assessment of existing technology as it relates to its ability to support the future state vision.
So we start with some considerations. We review all the technologies with the business case justification for each, the questions to ask, are the technologies positioned to meet future state organizational business requirements? What’s the return on investment? Are there more cost effective configurations or alternative technologies to better support the future state business operations? Also will these technologies be required in the event of replacement of an EHR system?
Old legacy systems are often supported through the addition of numerous bolt on technologies. We often see that instead of replacing the system for a fully integrated system, they just bolt on and layer technologies.
The second question is, does it make sense to replace the EHR PM legacy system based on the business case methodology? Does it meet future business requirements? Can it grow with the business? That’s a big one. And data integrity will you trust the data that is provided by the systems, so in the end the future state roadmap brings together the process and systems to an optimal configuration that is ultimately more profitable, sustainable, and prepared for growth.
As mentioned earlier, consultants like us utilize a partnership approach with both private equity and the medical group they support to create these results.
Rebekah Duke: Thank you Angie for explaining how we can best leverage technology to extract all those benefits.
Something mentioned earlier stands out to me. A great plan backed by massive amounts of due diligence and capital investment can quickly fail if the organization’s culture is not receptive. Sounds rather delicate. Also, ultimately the linchpin do all of this. Can you tell us the full story on this, Monty?
Montgomery Pate: Well, certainly I’ll try Rebekah. You have to move from that change management assessment, as we mentioned earlier, to an implemented change management strategy to ensure that an organization’s culture is responsive to what you’re attempting to accomplish.
Now, there’s lots of books and articles you can find on this topic. However, based on my experience, here’s what it represents to me. First I’d start with having a hardwired communication pathway and cadence. In other words, how does the organization ensure that the staff at the VP level are receiving the same information regarding the future state as the staff at the customer service or front desk level?
Also, how do you ensure that you’re quickly and accurately addressing? Questions that may arise during the transition. What forums are you using? Email, print, social media, town halls, or maybe a combination of all of these. The point is that communications has to be intentional, structured, and consistent, versus an ad hoc or primarily reactive approach.
Next I’d say you’ve gotta create that future state vision. What does that vision look like for the organization as for the organization as a whole, as well as at the individual level, what changes and what remains the same? This should be a vision that is easily understood by anyone in the organization.
Angie, do you have any other thoughts on this?
Angie Howard: I would say Monty I picked this up from you actually, articulating the why. So any change is disruptive and I think a lot of organizations fear that disruption and it feels a little threatening when you change. So leadership, stakeholders and ultimately staff members need to be able to clearly articulate why we are changing, what’s behind the initiative, improve revenue, reduced expense, better clinical outcomes, higher patient satisfaction, or a combination of all of these can help support your rationale for the initiative.
In creating a culture of transparency along the way during major initiatives that take us to the optimal future state, setbacks will occur. Projects are delayed. Vendors change. Decisions made early on are modified based on what we know today. Plan on these events occurring and be forthcoming with your staff regarding what occurred. If you are not quick in addressing what happened and why, staff will likely create their own narrative.
Montgomery Pate: Angie, I think that’s some important insight. I would also add identifying and engaging stakeholders as change champions. Now, in my mind, provider and staff champions, they’re really the keepers of the culture within an organization.
They help reinforce the why, as we talked about, as well as that vision that we previously mentioned. Now, I think it’s important to point out that none of these actions are one-time occurrences. They have to be ingrained into the way the medical group does business, and since every organization and situation is unique, it really precludes having a ready-made off the shelf cookbook approach. And this is why we truly operate as partners with the private equity and medical groups to help build a change management strategy that best meets everyone’s needs.
Angie Howard: No, I think you really captured that last part, Monty, with change management. I know it’s a difficult part of an organization, maybe changing ownership and it’s definitely something that needs to be at the forefront of any roadmap of growth.
Montgomery Pate: Absolutely.
Rebekah Duke: And this wraps up part two of our series. Thank you Monty and Angie for your time sharing all this wisdom surrounding private equities relationship with healthcare, and how having the right consultants on your side paves the path to success. Should you have any questions about how to make your practice more appealing to private equity or how to refine your acquisitions process as a PE firm we’re happy to have that conversation with you anytime. You can reach us at firstname.lastname@example.org.
This podcast is produced by Medical Advantage. Medical Advantage provides consulting designed to help practices improve care quality, reduce healthcare costs, and increase revenue. Our broad portfolio of services optimizes operations for medical practices, specialists, groups and private equity.
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