Dr. Abdul-Aziz: The Case of Management Principles Within a Small Pediatric Medical Practice

Abstract

Dr. Khalid Abdul-Aziz has been agonizing over whether he should leave the group of pediatricians that he has been associated with for the past five years to establish his own practice, or stay put. He has encountered a number of very frustrating situations over the time he has been with the group. While he loves the practice of medicine and his patients and their families, he has not been able to achieve the level of professionalism in service delivery that he seeks because of three types of constraints within the group: philosophical, personnel, and procedural. There are major challenges to any new medical sole practitioner, but the potential rewards of molding his practice in the way he thinks it should perform medicine is extremely enticing to him. [PUBLICATION ABSTRACT]

Headnote

Abstract

Dr. Khalid Abdul-Aziz has been agonizing over whether he should leave the group of pediatricians that he has been associated with for the past five years to establish his own practice, or stay put. He has encountered a number of very frustrating situations over the time he has been with the group. While he loves the practice of medicine and his patients and their families, he has not been able to achieve the level of professionalism in service delivery that he seeks because of three types of constraints within the group: philosophical, personnel, and procedural. There are major challenges to any new medical sole practitioner, but the potential rewards of molding his practice in the way he thinks it should perform medicine is extremely enticing to him.

Keywords: Hospitals, corporate culture, Jordan, finance, strategy Medicaid.

Introduction

In 1990, Khalid Abdul-Aziz (age 24), a Jordanian citizen and a medical student at the University of Kuwait, was forced to leave Kuwait to return to his native country because of the Iraqi invasion of Kuwait. Abdul-Aziz, the son of an educator, had lived all his life in Kuwait and had only one year leftto graduate. Three years later, Abdul-Aziz had graduated from the medical school at the University of Jordan and arrived in the United States on a student visa to continue his medical education and specialize in pediatrics at the Mayo clinic, ranked as one of the top five medical schools in the U.S. Upon successful completion of that specialization in 1996, Dr. Abdul-Aziz accepted an offer to work with a group of physicians in a small rural town in the Midwest. The town was considered by the U.S. government to be an underserved area and physicians who practiced a minimum of three years in such areas were qualified to become permanent U.S. residents (green card holders), clearing their way to become U.S. citizens.

In 2001, after five years of practice in the rural area and successfully obtaining his green card, Dr. Abdul-Aziz decided to join a practice in a larger city. He was offered a lucrative package by Mercy Hospital in Jefferson, a mid-sized metropolitan area within Madison County, located in a middle-Atlantic state. The hospital offered Dr. Abdul-Aziz a two-year contract that included a clinic to see patients, a guaranteed base salary, and a percentage of revenues exceeding a specific pre-determined amount. The contract offer also included a clause that after two years, Dr. Abdul-Aziz would no longer receive salary support from Mercy.

In summer 2001, Dr. Abdul-Aziz moved to Jefferson, and started working at Mercy Hospital. While working at the hospital he met Dr. Gordon (65 years old) and his partner Dr. Reese (35 years old), pediatricians with a large base of patients in Jefferson and surrounding cities. Drs. Gordon and Reese do not accept Medicaid, which is insurance by the federal government designed for the indigent; their patients either pay with cash or have private insurance. Their practice was so busy that the partners did not have enough time to spend with their families. Dr. Gordon was seeing as many as fifty to sixty patients a day. Recognizing Dr. Abdul-Aziz's intelligence and pediatric skills, Dr. Gordon approached Dr. Abdul-Aziz to ask him if he would help them with call coverage. Call coverage is a term meaning that if one doctor is off, the assigned doctor will provide coverage for that doctor and hence see all his/her patients during the absence (whether overnight, weekend, vacation, etc.) until the physician returned to work. Dr. Abdul-Aziz agreed to the opportunity because he wanted to network with local pediatricians and also gain additional income.

Over many months, Drs. Gordon and Reese were very impressed with Dr. Abdul-Aziz's high level of patient care. Many of their patients complimented Dr. Abdul-Aziz's high standards of practice. As a result, they offered to have him join their group on a full-time basis. Dr. Abdul- Aziz agreed to join them as soon as his contract with Mercy expired at the end of June, 2003. The opportunity for Dr. Abdul-Aziz to join the new group meant the potential for substantial additional income.

On July 1, 2003 Dr. Abdul-Aziz joined Dr. Gordon and Dr. Reese in their practice. The clinic offices were located in an old building on a side street offa very busy thoroughfare in the town. There were six exam rooms for patients. The building's parking lot was limited to sixteen vehicles and one handicap space. The parking spaces were not enough for a busy practice with three physicians and their employees. The rent was $4,000 per month.

Two months later, Dr. James (40 years old) joined the group as a result of an invitation from Drs. Gordon and Reese (with no input from Dr. Abdul-Aziz). Drs. Gordon, Reese, and James were born and raised in towns nearby Jefferson. Dr. Abdul-Aziz noticed that Dr. Gordon and Dr. Reese and his nurse were managing the clinic. In fact, Dr. Reese was designated the managing partner. The group then moved to a new location in a Mercy-owned medical building located about 5 miles from the hospital, but within a half-mile from the group's previous office. The clinic was now in a new building with eight exam rooms. The rent for the facility jumped to $6,000 a month. Although more exam rooms were still needed, there was plenty of parking at the new building and it was in an excellent location.

Dr. Abdul-Aziz learned that there was no formal legal partnership for the group. Therefore, he insisted that legal partnership papers should be drawn up and filed. The partnership (corporation) gave all partners equal shares. Expenses were to be divided equally among the four partners. Income was based on performance.

Problems started to emerge between the partners over allocating equal shares of overhead expenses. Drs. Abdul-Aziz and James did not have much business in the beginning. Their firstyear share of expenses accounted for 70 percent of their total income.

Senior partners (Drs. Gordon and Reese) did not help the new partners (Drs. Abdul-Aziz and James) by providing them with patients that they did not have time to see during very busy and hectic days. Part of their original agreement was that all new patients were to be divided equally among all partners. The two new partners were suffering from a lack of business to pay their expenses, and yet the senior partners never offered for them to care for excess patients they had in the waiting room. This created an atmosphere of competition and jealousy. Dr. Gordon was seeing 35-50 patients a day and patients were waiting as long as two hours for treatment. Meanwhile, Dr. Abdul-Aziz might have 10 patients a day and had plenty of free time to see other patients. Dr. Abdul-Aziz always thought that the senior partners perceived the partnership as just a way to cut their own expenses and to provide call coverage. It did not bother them that their overhead accounted for 35 percent of their income while that for Drs. Abdul-Aziz and James was 65-70 percent.

Dr. Abdul-Aziz also noticed that the group had no consensus decision making. Dr. Gordon forced the clinic employees to do what he wanted them to do. He also demanded that Mr. John Scott (the corporation's accountant whose own company handled billing) do certain things for the corporation without checking with the rest of the partners.

In November 2003, Dr. Gordon decided to work only part-time (three days a week instead of five). This had been one of his goals when the junior partners joined. He wanted his partners to agree to take call coverage for him also so that he would not take weekend calls. He also wanted to take calls on only one night per week. The other partners agreed in hopes that they would get to treat his vast list of patients accumulated over the years on the days he was not scheduled to work. Dr. Gordon also demanded a break on his share of the expenses (his new share of expenses would now be 20 percent instead of 25 percent). Within eighteen months, Dr. Gordon wanted to go back to full-time because his income started to decline from $350,000 per year to $200,000.

The partners never tried to promote the practice and the physicians. Dr. Abdul-Aziz was frustrated and tried to convince his partners of the benefits of advertising. Unfortunately, Dr. Gordon and Dr. Reese refused to advertise and Dr. James did not want to have any disagreement with the senior partners.

Dr. James was enjoying referrals from the receptionist and other employees in the clinic including Emily, the office manager. Whenever a new patient called, the receptionist was listing the new patient name on Dr. James's schedule or at times, she would ask the patient to come on a day when Dr. James was working and one of the other partners was off. She did that because Dr. James was her own child's pediatrician. The office manager was also doing the same thing. She brought her children to Dr. James for regular checkups and any illnesses. Dr. Abdul-Aziz noticed the pattern when he became suspicious about the increasing number of patients Dr. James was seeing, while Dr. Abdul-Aziz was not getting any new patients. At the partners' next meeting, Dr. Abdul-Aziz brought up the issue with all of his partners and the accountant. No one cared to do anything about it, even though Drs. Reese and Gordon were also experiencing a drop in new-patient visits. Dr. Abdul-Aziz warned the partners that this violated the partnership agreement. Again, no one cared to do anything about it.

John Scott, who supervised the billing management, bank account, bookkeeping, and payroll, was not happy about the way the office was being run. But his role was only to advise the partners and it was up to them to decide. He liked Dr. Abdul-Aziz's enthusiasm about work ethics and professionalism and sided with him on many issues. Unfortunately, the partners paid little attention to the business. Scott felt that the three other partners were satisfied as long as they were seeing patients and making money. They were not interested in managing the daily operations or even in overseeing it. The partners, excluding Dr. Abdul-Aziz, did not make time to have a regular partnership meeting. Their meetings were at irregular intervals. Sometimes it took a crisis before the partners would meet. All of these factors indicated that there was no discipline in the business.

Dr. Abdul-Aziz Responds

Dr. Abdul-Aziz, recognizing all the unsolved problems in the clinic, decided to take a different approach. He started to write a weekly column in the local newspaper to make parents and grandparents aware about medical issues related to their children and grandchildren. These issues included immunizations, safety, and symptoms of diseases. He also contacted one of the local TV stations and offered his services to discuss these types of issues in interviews. He was a medical host on an early morning show and was well received. He also visited OBGYNs on his days offin order to meet physicians and offer his services to their patients. He also became well known in town as the "circumcision doctor." Some OBGYNs and pediatricians elected not to perform this procedure on baby boys. So, Dr. Abdul-Aziz saw an opportunity to perform it. Although the financial return was rewarding (averaging $250 per procedure), more importantly, he took it as an opportunity to meet parents of babies who had not yet decided on a pediatrician, and it helped him to gain new business. Also, Dr. Abdul-Aziz became well known among hospital nurses for his genuine care for his patients while they were in the hospital. He would read patients' charts very critically and at times detected mistakes on the charts. His accuracy gained him lots of respect among nurses and supervisors.

On his mandatory day off, he would wake up before sunrise and drive to the nearby mosque (Muslim house of worship) to pray, then he would drive to the hospital to see his patients. He believed that pediatric patients and their parents appreciated doctors' efforts when their loved ones were in the hospital. He also asked a printing company to make magnetic pads to put on refrigerators with his practice information on it and the 800-phone number for the poison control center. He made sure to give these magnetic stickers to his patients in case they had an emergency.

He also made it a point to call in the evening to check on the status of his patients. Many parents were amazed that he would do this because they had never experienced a doctor in town who would do such a thing.

He sent "thank you" post cards to all his new patients within 24 hours of their first visit with him. For pregnant mothers who were looking for a pediatrician, Dr. Abdul-Aziz requested a meeting with them before their delivery in order to introduce himself and his practice to them and let them get to know him.

Dr. Abdul-Aziz believed that no patient should spend more than 30 minutes in the waiting room before seeing him. He made it a point that if he was involved in an emergency and had to go over 30 minutes, that he would personally go out to the waiting room and speak to his patients to apologize for the delay. Patients were simply astonished at his care. In fact, many of his partners' patients wanted to switch to Dr. Abdul-Aziz but he advised them not to do that because of his relationship with his partners, unless the matter was very serious and the patients were going to completely abandon the group.

He called his patients and their parents when they were out of town, such as receiving chemotherapy at St. Jude or when undergoing major surgery at a distant university medical center.

He also implemented a three-room system. One room was for healthy babies that came to the clinic for vaccinations or wellness checkups. A second room was for severely sick children suspected of having viral or bacterial infections. A third room was used for mildly sick children. Many parents applauded the move and thought it was a wise strategy.

In 2005, as his patient base started increasing, Dr. Abdul-Aziz became aware that Dr. Gordon was being rude and hostile with Abdul-Aziz's patients whenever Gordon was the on-call physician. However, Gordon never expressed this behavior toward any of Dr. James' patients. Many of Dr. Abdul-Aziz's patients complained to Abdul-Aziz about Gordon's unprofessional behavior. Several times, OBGYNs reported to Dr. Abdul-Aziz, that Dr. Gordon had visited them and asked them "why he was not getting a referral from them and instead they were referring their patients to Dr. Abdul-Aziz?"

Within the last two years, Dr. Abdul-Aziz had been treating the bulk of the group's patients. A substantial number of patients were leaving his partners and switching to him as the permanent physician for their children. In the medical field, it is the patient's choice to transfer their files from one physician to another. Dr. Gordon did not get many patients switching from his partners because many patients thought that he was rude to them, especially when covering calls for Dr. Abdul-Aziz. Dr. Reese had a very dry personality and was brief and matter-of-fact with his patients. Patients' parents noticed that Dr. Abdul-Aziz was thorough in his exams. Dr. James was very personable and his patients liked him. Dr. Abdul-Aziz had the most patients, followed by James, then Reese and finally, Gordon.

Employees and Corporate Culture

The pediatric group employed 12 staffmembers: two female workers in clerical billing; five nurses (one for each doctor and one nurse in the clinic lab); two in the check-out window; one filing; and two receptionists. Although the clinic was typically very busy with patients, some employees would often spend time surfing the Internet. Physicians' nurses offered no help to the other physicians. If Dr. Reese finished seeing his patients at 2:00 PM, he gave his nurse permission to go home. The office manager (Emily) was not given authority over the nurses and was not even allowed to fire an employee. Dr. Abdul-Aziz was not happy that all the clinic nurses did not arrive and depart work on time (8:30 AM and 5:30 PM). He felt that since the medical corporation paid their salaries, they should comply with the rules of the corporation; however, his partners always backed their nurses and let them do what they wanted to do. Dr. Abdul-Aziz's nurse was the only one staying until 5:30 PM. One day, she came to him and told him that she was not happy at work because she felt that she worked harder than other nurses and yet was paid less. The following conversation ensued:

Dr. Abdul-Aziz: "What do you mean you are making less money?"

Nurse: "Dr. Reese's nurse, Jennifer, is making $600 more per month than I do!"

Dr. Abdul-Aziz: "Who told you this information?"

Nurse: "She did."

At this point, Dr. Abdul-Aziz, knew that something was not right. Due to being the senior nurse in terms of years working for the corporation, Dr. Reese's nurse (Jennifer) made a little bit more than other nurses, but definitely not $600. So he went to Dr. Reese to ask about it. Dr. Reese told him that Jennifer came to him one day and said that she had been offered more money to work at a home-health agency. Therefore, Dr. Reese was paying her $600 a month out of his own funds so that she would not quit her job, and told her to keep the matter confidential. He also added that Dr. Gordon and Dr. James also paid their nurses extra, especially due to increasing gas prices. Dr. Abdul-Aziz was surprised and disappointed that his partners were doing this without letting him know. He then understood why the nurses felt that they worked for the doctors and not the corporation.

Jennifer knew how to manipulate things. The other nurses, including Emily, were afraid of her. She made herself their "boss" and as a result there was lots of friction between the nurses. The partners told Dr. Abdul-Aziz that it was difficult to find nurses these days due to a shortage of LPNs (licensed practitioner nurse) and that any of their nurses could get a job any minute at any place; therefore, they had to put up with them. Dr. Reese expressed satisfaction for the work that his nurse (Jennifer) was doing as long as she took care of his patients. Dr. Abdul-Aziz said that the partners were not in control of the business and that it would be very difficult for the nurses to find another job with the pay, benefits, and relaxed environment they were working in.

The twelve full-time employees received full benefits including Blue Cross health insurance, 401k plan, sick leave, dental insurance, and a bonus (totaling one month's salary per year). Most medical offices in Jefferson did not provide these benefits, especially health and dental insurance.

Dr. Abdul-Aziz received many complaints over the last three years from patients' parents that the receptionist, Abby, was rude to them over the phone. One day Dr. Abdul-Aziz, the other partners and Mr. Scott heard Abby screaming on the phone at a patient's mother and telling her "Why do you wait two days to call at 4:00 to bring in your child?...We will be closed at 5:30....why don't you come in tomorrow morning!" Dr. Abdul-Aziz immediately stepped in and asked Abby to tell the patient to come right away. Abby became worried when she noticed that all the parents in the waiting room were listening to her conversation. When the patient and mother arrived Dr. Abdul-Aziz saw her child and apologized for the receptionist's rude behavior. Dr. Abdul-Aziz, who was very upset, later met with the partners in his office and asked them to dismiss Abby from the clinic. The partners were reluctant because she was friendly with them and also because she had worked for the group for three years.

Filing Records

Part of the job specifications of the female receptionists (Abby, specifically) was to perform filing duties, such as for lab results, x-rays, and hospital records. Dr. Abdul-Aziz noticed that such records were not being updated in patients' files. For example, if a doctor orders an x-ray, the patient goes to the lab and gets one. The results are automatically sent back to the office and should be placed in the patient's file. When the patient later returns to see the doctor and the xray report is not included in the file, the nurse has to go to the front and find the x-ray report in a pile of different documents. Dr. Abdul-Aziz's nurse was not happy with this situation because she felt that it was Abby's and the other receptionists' job to perform the filing duties. The situation was getting worse and becoming an embarrassment in front of patients. Because Dr. Abdul-Aziz's patient flow had increased to 40-50 a day, this was an intolerable situation. He asked the receptionists to file documents so that the work would not get backed up, but Abby claimed that it was not her job to do it.

Dr. Abdul-Aziz later found out that it was Abby's job to perform the filing. In fact that was the reason she had been hired. Unfortunately, the office manager avoided addressing the issue because she felt that she did not have the power to hire and fire; therefore, Dr. Abdul-Aziz again addressed the issue with his partners and Mr. Scott. He told them that those responsible for filing were spending more time surfing the Internet than doing their job. The other partners suggested hiring a part-time college student to perform the duty. Since the three partners agreed to it, Dr. Abdul-Aziz felt that it was better for him to agree also.

Clinic Finance

There are two crucial aspects in the financial management of the group's office management: billing and payroll management. Mr. Scott's company handled the payroll and bookkeeping. Billing was conducted on the premises of the group and included the following:

1. Collecting co-payment, deductibles, and amount not covered by insurance at the office.

2. Sending patient's claim to the insurance companies in a timely fashion, as some insurance companies will allow you only 2-3 months to receive the claim.

3. Handling denied claims and knowing how to re-file them. This process demanded dedication and knowledge about insurance coding systems so that workers could punctually re-enter and sometimes investigate the accuracy of patient information.

4. Having a clear policy towards aging accounts receivables and to execute this policy appropriately in the collection process. Questions arise as to how many statements you need to send to patients? If patients do not respond, do you turn them over to a collection agency or report the incident to the credit bureau? Once this happens, you will likely never see the patient again.

Billing was Samantha's responsibility in conjunction with Emily. Samantha was very good and a dedicated employee who knew billing very well. She filed patients' claims with their insurance companies. The billing work was enormous for her. She was not getting any help from the office manager or the receptionists. Samantha decided to move to another city and the partners assigned Abby to handle billing. Six weeks later, Dr. Abdul-Aziz noticed that she was not filing any claims. He checked with Emily, the office manager, who told him that she was not aware that Abby was not filing claims. Dr. Abdul-Aziz was surprised to hear that because Emily's desk was right across from Abby's desk where both shared the same office.

The group hired a new person to do the billing and things got even worse. Subsequently, Abby was asked to do the job but had absolutely terrible results. Dr. Abdul-Aziz attributed it to poor supervision. After six weeks had passed the partners realized there was a problem with cash flow. Normally, the four partners receive weekly electronic deposit statements from Blue Cross and Blue Shield insurance company. These statements were provided to them by Mr. Scott since he is in charge of keeping up with bank accounts. Deposits were going down severely while the partners were getting busier. Dr. Abdul-Aziz realized that there was a problem in entering the charges on time. Abby was weeks behind in the process. Unfortunately, the office manager apparently did not realize what was going on. The partners decided to find a qualified person to do the job. Therefore, they asked Mr. Scott to interview the candidates and hire the person for them. The company hired Jennifer and moved Abby back to the front. Jennifer did a great job with billing. After a while Abby resigned. Dr. Abdul-Aziz believed that designating two people to perform billing activities in the clinic was not enough considering the amount of business the four partners generated, especially with employees like Emily who actually did not do much of anything.

Dr. Abdul-Aziz felt that the group did not have a very effective billing system. Normally, whenever a claim is denied, the insurance company will state the reason for its denial. Unfortunately, Emily hardly ever followed up with denied claims. Nor did Drs. Gordon, James, and Reese follow up on their accounts receivable. In fact, they never asked Emily for their list of monthly accounts receivables. Only Dr. Abdul-Aziz would make such a request. As a result, Emily would get irritated with Dr. Abdul-Aziz every time he asked her for the A/R aging report.

The partners had never asked their bookkeeper to conduct an end-of-year audit. They did not have an interest in the front office and never wanted to be involved with the details of the business. However, due to many irregularities found in the business, the partners led by Dr. Abdul-Aziz requested that Mr. Scott conduct an audit. In early 2008 Mr. Scott did a formal audit of billing claims for the last three years. The audit showed a loss of $102,000 in claims because the claim was filed under the wrong social security number or because, in the time since the claim was originally filed, the patient had switched jobs and had a different insurance company. The patient would then provide the new insurance company information to the receptionist; but, unfortunately, no one in the group's billing department updated the records and time would expire for filing. Thus, the audit revealed that the significant billing losses were due to a lack of follow-up. In addition, the front desk was supposed to collect co-pays from patients but never did it. If patients did not have their checkbook with them, the office would just bill them later. They did not update the records for insurance information. The group's physicians were not detecting problems on time. The physicians were very friendly with employees and did not feel comfortable firing any of them.

Dr. Abdul-Aziz tried to convince his partners that it was time to fire the office manager (Emily) because she was not paying attention to the business's daily activity. He gave them numerous examples including (1) bringing her infant grandson to the clinic to babysit him; (2) making endless personal phone calls; and (3) spending lots of time on the Internet. He also added that when he joined the group, he had to change his Federal tax ID number because his old tax ID number had been used to bill to Mercy Hospital. He became aware of lots of denials from insurance companies because at that time insurance companies such as United Health were filing on Dr. Abdul-Aziz's old tax ID number. Emily was filing with the wrong tax ID number (Mercy Hospital's instead of the group's). Emily never reported the change to the insurance company. Customers were irritated because their claims were rejected and Dr. Abdul-Aziz was considered by the insurance company to be out of their network, although in reality he was not. It would make a lot of difference in the cost of care for patients if the doctor were out of network.

Although outsourcing is becoming a popular practice in business these days, the group never thought about outsourcing billing to Mr. Scott or any other company. Outsourcing billing is a popular practice in healthcare organizations, especially hospitals. An organization normally pays the outsourcing agency 6% to 8% of the total amount collected as a fee for their services. The percentage varies depending on the volume of business.

The group had a number of other serious management deficiencies that were revealed by the 2008 audit performed by Scott. The practice had lost a lot of money on a type of penicillin injections that, for the past five years, had been reimbursed by most insurance companies at a rate of $22 per shot less than the clinic's cost. Consequently, the group had been losing money on it for several years. The audit also revealed that there were other things the group had charged less for than what insurance companies would allow, such as infant wellness exams (which were also losing $30 per exam). In effect, there had been no critical analysis and review of what was happening.

Relationship with Metro Hospital

In 2007 the partners gave up visiting Metro hospital because the senior partner, Dr. Gordon, did not want to drive to Metro and was fed up with the hospital giving him unassigned patients. Metro was a municipal hospital located in an immediately adjacent city, South Jefferson. Federal health care rules require that when a patient does not have a pediatrician they can go to a hospital for treatment. The hospital is legally obligated to provide a pediatrician for the patient.

Because Drs. Gordon, James, and Reese decided not to attend to patients at Metro hospital, Dr. Abdul-Aziz could not go either because, should he treat a patient in the hospital, none of his partners would take call coverage for him in case he was offor sick. However, he kept his privileges with Metro and also continued to perform circumcisions there, since circumcisions do not mandate call coverage. Dr. Abdul-Aziz did not like the idea of severing ties with Metro. He wanted to keep good relationships with the hospital. The administration at Metro tried their best to get the partners to bring their business back to Metro. They offered the group a waiver from unassigned patients, all because the group enjoyed a large base of patients and because they were very competent physicians. Although Dr. Abdul-Aziz tried to convince his partners to reverse their decision and to resume admitting patients to Metro, Dr. Gordon insisted that he was not interested and Drs. Reese and James followed their senior partner's decision. Dr. Abdul-Aziz and OBGYNs in South Jefferson told Drs. Gordon, James, and Reese, that it was not a wise decision to give all of their hospital business to Mercy. Instead, a healthy competition was needed. Also South Jefferson was a fast growing city and more than half of the OBGYNs had their practices in South Jefferson. Dr. Abdul-Aziz also added that the core of business in pediatrics is newborn patients.

The Medicaid Issue

Drs. Gordon, James, and Reese were adamant about not accepting Medicaid in the practice. Their major reason was that Medicaid reimbursement was less than half (30-40 cents on the dollar) of what physicians normally charge and it was too much of a hassle because of the many regulations. For them, deciding whether to accept or not to accept Medicaid patients was purely a business decision.

Dr. Abdul-Aziz tried to convince his partners to accept Medicaid in a limited capacity as a goodwill measure to help their most needy existing patients, whose parents at one time had private insurance, but now one or both may have lost their jobs and were then forced to carry Medicaid. In the last two years, two of the largest employers in Jefferson decided to shut down their organization in a move to restructure and save money. The clinic served a sizable number of patients from both companies. Dr. Abdul-Aziz argued that the group should help their existing patients rather than leaving them to other pediatric groups in town that did accept Medicaid.

Most of the group's Medicaid patients leftthe clinic for other physicians and clinics because they could not afford to stay, especially if they had more than one child. Patient data revealed that 5%-10% of the total patients were self-pay and most of them were on Medicaid; but because they were familiar with the group's physicians, they tried not to seek out other physicians and would rather pay cash for their visits.

There was a significant difference in philosophy among the partners. Whereas Drs. James and Reese preferred to give their charity to St. Jude, Dr. Abdul-Aziz believed in giving his charity to his patients in his own town by helping them when they lost their insurance and ended up on Medicaid.

Deciding Whether to Move

By this time, Dr. Abdul-Aziz had become quite discouraged with how things were being run in the group. Not only had decisions been made (such as pricing, filing, and billing) resulting in significant losses of potential income, but the partners refused to try and grow the business. Moreover, the partners had ceded most authority to the stafffor running the business. As a result, Dr. Abdul-Aziz wondered if he should break offfrom the group and establish his own practice. He had already done a preliminary search for an office location.

Abdul-Aziz decided to broach the idea of leaving with Reese and James, and told them of his tentative plans. He also told them that he would welcome them if they wanted to go in as partners on the property and that together they could build a large clinic and each pay about the same note to the bank as the rent payment on their existing clinic. However, he told them that the arrangement would not involve being their partner in the practice. He told them that they could all work in the office and share calls on the weekend but that he would have a separate legal corporation. He also suggested that they could rent space from him in case they preferred that rather than a purchase.

Dr. James and Reese liked the idea and they told Dr. Abdul-Aziz that they wished to discuss it with Dr. Gordon since he was the senior partner. When they told Gordon, he was furious with the idea and convinced James and Reese not to join Abdul-Aziz should he move to a new location.

Dr. Abdul-Aziz began to intensively consider the pros and cons of such a move. He realized that if he were to make a move it needed to be within the near future. He set a date of January 2009 for a decision, which gave him only six months to determine whether he would stay with the group or strike offon his own.

DR. ABDUL-AZIZ

TEACHING NOTE

Synopsis

This decision-based case deals with an actual situation involving Dr. Abdul-Aziz (all names and locations are disguised) who must make a decision about his future with the small group pediatric practice. The case is based on primary data. Dr. Abdul-Aziz has been a partner with the group for about five years, but has been disappointed in how the practice is managed. The lack of effective staffsupervision has resulted in several significant problems. Physicians have established certain policies without informing other partners. Nurses and reception staff have been poorly supervised and as a result some have resorted to surfing the Internet instead of handling important office tasks. Improper supervision of filing has caused slowdown and embarrassment with patients. Billing carelessness and pricing inaccuracies have cost the partners hundreds of thousands of dollars over the last few years. With the growing patient base of Dr. Abdul-Aziz, he has the opportunity to leave with his patients and establish a new independent practice.

The case focuses on the decision of Abdul-Aziz to remain with the group and try to change people, philosophies, and procedures or to separate and establish a new practice where he can implement the professional systems with properly trained and supervised staff, guided by his own philosophy of service and medicine and unfettered by his current environment.

Use & Objectives

This case is suitable for a undergraduate or graduate classes as well as executive education (e.g., with doctors). It may be used in a variety of courses such as: Human Resources, Entrepreneurship, Social Entrepreneurship, and Strategic Planning and Management.

There are several objectives that may be achieved with the case. The case should enable students to:

1. Understand management difficulties that confront those in small medical practices.

2. Understand how effective management and marketing approaches can lead to patient satisfaction and practice growth.

3. Provide entrepreneurial insight into the decision to start a business.

4. Develop alternative strategies for program elements within the human resources, management, and marketing functions for a small medical practice.

Conceptual Foundations

This disguised case is a real situation used to provide undergraduate and graduate students with an opportunity to make practical application of sound management principles within a small pediatric medical practice. Students are given the opportunity to diagnose the various management issues facing the practice and to suggest possible solutions. The clinic is beset with problems of lack of supervision, failure to exert effective controls, lack of leadership, and conflicting personalities. Dr. Abdul-Aziz is considering separating from the group practice in which he is a partner and establishing his own independent practice in the same market.

Students are provided with an opportunity to develop an effective course of action for an interesting organization and its services. They are challenged to analyze how owners, who are not trained as managers, can accomplish the needed management activities. The case requires that students evaluate the various options and creatively develop alternatives and recommendations for Abdul-Aziz.

Teaching Plan

This disguised case is a real situation used to provide undergraduate and graduate students with an opportunity to make practical application of sound management principles. Students are given the opportunity to analyze management difficulties that confront those in the medical profession. The case is appropriate for students to develop alternative management solutions for program elements within the human resources, management, and marketing functions for a small medical practice.

Students should be encouraged to evaluate and include different management concepts and approaches related to the case. This case is suitable for written reports, oral presentations, and examination purposes.

Analysis

1. Does the partnership appear to conduct any strategic planning? What benefits might flow from such an activity?

There is no strategic planning conducted by anyone in the practice or by Scott, the business manager. Moreover, the partners do not have a vision for the future. The lack of planning and conceptualization of what the practice is to be and where it should be going has been costly. For example, the group continues to pay a considerable amount for rent rather than owning its facility. The partners have a lack of business sense, with the exception of Dr. Abdul- Aziz.

The partners do not share the same vision (long- or short-term) and ambitions that Abdul- Aziz has. They exemplify the mindset of not spending money to make more money. The office space is congested. The group is content to spend $5000 a month in rent for a clinic that needs more space due to increasing business. Abdul-Aziz is willing to buy a lot and build on it, in order to obtain a facility where the monthly note for the building will cost no more than the current monthly rent.

2. How important is it to establish clear authority within the practice? How might this be accomplished?

It is vitally important that clear authority and consistently fair policies be established in the practice. There is no corporate organizational structure; it is on autopilot. The doctors have abdicated their authority to the nurses and office staffand there is inconsistency in administrative policies and approaches. The only group member who appears willing and competent to handle the management of the practice is Dr. Abdul-Aziz. However, at every one of his suggestions, the other group members are reluctant to implement a more professional approach. When Dr. Abdul-Aziz shows signs of leadership, his partners refuse to grant him the right to lead them. He obviously has more management skills than other group members.

3. What human relations issues are presented in the case?

The main issue seems to be resentment on the part of Gordon toward Abdul-Aziz, although it is not clear from the case whether this is a result of jealousy or something culturally based. Gordon, as the senior partner, apparently does not want to retire. He is reluctant to relinquish control of "his" practice. Often in the medical field, when a senior partner at Dr. Gordon's age brings in a young partner, he would scale back and allow the new partner to see some of his patients to allow the new junior partner to earn a sufficient living. Unfortunately, Abdul-Aziz is feeling a sense of jealousy from his partners, especially from the senior partner. A result of this is that Gordon is rude toward Abdul-Aziz's patients when Gordon is on call. This appears to be one of the major reasons why Abdul-Aziz is considering leaving the practice.

4. What might be done to remedy the poor office operations?

The first step in solving this problem is to designate one partner (again, one who is interested and competent) to be responsible for managing the office. This person would have the clear authority for overall supervision of the staff. Although each physician would supervise the nurse who works for him, the group needs to establish uniform policies toward such things as work hours and protocols for assisting other physicians when they are not otherwise obligated.

An important step toward communication and consistency of operation is to engage in a certain amount of cross training. Apparently, there is no formal orientation or training for employees. There should be a consistent indoctrination for anyone hired into the practice. While there may not be a formal employee handbook, there could be a handout issued to each employee that codifies the practice's philosophy and procedures. This should be thought of as an internal marketing opportunity, not just a training activity. The present work situation illustrates what happens when workers are leftto their own devices - they wind up wasting time on the Internet rather than contributing to the organization's welfare and improving the patient experience.

There must be a system of accountability. Each employee must know clearly what is expected of them. A scheduled, timely formal appraisal system should be held for each employee. And any reward system should be based on accomplishments rather than simply traditional generosity of the physicians.

5. What are effective examples of medical practice marketing and customer relationship development illustrated in the case?

Dr. Abdul-Aziz appears to be the only physician actively and effectively marketing the practice. He has been involved in writing a column for the newspaper, appearing on TV shows, sending postcards, and even providing refrigerator magnets for prospective patients. These are all effective, affordable, and appropriate means of marketing his practice. He has established rapport with other physicians who may generate referrals for him. One of the unusual and certainly highly effective means of achieving patient/family satisfaction is his callback approach. By calling patients at the end of the day to check on their condition, he is able to accomplish not only medical objectives, but perhaps more importantly, create a sense of trust and appreciation among his patients that generates much greater levels of customer satisfaction than his other group partners. This routine activity of his creates a "wow" moment for patients because of its rarity.

6. Why is the practice not optimizing its revenue? How could this be rectified?

A major issue has been billing problems. Apparently, the partners did not believe in educating the billing personnel. This further indicates the lack of business sense among the group members. Dr. Abdul-Aziz tried to tell them that the billing personnel needed formal education and training on how to do billing but Dr. Gordon and the other two partners never agreed to it nor did they pay attention to it. Business was "good enough" in terms of revenues and they just did not see any importance to do anything further.

This problem is able to be corrected by training (internal and possibly external, such as at a seminar) and supervision. There is no real control at work in the process. Obviously, Scott needs to play a larger role in the billing operations if the process is to remain internal.

The billing could be outsourced to an organization that would handle the task professionally and result in much greater collection levels. The tradeoffis a higher cost but also potentially higher profit to the practice.

7. How should Medicaid patients be handled?

This is an interesting ethical issue that students may enjoy discussing. The senior partner (Dr. Gordon) has refused to accept Medicaid. Dr. Abdul-Aziz asked his partners to at least consider accepting Medicaid from their existing patients that had private insurance but lost their jobs and so no longer qualify. He argued with them that it just did not make sense to drop a patient (or force them to pay cash) who has been bringing their children to the group for years when this situation occurs. He argued that the clinic needed to help those who have been existing patients and are now in need of care. The partners, particularly Gordon, were unsympathetic about the problem and continued not to accept Medicaid.

Students will have legitimate differences in their viewpoints, as did the partners. One thing to recognize from a marketing perspective is that accepting Medicaid could develop a higher sense of loyalty among patients. Students could also discuss whether such a marketing reason for acceptance is really being "socially responsible."

8. Should Dr. Abdul-Aziz establish his own separate practice or stay with the group?

To answer this question, students should make a list of pros and cons with regard to the situation. Once this is done, the response is likely to be for most students that he should establish his own practice. The following are the most salient points in support of this course of action: (1) he has a risk-taking orientation that suits the situation (an important ingredient for successful entrepreneurs); (2) most of his patients will undoubtedly follow him to his new practice (this will ensure an uninterrupted flow of revenue, considerably different from what most every startup faces); (3) he will be able to thoroughly plan the practice's implementation and control its results (he has learned much from his past experience and knows what pitfalls to watch out for) (4) he is highly likely to be successful (he has entrepreneurial and managerial interests and attributes that many/most doctors do not have); (5) he has the marketing skills and mindset to make the practice a success (he is not reticent and has good instincts for appropriate and professional approaches that have already proven successful); (6) he will have less stress (owning his own practice would appear to be much less taxing than continuing to work in an environment where his counsel is ignored and so many operational details have run amuck). (7) call coverage can probably be arranged (this is perhaps the biggest issue; but one would assume that a plan could be worked out, either with the present group or another group in the area - since he appears to be a very hard worker, even lack of call coverage may not be a barrier)

The astute student, and perhaps even the casual observer, will question how Abdul-Aziz could possibly make a significant financial decision with no financial input provided in the case. Actually, the implication from the case is that debt load and financial implications are not overly important to the decision. Doctors can typically get financing very easily. Although Abdul-Aziz is considering buying a parcel of land and building a new office (high cost), students might discuss other lower cost alternatives to this decision, such as renting (which the group is now doing). His cost structure would be relatively unchanged under such an approach. Thus, the case decision does not hinge so importantly on financial factors, but rather his goal of practicing medicine in the way he deems best with an office structure and personnel that are supportive of that disciplined approach.

Epilogue

Dr. Abdul-Aziz did establish his own practice on schedule in a new facility. It is quite successful and growing.