Introduction:
Jay: Greetings and welcome back. My name is Jay Shorr, and I am one of the partners of Shorr Solutions. We’re going to speak about what I’ve learned when my practice, instantly imploded, and how to keep it from happening to you.
I’ll give you a brief introduction. I am a former practice owner. I will make a disclaimer I am not a physician, but I was a partner in a leading dermatology Facial Body Plastic Surgery cosmetic plastic gynecology practice here in South Florida. And, in late 2011 The medical director was diagnosed with a terminal stage four condition and in June of 2012 lost her battle to stage four cancer. And the reason that I bring this to your attention is that we were totally unprepared for what happened when the practice instantly imploded. This topic is so very near and dear to me personally, because the medical director, who passed away unexpectedly in premature demise was my late wife.
So what I’d like to do is explain to you, first of all, that medicine is a science. Medicine is a way to heal the sick and the injured. In our profession medicine is a way to keep our patients looking young and beautiful. After all, we’re in this aesthetic business. Isn’t that what this is all about.
But medicine is one of the most respected professions today. And why is that? Because in order to be a physician, you’ll have to go to your four years of undergrad and go to four years of a traditional medical school, you may do a one-year internship, and a three-year residency, maybe another five-year residency, into a surgical specialty. And then you go out, and you either work for a practice, or you work for a large group, or you go out on your own. But never lose sight of the fact that medicine is a business, you’re going to get into the business side of that in a little bit because of business, we have to plan, operationally administratively, financially, everything that goes into creating and making this a true business.
My Story:
I had serious plans for the future, but the world doesn’t always hand you what you had planned. We had a leading dermatology surgical practice here in South Florida, as I mentioned, it was a very, very profitable practice, But I didn’t plan for a premature demise I didn’t plan for an immediate disability, although we had disability insurance, I never planned that one day, it would end before I wanted it to end.
However, today is a totally different story now I went on the road for several years. After we sold the practice I sold the practice and basically sold it for pennies on the dollar, as I sold it as an asset purchase because, after a while, there really wasn’t a whole lot left of the business. And we’re going to get into some of this because you hadn’t planned on it. Now, there are many, many different ways that this can happen. And back then, there was no such thing in our world as a pandemic, and I went on the road for several years, doing a lecture and writing a series publication called “Preparing For the Unexpected in Your Medical Practice”. But what did the unexpected really mean? It meant a fire. It meant an explosion. It meant that it meant disability, but never in my world, did it mean premature demise. And today never did it mean a pandemic.
Stages of Grief:
So what are the stages that you go through when this all happens? You know, we have to have stages of arrest in everything that we do, I’ll tell you the first thing that happened to me. I went into a mental state of shock because I never thought it could happen to me. I heard all of the stories about people that it happened to, and everyone looks around and they say, “Did you hear what happened to Dr so and so?”, he or she. Oh my goodness. Isn’t that a tragedy, he or she was so young? Age doesn’t have a barrier when it comes to a disability or premature demise/death.
From shock, I went into denial. Why did I go into denial? It could never happen to me. It happens to everybody else. And from denial. I went into a stage of anger. I was angry. Why is this happening to me? I wasn’t prepared for it. And everything about my whole world is imploding from under me. I was angry because I was losing my spouse. I was angry because I was losing our medical practice, more than anything I was angry at the fate of what was happening to my wife, the illness, and knowing that it was a stage four terminal cancer situation that I was in anger for what she must be going through. And then I was fearful because I was fearful of not knowing what was ahead of me. I hadn’t properly planned for this, and our practice imploded. And I want to prepare you for what you need to be aware of if, in the event, it does happen to you.
And the last stage of this five-stage arrest is having a balance, and a harmony of what do I do, and how do I go about doing it. Because it happens all at one time. And all of a sudden, when this happened in our practice, the millions, and I mean millions of dollars of revenue and profit, turned into loose change. Because when you have millions of dollars worth of revenue in the practice and you’re doing 30 35% net margin, and you’re still making millions of dollars between your pay and everything else or hundreds of thousands of dollars, it doesn’t matter what stage you are it’s all relative. Alright, because everyone will take advantage of you because you’re in a stage of panic.
What Could We Have Done Differently?
But how could we have done things differently? Well of course you could do things differently. If only I had known, but I didn’t. So what I’m trying to prepare all of you for is what to do. So that if and when it does happen to you, you are properly prepared.
So what do you do? Let’s take stage number one. Put together a legal and accounting plan that consists of your attorney, and your financial advisors, and your accountant, and have a consulting team to come up with a comprehensive strategy. “If what, then this” it’s a business plan. You should be having a business plan already. This is going into the fourth quarter, October, November, December of 2020. So put together a plan that consists of your attorney and accounting, which is your accounting team. And have a consulting team. It’s not a sales process, but a team like Shorr Solutions or marketing or a management team that has been there done that worked with other practices and knows how to guide you in the right direction to put together a comprehensive strategy.
And conduct a professional evaluation of your practice, including your assets: your capital equipment, your real estate (if you own it), your employee base, because that is real assets. There is nothing more important than your staff, that is one of your number one assets beyond the real property. Real Property meaning your real estate, your capital equipment, revenue, your website, that’s a tangible expense and a tangible asset. Why do I say that? Your website is one of the things that bring you revenue. And when we talk about business plans. It is one of the things that is a tangible real asset.
And put together a what-if strategy, ahead of time. If this happens, then this is what’s going to happen afterward. But, don’t shoot from your hip, shoot from a plan. And have your plan and your strategy, already in place.
Well, if you have a partly uninsured practice include the following: a locum tenens. If you do insurance, and you have to go out on disability and you’re an insurance-based practice, you can bring in a locum tenens and bill it as you under the locum tenens with a Q-6 modifier. If you are not an insurance-based practice, don’t worry about it. You can bring in a locum tenens meaning that somebody will stand in your shoes, while you’re out.
Think about including new associates in your practice. Whether they are professional associates, like doctors, MDs, DOs, non-surgical physicians, NPs, PAs, etc. so that while you are out, you can still be generating revenue. Because just because you can’t be practicing doesn’t mean you can’t be a medical director within your own practice. You may not be able to physically stand on your feet, you may not be able to physically treat patients. But you can still be a medical director of your practice.
Have insurance. Insurances that will be able to take care of these situations, meaning that you have partners, and family, whether it’s disability insurance that will pay, while you’re out, have business interruption insurance that will pay that in the event of your disability or something like that, or if you have a buyer or if you have losses that you can’t generate revenue, except for pandemic. Now I’m not so sure that in the future, we’ll be able to get pandemic insurance that will pay you in the event that you have to shut down, but types of insurances today don’t cover the pandemic, because it really was never considered an act of God.
So, if you have life insurance and you have a partner, you can insure one another’s life. And if you have family in the event of your demise, it can actually pay your family values in what your life was worth, so that the assets in their business and your business. If and when it goes to probate isn’t a total loss. Because if you are a professional limited liability corporation, or your professional association or PC depending upon what state or Commonwealth you are incorporated in, or that you put the type of a business that you’re in. If you are a partner that is a non-practitioner non-physician because some states and the Commonwealth do allow the corporate practice of medicine, meaning you don’t have to be a doctor, but if you’re not, then it will go into probate and you are not allowed to own that practice. Have irrevocable life insurance trust. What they are are trusts that will house the life insurance. So the owner of the life insurance policy is owned by the life insurance trust, called an ILIT irrevocable life insurance trust. It names a trustee in the trust that you have, but it will not be subject to probate. So if and when the assets don’t get counted towards your total net worth it’s avoidance, legally, of taxation.
And alter the branding of your website so that it can be kind of generic. So that if something happens to you, it still has value, and it still has an asset that can help another person coming in.
Final Takeaways:
Now, ladies and gentlemen, no one ever expects this to happen. So when your business, instantly implodes beyond your wildest dreams, you want to have an operational, financial, business, and executive management plan. Operational, administrative, financial, and marketing. Have people like your accountant, your attorney. People that specialize in health care. People that specialize in asset protection. Work with a consulting team that has been there, done that, has the whales on the back to show for it and knows how to help you. Because it will vary from state to state. It varies from practice to practice. It varies on the type of specialty, but the one thing that is common is your finances.
Make sure you have a business plan that also helps you in the future. So that when somebody has to come in and take over, you’ve got something that you have to sell. Because if you don’t, when somebody like a consultant, like us comes into your practice, I’m going to look at your business plan. I’m going to look at your p&l. I’m going to look at your tax returns, and I’m always going to look at, what did you draw out of it, to wonder what is the value of your business. Because there’s a term called EBITDA. It is your earnings before interest, taxes and depreciation. A lot of times people say, “Well, I want to write this off as an expense”. That is all good while you are operating your business. But when your business implodes, and you want to go sell it like I tried to do, what do they ask for?
When people hire consultants like us, they ask us to go in and evaluate a practice for any number of reasons. Could be for implosion. I look at tax returns, I look at p and L’s. Many times more than not, they don’t match. Revenues might match, but the net net does not match. Why? Because you took expenses out of the business for your own sake. You legally deducted expenses – I’m not here to tell you whether you should have you shouldn’t have – but always remember when it comes time to sell your business, they won’t always match. And somebody that knows the ins and outs of your business will be able to justify the expenses that were related to you personally, and back the back into what the normal profit might be.
Ladies and gentlemen, I wanted to share the pearls of what I have learned. When my practice, instantly imploded, and how to keep it from happening to you. So it’s time that I’d love to say goodbye. Good luck. Stay safe. Thank you for joining us.
