Healthy specialist care
working relations
Health care in the US is a very complex business. How it is provided and how that provision is structured varies from north
to south, coast to coast and sometimes within states, depending on geography, demographics and even tradition. For
Lydia Crowson in Chicago, as for other bankers in the US, the differences are greater than for many of our other health
care relationship managers as her area of focus spans ten states in the US's very diverse Mid-West. She introducés Jeff
Gonner, CFO of a multi-specialty practice in lowa, whose day-to-day business is a far cry from the emergency room.
Care focus
Business, not service
Government collections
Complex sector 41
Understanding doctors
I 4 Whats NewS Issue 1O October 1998
Chicago health care relationship
manager Lydia Crowson juggling clients
across ten states
Before moving to Chicago, Lydia
Crowson was based on the east coast
- same country, same situation? 'Not at
all,' she says. 'That is one of the
difficulties with
health care financial
services in the US.
So you can never
say you know
everything about
this industry
because it differs so
much from place to
place. Jeff Gonner
will explain about
how physician-
owned multi-
specialty practices
emerged - this type
of structure is very
typical for this area
of the Mid-West;
you won't find it in,
say, Boston. That's what makes this
industry so interesting - there is no such
thing as cookie-cutter business.'
The concept of multi-specialty groups
evolved primarily in response to
community needs. Iowa is typically a
rural, agri-focused state, with relatively
low population density. Providing
specialist health care to scattered
populations didn't make sense, so group
practices emerged to create economies of
scale. 'I believe we are the oldest multi-
specialty group in the state of Iowa,' says
Gonner, who has been CFO for over ten
years. 'We've celebrated at least 50
anniversaries. When groups were first
created, they tended to focus. Some on
primary care, others, like ours,
concentrated on specialist care. Focus is
very important here because as specialists,
you depend on primary care referrals that
you may not get. This led overtime to the
evolution of a group which now
comprises at least 50% primary care and
50% specialist care physicians.'
If the Group has created a viable and
secure referrals source for its specialists,
the two local hospitals are still in
competition for their
business. 'You have to
remember that,
unfortunately, medicine
in the US is a business,
not a public service. In
the US now, we're seeing
an integrated network
concept coming in where
groups are trying to line
up with a single hospital,'
Gonner notes. 'However,
this shift is only one of a
huge shake up occurring
throughout the US health
care industry which in
many ways dominates
developments at every
level, even finance.' But
before going into that aspect, first some
numbers on Gonner's Group: It serves
patients in a 45 to 60-mile radius from its
main location in Dubuque and has in
excess of half a million patiënt visits a
year to offices located throughout the
region.
'There are some 85 full-time
physicians and we employ
close to 40 mid-level
providers, like physician-
assistants, physical
therapists, psychologists,' he
explains. 'And we also have
about 720 support staff. I'll
be honest with you, 1 think
that is a little high. But the
reason is because we have a
number of satellite offices
and these are not usually
efficiënt in terms of staffing.'
The Group generated a real turnover in
excess of USD 70 million in 1997, but
because government reimbursements on
health programs are only 50 cents on the
lowa dient Jeff Conner,
relying on Rabobank for
debtneeds
dollar, actual collections are much lower.
However, the Group also owns its own
insurance company, offering health plans
to employers, 'making our income around
USD 68 million,' Gonner calculates.
It is this kind of financial reality in the
health care industry, i.e. the discrepancy
between actual turnover and the amount
actually reimbursed that makes this a
truly complex sector, especially for most
banks. 'That's why we need financial
institutions which understand our
industry,' Gonner says. 'If you look at our
financial statements, they are not like
other businesses. I don't know whether
they are taught in medical school or if
they are bom with it, but physicians
rarely leave capital in the business. They
try to distribute their profits. It's been a
challenge to retain earnings. A bank must
understand the dynantics of the group, it
has to know our business and the
environment in which we function.'
On further reflection, he adds: 'I think
another thing that a bank can help us
with is introducing some financial
discipline to the physicians. On the other
hand, that is a fine line
because if - and I think its
safe to generalize about
professional groups like these
- the bank is perceived to be
overbearing, then they'11 find
another institution for the
transaction. The bank has to
understand the physician's
psyche, they don't like no for
an answer, so you have to
say it without saying the
word. Or come up with an
alternative. What you do, I
find, is come up with two ol^|
three, and let them choose. I don't know
how it is elsewhere - Lydia has a lot of
experience on the east coast and she says
it's different there.'
