What NASA probably can’t tell you about expansion
How to launch a satellite
If you’ve looked at the options for growing your practice merger, affiliation with other practices, finding management investors and you don’t like any of them, there is still another way to grow your business, and it doesn’t have to be expensive or time-consuming. Steve Earnhart, MS, president of the Dallas-based consulting firm Earnhart & Associates, says the answer is to set up a satellite office.
Earnhart knows about satellite facilities not only does he advise physicians on the technique now, but he once managed a practice with 18 such locations. "You open a satellite when you aren’t growing well or if you see erosion," he explains. "It gives you an inroad into a new market without costing a lot of money."
Likewise, if a practice is doing well, it will outgrow its office space. "Moving or adding on is expensive. Opening a satellite is a way to circumvent this."
Earnhart says there are five easy steps to opening a satellite:
1.Know your patients.
The first thing you should do, he says, is to study the demographics of your patients. "There are some good software mapping programs that can help." He uses Maplinx. These programs allow you to input either ZIP codes or telephone area codes and prefixes for each of your existing patients. The program then gives you a visual indication of where your patients come from.
Earnhart compares it to the weather maps you see on television the hottest areas are colored red, while the coolest are blue or purple. "I hire college students on weekends and pay them minimum wage, provide them with snacks, and let them do all the data input."
Once you know where your existing patients are, you can narrow the locations where a satellite office would draw adequate patients but not cause competition with your existing office.
If you are ambitious, you can also look at historical data, loading in the information for your patient bases for the last few years. "That can show you where you are losing or gaining market share," says Earnhart. The software programs he uses allow you to graph such trend data, too.
2. Know your competition.
"Look at where your competition is on the map you just made and determine how much business you are drawing from them," he says. For example, if you have a hot area right around a competitor’s office, you know you are a big draw and there is no need to put an office in that location. "If you are not drawing from them, consider it one of your potential locations."
3. Choose your location.
Once you know where you have patients and where you don’t, where your competition is and where they aren’t, you can start to narrow your options for satellite locations. Along with those considerations, Earnhart says you should make sure you choose a location with high visibility and traffic. "Scout the location," he warns. "If you do that, you’ll find multiple potential locations." Don’t rely solely on your maps to determine where to set up shop.
Among the best places to consider are strip malls, he says. "They have visible signage and usually a lot of traffic." One of the most successful operations Earnhart heard of was placed right next to a grocery store.
Taking out ads in the major paper in your market is probably a waste of money for this kind of endeavor, says Earnhart, but an ad in a local free sheet is appropriate. "They don’t usually cost more than $100." Even better is to use flyers around the area where you are setting up the satellite office. This option is cheap you write the flyer yourself on your computer, copy it on brightly colored paper at a copy shop or in your office, and pay someone to deliver them to area homes and businesses. Earnhart says it costs him $300 to $500 to deliver the flyers in a seven- or eight-block radius.
"Be sure you also send flyers to all your referring physicians and post one in your office so existing patients know there is another office opening," he says.
5. Start slow.
Earnhart recommends that you start by staffing the new location just a half day per week or every other week at the beginning. "That lets you make the minimum commitment while you see how successful it is."
Have potential patients call a number other than your main line to make appointments at the satellite, he says. "That way, you know when that line rings exactly what it will be about."
For the one morning or afternoon you open the office, simply take your equipment and your staff with you to the new location. "Whenever anyone comes in, track where they are from. Write down that information and at the end of the week, load that into your computer program." Earnhart says if the people are coming from a very wide area perhaps from the next area code, then you might want to consider another satellite location.
Within three months, he says you should be filling that half day and looking to expand to another half day. "If you aren’t, then shut it down. It’s not working."
After you fill two half days with appointments, then go to one full day and one half day, says Earnhart. After that, "you may want to consider hiring more staff."
The only costs for the experiment are the short-term lease, signage, and the minimal advertising, he says. "Compared to expanding your office or finding new space and having to let all your patients, payers, and vendors know, it’s cheap."
Another option that can keep the cost of space down is to sublet from another practice. But Earnhart warns that this can backfire. "If you are a general surgeon and you sublet space from an internist, your other referring internists may get upset and refuse to refer to you," he says. For some, however, it can work. Optometrists and ophthalmologists are a good pairing, for example.
If you are still nervous, he adds, look in the yellow pages for practices with multiple locations that are not your direct competitors. "Call up the administrator and offer to buy him or her lunch. Get their advice. If they aren’t your competition, they’ll talk to you."
There also is a more expensive option: building or renovating an office to suit your needs. This is the path taken by Grosse Pointe (MI) Allergy & Asthma, a five-physician practice that recently opened a new satellite office 15 miles from its main office.
"We needed to increase our geographic draw," explains Susan Haro, practice administrator. "There was no competition for us in the area, and the hospital we were affiliated with was moving into the [new] area."
Haro says her practice took an existing "cookie-cutter suite" offered by the hospital and made some changes to it to suit the practice’s special needs such as having special counter ledges for aerosol machines used in treatment. The practice also spent some money to have television mounts put in every treatment room to facilitate patient education.
While finding an existing space might seem cheaper and easier, Haro says the needs of Grosse Pointe Allergy & Asthma would have required such extensive renovations that the cost would have been prohibitive. "When you start talking about moving plumbing, the costs really start to escalate," she says.
Haro says she understands those who take a more conservative approach to expanding a practice, but her situation was unique. "We knew we were adding another physician already, and we knew the hospital would be a draw for new patients." Currently, the satellite office operates five days a week and two late evenings. "We did start out with less time and gradually increased hours," she says.
Two physicians staff the facility 60% of the time, and within a year, Haro says there will be two full-time physicians at the satellite office.
If you decide to take a bolder step in your expansion, Haro says you should be sure you get the advice of your accountant and an attorney. "The accountant can help you predict where the extra office will take your business, and the lawyer can help you with your contracts."
She also recommends that you ask existing staff for a wish list of items or amenities they want in a new office. If you are having something built or remodeled to order, says Haro, you might as well get input from your staff.
Having a physician check out potential sites with you is also a must, she says. "It smoothes the process if they are the ones reporting to the board."
She also advises that the designer and architect work together. "We had a room size that was set, but the furniture we chose didn’t fit into it. It would have been easier if we had them work in tandem, rather than consecutively."
While there is little data available to Haro to track how well the new office is doing it only opened in February preliminary data shows that there is a 35% increase in revenue. "And that’s with it not being fully staffed."
• Norman Chenven, MD, President, Chief Executive Officer, Chairman of the Board, Austin (TX) Regional Clinic. Telephone: (512) 419-0707.
• Marci Thomas, CPA, Partner, Director of Health Care Enterprise Risk Services, Deloitte & Touche, Atlanta. Telephone: (404) 220-1500.
• Jim Haught, MBA, Regional Vice President, Ortholink, Atlanta. Telephone: (770) 350-8070.
• Naomi Fuchs, Executive Vice President for National Development, National Independent Practice Association Coalition, Oakland, CA. Telephone: (510) 267-1999.
• Steve Earnhart, MS, President, Earnhart & Associates, Dallas. Telephone: (972) 713-6626.
• Susan Haro, Practice Administrator, Grosse Pointe Allergy & Asthma, Eastpointe, MI. Telephone: (810) 447-4200, Ext. 231.
• Janet McCauley, MD, Mid-Atlantic Women’s Care, Norfolk, VA. Telephone: (757) 425-1600.