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Give expansion plans for your practice a 'stress test' to ensure they're winners

Article-Give expansion plans for your practice a 'stress test' to ensure they're winners

Key iconKey Points

  • A feasibility study can help determine whether a potential business venture is viable.
  • Break the study into three parts: technical and organizational, market and financial.

Dr. Fabrizio
FOR SOME, SEEKING CREDIT in today's economy feels like looking for water in the desert. But there is a possible oasis, and for physicians looking to add to their aesthetic service mix, it takes the form of a feasibility study and a solid business plan. "Many practices and physicians are finding they have to make a business case before the banks will give them money. It's more competitive now, and they need to make sure they spend time on the due diligence at the front end," says Nick Fabrizio, PhD, FACMPE, FACHE, a principal of the MGMA Health Care Consulting Group, headquartered in Englewood, Colo.

A feasibility study can help to determine whether a potential business venture is viable. It examines the market; cost and associated expenses; potential income and revenue; regulation, licensing and compliance issues; and any other relevant items. It often proposes several possible scenarios, identifying the best one and therefore also providing material for use within a business plan — should the best situation actually be feasible.

"Determining early on that a business venture will fail saves time and money," according to Ken Brockman, CPA, and author of the paper "How to perform a feasibility study and market analysis to determine if an ancillary service makes sense."

TO THE POINT Mr. Brockman specifies that a feasibility study is an investigation and one that must start with clear goals. Overly broad parameters will have a negative effect on the study's results and conclusions. Objectives for the addition of an additional service often include quality of care goals in addition to financial targets. Ultimately, physicians want to achieve a return on the investment, while improving the quality of care available to their patients. "Quality is very important for elective procedures," says Dr. Fabrizio, noting many patients will be referred by word of mouth.

Once the goals are determined, Mr. Brockman breaks a feasibility study into three segments: (1) technical and organizational, (2) market and (3) financial. "Within each area, the specific constraints should be listed, risks weighed and potential alternatives recommended," Mr. Brockman tells Cosmetic Surgery Times .

ORGANIZATIONAL/TECHNICAL FEASIBILITY Organizational issues relate to the structure, governance, management and staffing of an organization and include regulatory restrictions or limitations. Naturally, technology refers to the needed equipment and should uncover availability and/or cost constraints.

Dr. Fabrizio recalls a ten-physician group practice in which two members decided to expand into laser hair removal; each had an afternoon to schedule procedures. An unexpected flood of patients resulted in a six-month scheduling backlog. "They quickly lost their market because patients weren't going to wait," Dr. Fabrizio relates. Thus, it's critical that physicians be able to accurately project capacity, availability of equipment and time, and total patient volume.

MARKET FEASIBILITY Patient volume can be pulled from the market feasibility segment, which should determine whether the group can establish a market niche to compete effectively with others. Is there a demand for the new service? Who's the current competition? Can the newcomer set himself apart?

"One should make certain to review all the potential capabilities of the new... service. There may be a competitor in the market, but by providing better access for the patient (e.g., through evening appointments or a more convenient location) the group may find a market niche that will make the ancillary service successful," counsels Mr. Brockman.

Estimates should be calculated for each physician since patient populations can differ significantly from community to community and practice to practice. For elective aesthetic procedures, a physician will need a real read on patient volume that is not only willing but able to pay for the cosmetic service.

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