OBL History

OBL’s have been scattered across the country for decades. Historically, OBL’s were few and far between. In 2008 Medicare increased reimbursement for outpatient procedures, driving the growth of OBL’s. With the ASC/OBL market rapidly growing, lower estimates predict the OBL market to grow to $14.5 billion by 2027, with more aggressive estimates of $88.77 billion by 2023. While the dollar growth may be appealing to administrators, government and commercial payors, and the lobbyists who fight for their respective sponsors, the real credit for this growth should be given to physician entrepreneurs. Physician entrepreneurs have at great personal and financial risk, leveraged their procedural skills to create a work environment that is streamlined, effective, and both patient and physician centric. The number of physician entrepreneurs appears to be skyrocketing. This growth may be due to a combination of COVID, physician desire for autonomy, physician burnout due to unnecessary and exhaustive administrative hospital-based barriers and opportunity. Many physicians have turned towards the OBL market. Given the minimally invasive nature of IR, the low complication rate, and the ability to physically reproduce a Cath lab in the outpatient setting, the outpatient setting is designed for the Interventional Radiologist. Indeed, the fastest growing market share belongs to interventional radiology.

Procedural Excellence

Procedural excellence and independent decision making is a necessity for anyone who wants to operate in an OBL, especially a sole operator. Ideally the sole owner is IR four or more years out of training, allowing for additional medical and procedural training before transitioning into an OBL. The trainee/early career IR should work hard to develop independent decision making. In sole ownership there is no attending oversight. While “at the elbow” mentorship may exist in an OBL, it certainly does not exist in an independently owned OBL. If an early career IR is in a big practice and has constant handholding or “oversight,” he or she will not develop the independent thinking and decision making needed to treat advanced disease in an outpatient setting. If a trainee is contemplating a future in an OBL, he or she should start to think like a sole operator early on in residency, while the luxury of support of residency and fellowship is in place.

Clinical Practice

OBL ownership involves a strong clinical acumen. For decades there has been debate about the need for an IR to have strong clinical skills. In the OBL setting, there is no debate. If you are not a strong clinician with decent bedside manners and an ability to connect with patients, you will not survive as a sole owner OBL. Evaluation and management (E&M) revenue will account for 5%-20% of collections. The trainee should participate in an active medical clinic 1-2 times a week. Ideally, he or she learns longitudinal care (following patients from initial consultation to procedure/recovery to final clinical follow-up), how to document and code clinic visits, and takes note of the equipment and facilities necessary to operate a clinic. A strong medical skill set is expected in every other field except radiology and pathology. However, a sole operator must buck this trend and understand that fundamental clinical excellence is a must when owning an IR practice. Prior to making the decision to go this route, an IR must really understand their own personality. No matter how good a doctor is at interventional procedures, if a patient does not feel cared for, doesn’t trust the medical decision making, or is simply turned off by the doctor’s demeanor, this will lead to a failing lab.

Financial

Sole owners often risk everything to build their labs. Every owner/operator will tell you that they have leveraged their houses, lived without a paycheck for months and even years, and spent many sleepless nights hoping to keep the doors open. A sole operator must have the direction, vision and personal strength to bear through the first 1-3 years of great instability. Unlike in a partnership, there is no one else to absorb the bills that start coming early, far before the first patient. The sole owner must be prepared to write these checks, which can become difficult and incredibly stressful especially if he or she is also supporting a family. They may start to question why they have taken this leap of faith. By researching, investigating, and ultimately seeking autonomy, the sole operator must be totally dedicated to the process. Expenses include leases, construction costs, staff, marketing, website development, contracting with payors, all before a single patient can be seen. The sole operator must look at this phase not as a dream that will pay for itself, but as a hard business, with a significant upfront cost of 500K-2M. Banking relationships are the key to moving through this phase. Commercial and healthcare banking is distinct from traditional personal (mortgage, checking account) banking. To start, an IR will want to reach out to his banking contacts and shop a loan on the OBL project; they will want to pick a bank that becomes a partner. Many relationships in the sole ownership are like a marriage; pick once, pick wisely, and make sure interests are aligned. Historically, banks have not understood the OBL market and much due diligence was needed on the banking end, which became the responsibility of the sole owner. Of late, more and more banks understand the OBL language. The sole owner will want to engage with an OBL that understands the landscape. The sole owner will need a proforma. This used to be a limiting factor for the sole owner, the doctor who has never taken a business class, and truly does not know what is realistic in an outpatient setting. Many management companies will use this as their added value, and many doctors have paid tens of thousands of dollars to have a ‘market analysis’ or a proforma built. A sole owner should network, ask questions, and find available free resources to provide these proformas. Fractional CFOs are another answer to proforma development. Banks will need to see the proforma as well as personal financials prior to any engagement, it behooves the sole operator to have these prepared.

Location and Lab Development

Once financing is procured, the sole operator has to find a space. The shopped space may range from an existing surgical space to a free-standing dilapidated building. Any space has potential and the sole OBL owner should look well beyond the more traditional and familiar medical office buildings. Location, community need, cost of real estate, certificate of need, and available finances all contribute to finding the perfect space to launch. The decision to lease versus buy usually comes down to how much financial risk the sole operator is willing to take, and whether he lives in a location with a high or low cost of living. In general, the more control one can have over all of the variables of the lab the better. Being able to control the building not only at the time of construction, but through the life of the lab favors a purchase if the sole operator can afford it.

Mistakes in leasing or ownership are very common, costly and time-consuming, adding 6-12 months to the opening date and potential loss of tens of thousands of dollars. While a commercial real estate company well-versed in the ASC/OBL landscape is an ideal resource in this early stage, in many states this can be hard to find. In this case, the sole OBL owner will have to rely on a commercial real estate agent and a contractor who has experience in medical construction when shopping for a space. Usually, the contractor and the real estate agent will work with the owner to vet a site before a legal commitment to the space is made. With the real estate and construction lead working together, the costly need to break the lease if the site has limitations on construction can be avoided. Another option is to consider a development partner (usually a company) who offers knowledge of medical construction and financing to purchase rather than lease. Unfortunately, this partnership by definition may require the IR to relinquish control at a very early stage, which is not the goal of sole ownership. Site procurement can start early, while the owner is working in another capacity. It is worth taking the time to get into the correct space with the correct deal.

Ideally the sole owner is in a medical community that he or she knows well. One can leverage one’s knowledge of the local market to pick the most profitable location. It is not uncommon for a sole operator to change sites several times during the development phase. Building non-compete issues, structural issues with fixed units or lead walls, and compliance with accreditation construction demands, not to mention proximity to patient catchment and proximity to the doctor’s family home all lead to the need to shop multiple leases. Advisors can help with picking a space, but this is an area where the sole operator may have an instinct and a vision. One must be able to see oneself going to work every day in a space that reflects the individual personality, for themselves and their patients. Sole operators take the financial risk to build a professional “home” and the physical space and design should be a place that is personally calming and allows the doctor to be the best version of themselves. Afterall, a lot of time will be spent there, and one benefit of paying for it all, is building to one’s liking.

Once the property is identified, designed and constructed, maintaining the facility offers another area of entrepreneurial excitement. If the property is owned by the IR, maintaining parking lots, landscaping, roofs, gutters, entrances, security systems, surrounding trees, dumpster location, storage, handicap parking requirements, parking lot grade, HVAC systems, pest control, signage, are all fun areas to learn about with an entrepreneurial spirit. In a leased property, one does not have to worry about any of these variables, however the lab owner loses the ability to operate the space to their liking. Whether owned or leased, a significant amount of tenant improvement cost will go into building the lab, so ensuring that the practicing IR is excited about the location and space is a must.

Operations

Once the real estate is selected, operations can begin. This is the most exciting part of being a physician entrepreneur. Every detail of the new practice can be shaped around the sole physician. While the sole operator has absorbed all of the risk and stress of the job, the ability to operate the clinic with complete freedom makes it all worth it. The sole owner can hire staff that will absorb the owner’s biggest stressors, and allow the doctor to practice medicine as he or she sees fit. Staff should be hired around the doctor’s personality and needs. There are no administrators to dictate who he or she has to work with, or what hours the staff works. After selecting the staff that most conform to the doctor’s personality, and needs of the corporation, one can start to practice medicine in a way that best utilizes one’s skill and knowledge base. The sky becomes the limit.

The many and complex operations of a clinic rests on the sole operator, from the hiring of personnel to the ordering of supplies. Once open, the operations of the clinic and OBL fall on the owner. It is assumed at this point that the sole operator is medically and procedurally excellent. Most of the sole operator’s energy will go towards operations, a lab without streamlined operations will flounder, and may ultimately fail. Operations include equipment selection and maintenance, electronic medical record (EMR), payroll, facilities maintenance, patient intake, invoices, disposables, taxes, marketing (on the ground and web-based), print materials, revenue cycle management (billing, coding, collections, banking, pre-authorization), office design, benefit selection and an endless number of details such as…. who opens the mail? The details are endless and ongoing. It will take several years, but eventually the successful operator will be well-versed in each of these operational entities. Another option is to hire a management group to handle the operations. It will always behoove the sole operator to know as much as he or she can about the operations. Even if this is hired out, ultimately it is the sole operator’s money paying for the management company. A successful sole operator will understand all of the operations in detail, then hire jobs out as needed. If one does not understand the details of the operations, one cannot properly vet a management company. The sole OBL owner must run a lean business, pay significant attention to detail, practice common sense and have a grit and work ethic that does not allow for failure.

Benefit

After all of the headache, stress, and sleepless nights while launching a sole practice, the benefit becomes clear. The sole owner is able to create a work environment centered around the sole operator. The work will be efficient, the staff and doctor will want to be at work, the patients will sense this and be thrilled to be cared for in a well-functioning space. With the staff, doctor and patient all on the same page, cases will go smoothly in record time. The satisfaction of creating the healthcare environment where everyone wins, will be so satisfying that you won’t be able to imagine it any other way.

What You Give Up

In all practice models, sacrifices must be made. In sole ownership, all of the risk and decision-making falls on the owner (as does the benefit). Sole ownership can be isolating; there are no partners to bounce cases or business decisions off (the benefit being all decisions are your own.) By virtue of being in the outpatient space, an IR loses out on very satisfying cases such as GI bleed, stroke, trauma, emergent TIPS. One reason to start this practice model later in life is to ideally perform enough of these that they are not missed.

A sole owner has the benefit of making all of the decisions and the downside of absorbing all of the risk. An IR who picks sole ownership for the money, or because it seems “easy,” will fail. The right person for sole ownership is one who can see it no other way.