On good advise

Targeted consulting for doctors, hospitals, banks and investors

In the summer of 2007, general practitioner Dr. Werner Huber (name changed) fulfilled a life-long ambition and opened his own practice. For a six-figure sum, he had the opportunity to take over a solo practice. On top of the initial expense, he would have to finance renovations and install some more technical equipment. After reading an estimate from the National Association of Statutory Health Insurance Physicians (KBV) – namely that one third of resident doctors were under increasing financial threat, and that the “Creditreform” database expected the number of insolvencies to rise again – Huber decided to reconsider his plans. He turned to the Steinbeis Consulting Center for Healthcare Business Research & Management for an independent expert opinion.

Despite increasing revenues, the number of insolvent doctors’ practices is rising rapidly. The Steinbeis Consulting Center for Healthcare Business Research & Management helps doctors to reorganize their practice in good time and so head off the worst case scenario. It provides start-ups with a comprehensive range of consulting services and support from experienced specialists. With a constantly updated healthcare database to draw on, the center also has a comprehensive battery of business and economic data.

Dr. Huber’s case only exemplifies what is happening with lots of doctors in Germany, who, for age reasons, are selling up to startup practitioners keen to take on their practice. Until the 1993 Health Care Structure Act, doctors had no restrictions in setting up their own practice. Since 1993 doctors tend to buy or take over an up-and-running practice. The number of doctors’ practices in Germany has stagnated, in fact since 1998 it has only grown by 0.9 per cent. This trend mainly reflects the growing number of practices merging into shared practices. Between 1996 and 2006 the number of general practitioners working for national health schemes went down by 5.5 per cent, the number of specialists grew by the same percentage. This is also a sign of medical progress which primarily affects specialist numbers: treatment that used to be carried out by hospitals can now also be carried out in practices. As a result there was a veritable boom in the number of practices in certain specialist areas such as oncology/hematology, anesthesia, cardiology and nuclear medicine.

Today’s practices are like modern service providers. They need business strategies. The benchmark for Dr. Huber’s takeover was based on the average turnover of a general prac tice in 2006: 208,062 euros. Of this, 82.9 per cent counts as health scheme practice, 15 per cent is private and 2.1 per cent comes from other sources of income. After deducting 52.8 per cent for costs the profit margin is 47.2 per cent. By comparison, shared practices do much better: remaining profits are 53.6 per cent. Dr. Huber’s decision is affected closely by a verage investment and financing costs. In 1990, taking over a solo practice (independent of the specialist field), required average financing of 143,991 euros, below the cost for a new practice which stood at 149,305 euros. This reversed when the Health Care Structure Act came into effect such that by 2004 it cost 203,402 euros to take over a practice in the former West German states (vs. 133,169 euros in the former East); a new practice in the West cost 136,512 euros (vs. 115,098 euros in the East).

Central to every doctor’s practice is how workflows are organized. Reinhold R. Wolff is an architect, planner and management consultant in the team of specialists working at the Steinbeis Consulting Center. He concludes that the biggest expense for doctors is its premises. A location can slow down workflows, it can also add personnel costs. With standard layouts, doctors spend an average of two hours a day moving around the practice. In the average solo practice there are three workers for every doctor and they also spend an average of two hours a day moving around. With carefully thought through layouts, the amount of time moving around can be cut by up to eight hours – the equivalent to one fulltime
employee. Clever layouts can slash costs by around 10 per cent per year. The Steinbeis experts check practice layouts and advise doctors on start-ups or conversions.

The Berlin-based Steinbeis Consulting Center does not just advise doctors like Dr. Huber. The center also analyzes hospitals and conducts business evaluations on hospitals, doctors’ and dentists’ practices, the emergency services and aid organizations. The center’s scope of services also encompasses comprehensive business consulting and project planning in the field of doctor’s premises, medical centers and buildings for the emergency services. Banks and consulting companies can also refer to the research database.

With future-oriented, ground-breaking projects, experience shows that it is often not only cheaper, but also much more efficient for practices and hospitals to carry out the work in-house, with the more scientific support of experts - rather than simply call in external advice. The Steinbeis Consulting Center works closely with the Institute for Healthcare Management at the Steinbeis University Berlin and the Steinbeis Business Academy in this field. The degree in Healthcare and Social Services Management (Bachelor of Business Administration) is tailored to the specific needs of healthcare.

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