Why Healthcare Companies Get Bigger… and Worse

WEBVTT

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All right.

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We're back today.

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We're talking about one of the most

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celebrated words in business.

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scale.

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You can't avoid it,

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especially if you're on LinkedIn.

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And in most industries,

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scale sounds like progress,

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more locations, more efficiency,

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bigger footprint, better margins.

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But as we've discussed before,

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healthcare isn't most industries,

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because when you try to scale something

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that is built on trust, judgment,

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mentorship, relationships,

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and local culture,

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you may grow the shell while hollowing out

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the soul.

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That was the line that resonated for many

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from before.

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Your latest article is part two of the

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scale series,

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and this one gets more operational.

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What can't be standardized?

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what scale is often used to justify and

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what operators should actually be

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measuring if they want to know whether

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they're building something real or just

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getting bigger because there is a

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difference.

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So let's start here, Larry.

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Everybody says they want to scale.

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I feel like that's even before business

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starts, people are saying, well,

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how can we scale this or when will

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we scale?

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But what do most health care leaders

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actually mean when they say that word?

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Let's make sure we understand the terms

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first.

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Well, let's start out this.

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They almost never mean what they think

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they mean.

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And the reason I say that is because

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the word scale has just become too

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ambiguous.

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It is a catch-all phrase now.

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And in my experience,

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which is over forty years now of watching

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these things happen,

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you always hear we're going to scale this

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almost always means one of two things.

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Either someone has figured out a genuine

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model worth replicating or somebody has

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raised enough capital that they're

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confusing funding for proof.

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And in my experience,

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it's usually the second.

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In healthcare,

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this distinction matters enormously

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because you're not scaling a software

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product or AI or compute.

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You're scaling humans,

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licensed professionals.

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These are complex patient relationships,

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regulatory environments that don't care

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how good your pitch deck is.

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The moment I knew this word really,

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really became dangerous is when I started

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organizations celebrate pins in the map,

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location count like it was a clinical app.

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We went from twelve and eighteen months.

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Everybody applauds.

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It was sort of this run up era

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where more was better,

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more locations were better.

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And nobody really did ask,

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did the model hold?

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what happened to the people already there

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that you acquired?

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How many stayed after they left and how

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many are there now?

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That's when scale stops being a strategy

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and really becomes a story you tell

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investors that we're getting bigger,

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so therefore we have scale.

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Where it is not,

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you've heard me say this before,

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buying things is not an advanced

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competency.

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That's the easy part,

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truly doing the hard work

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and scaling in its truest definition is

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rigor, discipline, and agony, frankly.

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In the article,

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which people can find in your sub stack,

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and we'll put the link in the show

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notes,

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you say some of the most valuable things

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in healthcare cannot be scaled through

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standardization,

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like other businesses or industries.

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What are some of those things that cannot

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be scaled?

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Hey, Jimmy,

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I lost you there for a second.

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Can you do the question too?

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Go to question two again.

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Yeah, something happened.

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We got to talk to you.

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Yeah.

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So in the article on your Substack, which,

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by the way,

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we'll put the link in the show notes,

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you say some of the most valuable things

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in health care cannot be scaled through

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standardization,

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like under other industries,

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because health care is different.

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What are some of those things that cannot

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be scaled?

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Yeah, I'll give you four of them.

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And I think they're my top four.

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First is clinical judgment.

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And that's the capacity of the therapist,

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the dentist,

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the doctor to not only decide clinically

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what's going on, but to read a room,

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to adapt to the patient,

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decide what protocol needs today.

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When do you need to listen more?

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When do you need to have hands on

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more?

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You can train for this,

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but you can't systematize it into a

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workflow.

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The second is trust.

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And that's

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runs rampant throughout an organization.

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That is the currency that matters.

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Between a patient and a clinician,

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for example,

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between a clinician and their manager,

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their business person,

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between the front desk and corporate,

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trust gets built locally

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over time through repeated interactions.

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But you can create conditions for it,

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but you can't scale for it.

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You cannot mandate trust from a home

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office.

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So we have clinical judgment and trust.

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The third is culture.

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Culture doesn't travel in a memo.

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People get this wrong because they try to

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say we have great corporate culture,

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while not recognizing that microcultures

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within individual locations matter.

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They matter a lot.

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It doesn't scale at the speed of a

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rollout.

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It scales at the really how deep is

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the bench of management and appreciation

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for it.

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Most management teams don't have that

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bench.

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They have slides.

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So after clinical judgment,

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trust and culture,

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I would say the last one is under

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the group of call it mentorship or tacit

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knowledge skills.

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And these are the, you know, an example,

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the senior clinician who pulls in.

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you know, a PT, you know,

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new PT asides on a Tuesday and says,

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you know, when this comes up,

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here's what I would do.

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It's the interactions that don't happen in

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any kind of standard operating procedure.

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It's the way people joke with one another.

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A little bit of that is culture,

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but it's really about how to get along,

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teamwork, collaboration, tacit knowledge,

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what we call the new smarts in our

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company.

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But that's half of how clinicians actually

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develop, if you think about it,

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through all those collaborative efforts.

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Strip that out of the workforce and you're

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in trouble.

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So those four things, I think,

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are the most things we take for granted

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that we try to inculcate or indoctrinate,

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but we can't.

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You cannot scale those.

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You can only enable them.

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Yeah.

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Well, some,

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a quote from the article was the playbook

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transfers process.

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It does not transfer judgment.

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That sort of feels like anybody can write

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an SOP when this, then this,

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then this it's everything else it's

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experience,

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which is what we actually provide the

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service.

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So what does that look like in the

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real world?

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The playbook transfer process,

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it does not transfer judgment.

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yeah and the longer you know sort of

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the longer you're in a multi-site

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environment you know the more obvious that

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becomes so let's talk about processes

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documentation steps workflows how do you

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onboard a patient how do you handle a

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denial how do you close out the day

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all that travels actually pretty well you

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can put in a binder you could push

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it through an lms you could measure

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compliance against it you can retest for

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it and you can truly scale a lot

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of process

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But judgment is what happens when the

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situation doesn't match the binder.

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It's the clinician who reads a patient and

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knows that the standard operating protocol

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is wrong for that particular visit.

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Sort of the office manager who sees three

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subtle things go sideways on a Tuesday

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morning and doesn't need to call

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corporate, doesn't need the binder.

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They act and they act with pride and

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values and support of the organization.

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It's the regional director who knows,

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you know,

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which conversations do I need to sit down

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and have an adult conversation or what can

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I do by text or what can I

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do, you know, over video?

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And the reality is there are just hours

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and hours of variation to all this.

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And patients don't fit into a box.

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And so staffing situations don't resolve.

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The binders are great,

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but the activity is the relationships.

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And you don't ship that in an acquisition

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packet.

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You can't put that as part of your

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integration team.

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And at the end of the day,

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those are the things that really matter

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and leave a clinic running well.

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Now,

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I like to say you need owners locally,

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whether or not they're actual equity

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owners or they act like an owner.

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That is more than just a statement.

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That actually is implying to an

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organization,

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I'm not good enough to scale,

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therefore I'm gonna entrust it to an owner

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who will take clinical judgment,

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who will take trust,

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who will take mentorship and tacit

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knowledge skills,

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and truly put them in an aura or

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an environment where it matters,

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then you don't need to worry about scale.

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You've got local autonomy,

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accountability within structure,

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and you really have a tremendous operating

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platform.

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Let's talk about culture because that word

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gets thrown around a lot.

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I think it's one of those words where,

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like you said in the beginning,

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people think it means something,

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but it's actually something else.

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Why do so many organizations confuse

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culture with branding, colors, logo,

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pizza parties, funny things that they do?

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That feels like that's what you see,

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but that can't be culture.

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So why do so many organizations confuse

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culture with branding?

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Yeah,

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it's because branding is a little bit

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easier to produce and, you know,

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culture is really hard to build.

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But even back to branding for a minute,

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branding has a true economic equation.

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It is the equity value above and beyond

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your book value.

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So Coke's value as a brand,

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Google's value as a brand,

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Apple's value as a brand is much greater

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than their equity value.

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It's sort of like the word scale.

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We now take branding to mean so many

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other other things.

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And you're exactly right.

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It's a value statement on a wall.

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It's a logo.

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It's a

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set of core values in a lanyard, right?

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Hashtag that the marketing team does and

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all of those things.

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You can show it actually branding

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standards and things.

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We have those and you show them on

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slides, right?

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But culture is much more different.

00:10:17.606 --> 00:10:20.589
Culture is literally how does the team act

00:10:21.431 --> 00:10:23.231
when leadership isn't watching.

00:10:23.331 --> 00:10:23.951
And you know what?

00:10:24.111 --> 00:10:25.432
Most of the time in business,

00:10:25.493 --> 00:10:26.313
particularly healthcare,

00:10:26.374 --> 00:10:28.595
the leader isn't typically watching.

00:10:29.235 --> 00:10:31.557
It's how the manager handles a complaint.

00:10:31.636 --> 00:10:33.677
It's their emotional intelligence,

00:10:33.717 --> 00:10:34.258
if you will,

00:10:34.357 --> 00:10:36.798
whether a clinician feels safe with a

00:10:36.839 --> 00:10:39.841
difficult conversation or confronting or

00:10:39.880 --> 00:10:41.042
flagging a problem.

00:10:41.642 --> 00:10:44.802
What gets rewarded informally is your

00:10:44.842 --> 00:10:45.364
culture.

00:10:45.644 --> 00:10:48.504
What gets quietly tolerated can become

00:10:48.544 --> 00:10:49.184
your culture.

00:10:49.245 --> 00:10:51.806
How the front desk treats a frustrated

00:10:51.865 --> 00:10:54.346
patient at four fifty p.m.

00:10:54.408 --> 00:10:55.067
on Friday.

00:10:55.128 --> 00:10:56.067
That's your culture.

00:10:56.668 --> 00:10:58.448
You can't produce that in a quarter.

00:10:59.009 --> 00:11:00.029
You have to build that.

00:11:01.029 --> 00:11:03.533
over years and here's where the confusion

00:11:03.572 --> 00:11:04.793
between branding and culture,

00:11:04.813 --> 00:11:06.215
I think it's really destructive.

00:11:06.916 --> 00:11:08.798
When a platform grows quickly,

00:11:09.498 --> 00:11:12.020
leadership starts looking at ways that

00:11:12.041 --> 00:11:13.442
they transmit culture,

00:11:14.442 --> 00:11:16.885
which to get it again at scale and

00:11:16.926 --> 00:11:18.667
because the real thing takes too long,

00:11:19.067 --> 00:11:20.869
they default it to a shortcut.

00:11:21.802 --> 00:11:22.003
You know,

00:11:22.023 --> 00:11:23.803
they commission a values exercise,

00:11:23.823 --> 00:11:24.904
they print the t-shirts,

00:11:25.184 --> 00:11:26.346
they do all the hands video,

00:11:26.365 --> 00:11:28.226
they mistake the package for the product,

00:11:28.267 --> 00:11:29.648
and the team notices immediately.

00:11:30.188 --> 00:11:32.190
And this is a key integration area.

00:11:32.951 --> 00:11:35.331
You want to unify things,

00:11:35.652 --> 00:11:40.196
but also embrace and understand legacy.

00:11:41.035 --> 00:11:44.421
I think what I try to really lecture

00:11:45.081 --> 00:11:47.485
in my companies that are really collective

00:11:47.524 --> 00:11:49.727
quilts of various different companies

00:11:49.888 --> 00:11:51.990
targeted together through, in some cases,

00:11:52.051 --> 00:11:53.452
mergers and acquisition.

00:11:54.073 --> 00:11:55.836
And you have to honor the past.

00:11:56.567 --> 00:11:59.068
You have to celebrate the present and you

00:11:59.089 --> 00:12:00.409
have to embrace the future.

00:12:01.150 --> 00:12:04.332
And culture integration cannot absolutely

00:12:04.373 --> 00:12:04.854
be scaled.

00:12:04.874 --> 00:12:07.035
You don't buy a company and then say,

00:12:07.076 --> 00:12:08.417
you're going to inherit our culture.

00:12:08.797 --> 00:12:12.019
You partner with a company and individuals

00:12:12.600 --> 00:12:13.081
and you say,

00:12:13.160 --> 00:12:16.062
we are going to honor your past and

00:12:16.222 --> 00:12:17.703
understand your values.

00:12:18.304 --> 00:12:19.426
And you know what?

00:12:19.466 --> 00:12:20.886
We're not going to try to replace your

00:12:20.927 --> 00:12:21.466
values.

00:12:22.227 --> 00:12:24.509
we're going to try to augment them that's

00:12:24.548 --> 00:12:27.649
what a true company that understands the

00:12:27.730 --> 00:12:31.071
difference between branding and culture

00:12:31.091 --> 00:12:33.351
you've said so many operators use scale

00:12:33.371 --> 00:12:35.753
this term scale to justify decisions that

00:12:35.793 --> 00:12:39.033
simply make clinicians lives worse and

00:12:39.114 --> 00:12:40.934
clinicians are a big part of the product

00:12:40.955 --> 00:12:42.495
and if their lives are worse they might

00:12:42.535 --> 00:12:44.897
leave and then your organization gets

00:12:44.937 --> 00:12:46.616
weaker so what are the most common

00:12:46.797 --> 00:12:49.878
examples of using that scale to justify

00:12:50.219 --> 00:12:51.178
maybe poor decisions

00:12:51.894 --> 00:12:52.053
Yeah.

00:12:52.073 --> 00:12:57.378
So what I tell folks in integrations of

00:12:57.437 --> 00:12:58.097
companies,

00:12:58.118 --> 00:13:00.840
there are minor issues that will change.

00:13:00.940 --> 00:13:02.461
We might change your payroll vendor.

00:13:02.480 --> 00:13:04.163
You won't even blink at, you know,

00:13:04.202 --> 00:13:06.423
but you need to understand there are those

00:13:06.443 --> 00:13:08.125
that are a little bit more difficult to

00:13:08.164 --> 00:13:08.605
change.

00:13:08.666 --> 00:13:09.546
And you're going to say,

00:13:10.527 --> 00:13:12.008
But we're going to sit down and have

00:13:12.028 --> 00:13:13.849
a conversation and get to understand.

00:13:13.869 --> 00:13:14.548
And then there are going to be a

00:13:14.609 --> 00:13:16.649
third level changes over time.

00:13:16.850 --> 00:13:18.510
And I believe eighteen months is a good

00:13:19.010 --> 00:13:21.793
milestone marker that are harder to accept

00:13:22.133 --> 00:13:23.653
because you didn't always used to do it

00:13:23.693 --> 00:13:24.134
that way.

00:13:24.173 --> 00:13:25.414
You always use this vendor.

00:13:25.475 --> 00:13:26.695
Now we're going to ask you to change.

00:13:26.735 --> 00:13:27.515
And here's why.

00:13:28.613 --> 00:13:29.854
That is going to be tougher,

00:13:29.913 --> 00:13:30.934
but we'll get through it.

00:13:31.336 --> 00:13:34.599
But it's remarkably consistent in health

00:13:34.619 --> 00:13:37.581
care platforms, PT, dental, primary care,

00:13:38.241 --> 00:13:40.464
of what tries to happen.

00:13:40.803 --> 00:13:41.544
So here are a few.

00:13:42.326 --> 00:13:45.729
Centralized scheduling that ignores local

00:13:45.948 --> 00:13:46.528
reality.

00:13:47.309 --> 00:13:48.490
The markets are different.

00:13:48.530 --> 00:13:50.192
You've seen one market and you've seen one

00:13:50.231 --> 00:13:50.532
market.

00:13:50.552 --> 00:13:51.893
Therefore, the reimbursement is different.

00:13:51.913 --> 00:13:52.893
The employers are different.

00:13:52.932 --> 00:13:54.274
The health insurance is different.

00:13:55.174 --> 00:13:57.035
So somebody in a regional office is trying

00:13:57.056 --> 00:13:58.596
to optimize your schedule,

00:13:58.856 --> 00:14:00.376
but gets very little feedback from the

00:14:00.417 --> 00:14:02.538
local office and doesn't understand payer

00:14:02.578 --> 00:14:03.739
mix or case mix.

00:14:04.279 --> 00:14:06.041
Doesn't understand that a new grad can't

00:14:06.061 --> 00:14:07.942
see as much as somebody who's seasoned.

00:14:08.562 --> 00:14:09.562
all of those different things.

00:14:09.621 --> 00:14:12.202
So centralized scheduling is a good thing

00:14:12.222 --> 00:14:13.802
to think about scaling,

00:14:14.342 --> 00:14:16.423
but it has to have what I call

00:14:16.442 --> 00:14:18.543
a healthy tension between centralization

00:14:18.583 --> 00:14:19.644
and decentralization.

00:14:19.903 --> 00:14:21.803
It's always harder to manage in the middle

00:14:22.104 --> 00:14:23.605
than it is on either extreme,

00:14:23.644 --> 00:14:25.065
but that's what adults really good

00:14:25.105 --> 00:14:25.825
companies do.

00:14:26.284 --> 00:14:28.346
Productivity models that don't account for

00:14:28.426 --> 00:14:29.385
case complexity.

00:14:29.926 --> 00:14:31.586
If I am PT and I have a

00:14:31.666 --> 00:14:33.666
women's health therapist or a pelvic pain

00:14:33.686 --> 00:14:34.187
therapist,

00:14:34.206 --> 00:14:35.466
they're going to see a different number of

00:14:35.506 --> 00:14:36.246
patients per day.

00:14:36.746 --> 00:14:38.687
than somebody seeing garden variety ankle

00:14:38.707 --> 00:14:41.149
sprains and low back pain or traditional

00:14:41.250 --> 00:14:41.929
MSK stuff.

00:14:43.510 --> 00:14:46.113
That is something that is depressing that

00:14:46.153 --> 00:14:47.933
tries to get scaled across organization

00:14:47.994 --> 00:14:48.995
and typically fails.

00:14:49.254 --> 00:14:51.797
I think compensation models are actually,

00:14:51.817 --> 00:14:53.638
that's the first one I should have

00:14:53.798 --> 00:14:54.639
mentioned because

00:14:55.558 --> 00:14:58.259
um you cannot centralize and scale a

00:14:58.320 --> 00:15:00.039
compensation model because there's too

00:15:00.059 --> 00:15:01.940
many variations to it but what you can

00:15:01.980 --> 00:15:04.221
do is have a variable compensation model

00:15:04.480 --> 00:15:07.822
that scales actually quite well and in

00:15:08.001 --> 00:15:09.721
physical therapy and even dental hygiene

00:15:09.761 --> 00:15:11.962
we try we pay we pay everybody the

00:15:12.003 --> 00:15:13.383
same and so how do they make more

00:15:13.442 --> 00:15:14.962
money they become a regional manager we

00:15:15.003 --> 00:15:16.264
take them out of patient care or they

00:15:16.303 --> 00:15:17.703
become a aging coach

00:15:18.725 --> 00:15:20.546
And that doesn't make any sense.

00:15:20.566 --> 00:15:22.447
You want your clinicians being the rock

00:15:22.486 --> 00:15:22.947
stars,

00:15:22.988 --> 00:15:24.908
being the athletes that make the most

00:15:25.048 --> 00:15:25.370
money.

00:15:26.269 --> 00:15:27.711
And that's just how it should be.

00:15:27.751 --> 00:15:29.793
But in PT, particularly,

00:15:29.852 --> 00:15:32.154
it calls itself a doctoring profession but

00:15:32.274 --> 00:15:33.735
refuses to mature to one.

00:15:34.417 --> 00:15:36.638
Dental and primary care and orthopedic

00:15:36.658 --> 00:15:37.619
surgery and the like,

00:15:37.918 --> 00:15:39.860
they made that transition years ago.

00:15:39.961 --> 00:15:41.302
We just don't want it.

00:15:42.461 --> 00:15:43.903
And then I think, you know,

00:15:44.102 --> 00:15:45.803
I think the one that everybody cites too

00:15:45.924 --> 00:15:48.686
is what are the local decision rights or

00:15:48.725 --> 00:15:51.788
the authority around clinical decision and

00:15:51.868 --> 00:15:53.568
centralizing all those things when they

00:15:53.589 --> 00:15:54.450
should stay local.

00:15:54.610 --> 00:15:56.610
Even things like supplies and labs.

00:15:56.650 --> 00:15:57.532
I'll give you an example.

00:15:57.572 --> 00:15:59.773
We have, you know, in the dental world,

00:15:59.812 --> 00:16:02.715
there are tons and tons of different labs.

00:16:03.475 --> 00:16:05.817
But the reality is you should really try

00:16:05.856 --> 00:16:07.518
to scale it down to a handful of

00:16:07.557 --> 00:16:07.778
them.

00:16:08.563 --> 00:16:10.284
but then give that local clinician the

00:16:10.404 --> 00:16:13.267
opportunity to do within the confines of

00:16:13.307 --> 00:16:14.607
that narrowed down number.

00:16:14.927 --> 00:16:16.349
Doesn't typically work that way.

00:16:16.830 --> 00:16:19.630
And so, you know,

00:16:19.671 --> 00:16:21.272
you have to have both things working and

00:16:21.292 --> 00:16:23.793
that healthy tension around decisions and

00:16:23.833 --> 00:16:24.375
everything,

00:16:24.414 --> 00:16:25.916
but you're having a really clear line of

00:16:25.936 --> 00:16:27.797
distinction between what are your decision

00:16:27.836 --> 00:16:30.138
rights, what is your judgment,

00:16:30.499 --> 00:16:32.600
and what needs to go up the flagpole,

00:16:32.620 --> 00:16:33.921
so to speak, to corporate.

00:16:34.985 --> 00:16:36.226
One of the strongest lines in the article

00:16:36.246 --> 00:16:36.826
I thought was this.

00:16:36.866 --> 00:16:38.607
The metric keeps counting locations.

00:16:38.707 --> 00:16:40.568
The damage is happening inside of them.

00:16:40.589 --> 00:16:41.708
This goes back to what you said in

00:16:41.749 --> 00:16:43.529
terms of pins on the map.

00:16:44.230 --> 00:16:46.390
What damage gets missed when you're paying

00:16:46.431 --> 00:16:48.272
attention to number of locations or pins

00:16:48.312 --> 00:16:48.792
on a map?

00:16:49.413 --> 00:16:50.993
What damage gets missed probably before

00:16:51.033 --> 00:16:52.994
you know something even bigger is going to

00:16:54.115 --> 00:16:54.375
happen?

00:16:54.575 --> 00:16:57.056
That's the heart of the problem here is

00:16:57.655 --> 00:16:59.297
unit count is an easy metric.

00:16:59.336 --> 00:17:01.018
You can say it on a call.

00:17:01.057 --> 00:17:02.859
You can have ribbon cuttings and show

00:17:03.595 --> 00:17:03.894
you know,

00:17:03.914 --> 00:17:06.215
the local politicians with you there.

00:17:06.635 --> 00:17:08.457
But inside those locations,

00:17:09.017 --> 00:17:10.576
none of the things that actually determine

00:17:10.616 --> 00:17:12.758
whether the business is healthy is really

00:17:12.798 --> 00:17:15.038
being tracked with the same intensity.

00:17:15.398 --> 00:17:18.220
Clinician turnover, kept visit rate,

00:17:18.259 --> 00:17:19.420
continuity of care,

00:17:19.480 --> 00:17:20.820
how long it takes for a new patient

00:17:20.840 --> 00:17:22.141
to get into the door,

00:17:22.541 --> 00:17:24.241
whether the founding clinicians are still

00:17:24.281 --> 00:17:25.742
there or whether they're vested on and

00:17:25.762 --> 00:17:26.343
moving out.

00:17:27.123 --> 00:17:28.963
And in acquisitions,

00:17:29.923 --> 00:17:32.325
traditional metrics tells you that the

00:17:32.345 --> 00:17:34.586
typical owner stays less than five years.

00:17:34.625 --> 00:17:35.826
Well, OK, that's one thing.

00:17:35.865 --> 00:17:37.906
But what about our clinicians and all of

00:17:37.926 --> 00:17:38.807
those kinds of things?

00:17:38.846 --> 00:17:40.688
What I've seen in health care platforms is

00:17:40.748 --> 00:17:42.188
acquisitions have been a bridge to

00:17:42.248 --> 00:17:42.949
retirement,

00:17:43.009 --> 00:17:45.170
not a bridge to leverage growth.

00:17:46.710 --> 00:17:50.555
And every platform that I've seen,

00:17:50.595 --> 00:17:51.936
when they go sideways,

00:17:52.357 --> 00:17:54.401
the top line might keep going up,

00:17:54.421 --> 00:17:58.246
but the bottom line gets absolutely worse.

00:17:58.286 --> 00:17:59.688
And the operators that run those

00:17:59.728 --> 00:18:00.368
platforms,

00:18:00.388 --> 00:18:01.990
they can't tell you exactly what their

00:18:02.010 --> 00:18:03.653
location count is in any given day.

00:18:04.493 --> 00:18:06.515
But they can't tell you what the retention

00:18:06.555 --> 00:18:08.715
rate of their clinicians are hired three

00:18:08.736 --> 00:18:09.236
years ago.

00:18:09.615 --> 00:18:12.277
You should absolutely know at any given

00:18:12.336 --> 00:18:14.198
time my first year hires.

00:18:14.518 --> 00:18:15.878
What is that retention rate?

00:18:16.378 --> 00:18:18.078
What is it at two and three years

00:18:18.098 --> 00:18:19.559
and what is it above three years?

00:18:20.240 --> 00:18:22.681
And what you find is most companies are

00:18:22.760 --> 00:18:24.902
really good at the two and three year

00:18:24.942 --> 00:18:26.262
point because people get invested.

00:18:27.403 --> 00:18:29.084
I'm sorry, above the three-year point,

00:18:29.423 --> 00:18:31.305
but that middle category and the first

00:18:31.325 --> 00:18:32.684
category are a train wreck,

00:18:32.944 --> 00:18:35.326
particularly in this post-pandemic world.

00:18:36.287 --> 00:18:37.727
We are confusing,

00:18:38.386 --> 00:18:41.028
absolutely confusing turnover rate

00:18:41.848 --> 00:18:44.890
aggregated with what it is parsed by the

00:18:44.970 --> 00:18:46.750
number of years that you've been with an

00:18:46.810 --> 00:18:47.471
organization.

00:18:47.911 --> 00:18:48.991
And then second to that,

00:18:49.051 --> 00:18:52.454
what I see is companies not including

00:18:52.634 --> 00:18:55.798
involuntary turnover into their retention.

00:18:55.817 --> 00:18:56.097
You know,

00:18:56.117 --> 00:18:57.659
we had a whole series of articles on

00:18:57.719 --> 00:18:58.259
retention.

00:18:58.299 --> 00:18:59.621
So what happens is you make a bad

00:18:59.661 --> 00:18:59.941
hire.

00:18:59.961 --> 00:19:00.721
They don't pass.

00:19:01.402 --> 00:19:02.502
Let's just say they don't pass their

00:19:02.563 --> 00:19:03.483
licensure exam.

00:19:03.903 --> 00:19:04.545
Well, they leave.

00:19:04.565 --> 00:19:05.425
You have to replace them.

00:19:05.586 --> 00:19:06.626
That is turnover.

00:19:06.886 --> 00:19:07.606
But somehow or another,

00:19:07.626 --> 00:19:09.169
we want to carve the bad apple.

00:19:09.469 --> 00:19:10.190
We got rid of them.

00:19:10.230 --> 00:19:11.250
They were a bad clinician.

00:19:12.030 --> 00:19:13.472
That is still turnover.

00:19:13.673 --> 00:19:15.013
It doesn't matter whether it's voluntary

00:19:15.034 --> 00:19:15.674
or involuntary.

00:19:15.714 --> 00:19:17.196
And I see a lot of folks making

00:19:17.217 --> 00:19:17.817
that mistake.

00:19:18.979 --> 00:19:21.461
So if location count is vanity,

00:19:22.923 --> 00:19:24.884
what should smart health care operators

00:19:24.986 --> 00:19:25.546
actually measure?

00:19:25.866 --> 00:19:27.028
You mentioned a couple of those things

00:19:27.048 --> 00:19:27.788
just a second ago.

00:19:29.181 --> 00:19:31.182
So I am convinced that,

00:19:31.721 --> 00:19:33.123
I hate boiling things down to one or

00:19:33.143 --> 00:19:33.903
two metrics,

00:19:33.963 --> 00:19:36.825
but I'm gonna do a couple three for

00:19:36.845 --> 00:19:37.285
you here.

00:19:37.345 --> 00:19:39.006
But I am convinced that the number one

00:19:39.487 --> 00:19:44.068
is same store organic growth.

00:19:44.568 --> 00:19:44.990
Growth,

00:19:45.029 --> 00:19:46.410
which will be the topic of the next

00:19:46.470 --> 00:19:48.191
article, I hope it's not a series,

00:19:48.250 --> 00:19:49.372
but it might be,

00:19:49.892 --> 00:19:51.633
it's because we confuse growth with

00:19:51.673 --> 00:19:52.294
something good.

00:19:53.054 --> 00:19:54.174
And the reality is,

00:19:55.281 --> 00:20:05.953
Organic ,

00:20:05.392 --> 00:20:07.733
variable costs only go up when you add

00:20:07.794 --> 00:20:08.535
professionals.

00:20:08.815 --> 00:20:11.336
Therefore, your margin and your EBITDA,

00:20:11.356 --> 00:20:12.999
your cash flow, should go up.

00:20:14.590 --> 00:20:16.070
Are the clinics getting that tells you if

00:20:16.090 --> 00:20:17.951
the clinic's getting better or are you

00:20:17.991 --> 00:20:20.832
masking flat performance with acquisition

00:20:20.892 --> 00:20:21.853
and top line growth?

00:20:21.893 --> 00:20:22.873
This one metric,

00:20:23.613 --> 00:20:25.492
same store organic growth really separates

00:20:25.553 --> 00:20:27.513
the real good artists from the roll up

00:20:27.554 --> 00:20:27.894
artists.

00:20:28.253 --> 00:20:30.034
And my fundamental belief is you should

00:20:30.054 --> 00:20:32.194
not even qualify to do acquisitions or

00:20:32.255 --> 00:20:33.994
mergers until you can demonstrate a

00:20:34.035 --> 00:20:36.536
repeated same store organic growth model,

00:20:36.556 --> 00:20:38.135
because that's what a real operator does.

00:20:38.556 --> 00:20:39.797
All you're going to do if you don't

00:20:39.876 --> 00:20:40.896
is buy things and ruin them.

00:20:42.097 --> 00:20:42.778
Then what are you going to do?

00:20:42.798 --> 00:20:43.858
You're going to get a cycle until you

00:20:43.898 --> 00:20:45.259
buy more things until you run out of

00:20:45.299 --> 00:20:47.381
capital and then you're over leveraged if

00:20:47.401 --> 00:20:48.602
you're in the private equity world.

00:20:49.403 --> 00:20:52.884
The second data would be that retention

00:20:52.924 --> 00:20:55.186
rate we talked about at the first year,

00:20:55.366 --> 00:20:58.989
two, three above three-year mark.

00:20:59.990 --> 00:21:01.050
Don't game the system.

00:21:02.324 --> 00:21:02.723
measure it.

00:21:03.023 --> 00:21:04.305
You might not be able to compare it

00:21:04.345 --> 00:21:06.165
with other companies because everybody

00:21:06.185 --> 00:21:07.527
might measure it a little bit different,

00:21:07.886 --> 00:21:09.407
but that is really, really critical.

00:21:09.448 --> 00:21:11.128
Who is staying because they want to stay?

00:21:11.469 --> 00:21:13.471
That's your real workforce durability.

00:21:13.911 --> 00:21:14.810
And then the last one,

00:21:14.871 --> 00:21:16.893
I'll just kind of call it kept visit

00:21:16.972 --> 00:21:17.393
rate.

00:21:17.952 --> 00:21:19.953
You know, the number of patients that,

00:21:19.973 --> 00:21:20.734
this is a tough one,

00:21:20.855 --> 00:21:22.215
the number of patients that complete their

00:21:22.875 --> 00:21:23.855
You know, treatment plan.

00:21:23.875 --> 00:21:25.596
We talked about this cliff at the two

00:21:25.616 --> 00:21:26.336
and three visit.

00:21:26.396 --> 00:21:27.096
You get drop off.

00:21:27.116 --> 00:21:28.477
So I see more new patients and new

00:21:28.517 --> 00:21:29.958
patients are good, good, good.

00:21:30.258 --> 00:21:32.117
So you realize that you have to continue

00:21:32.137 --> 00:21:34.118
to milk your own cows first and make

00:21:34.138 --> 00:21:36.078
sure you've maximize not in terms of

00:21:36.138 --> 00:21:37.799
maximize profits or maximize it.

00:21:37.839 --> 00:21:39.920
But if your patients are scheduled for

00:21:39.960 --> 00:21:40.621
five visits,

00:21:40.641 --> 00:21:41.921
do they keep those five visits?

00:21:42.520 --> 00:21:44.762
um so that captures drop off no shows

00:21:45.403 --> 00:21:47.165
and the silent sort of attrition that

00:21:47.205 --> 00:21:48.507
tells you whether patients are actually

00:21:48.527 --> 00:21:49.887
finishing their care but if i was going

00:21:49.907 --> 00:21:51.068
to add a fourth one it would be

00:21:51.730 --> 00:21:54.471
how many as a percentage how many inbound

00:21:54.512 --> 00:21:57.675
calls are answered of new patients because

00:21:57.695 --> 00:22:00.778
what i see happening in the non-pt world

00:22:00.817 --> 00:22:02.880
is generally better about call center

00:22:03.201 --> 00:22:03.881
knowledge and

00:22:04.761 --> 00:22:07.203
and expertise whereas in pt we don't

00:22:07.243 --> 00:22:08.826
typically make those measurements and we

00:22:08.865 --> 00:22:11.147
don't realize how much lost visits we're

00:22:11.188 --> 00:22:12.829
getting because we're only answering you

00:22:12.849 --> 00:22:14.411
know the phone eighty percent of the time

00:22:14.451 --> 00:22:16.012
and in pt the demand is as high

00:22:16.032 --> 00:22:17.574
as it's ever been so that's serious

00:22:17.634 --> 00:22:21.137
numbers all right final question can scale

00:22:21.178 --> 00:22:23.579
be done well then or is the model

00:22:23.660 --> 00:22:24.641
fundamentally flawed

00:22:25.700 --> 00:22:28.560
Scale can absolutely be done well.

00:22:29.000 --> 00:22:31.001
Companies that do it well understand the

00:22:31.061 --> 00:22:33.262
difference between systems.

00:22:33.623 --> 00:22:35.243
They pick their battles well.

00:22:35.364 --> 00:22:37.023
We're gonna scale and centralize five

00:22:37.084 --> 00:22:37.624
systems,

00:22:37.663 --> 00:22:38.904
but we're gonna leave clinical

00:22:38.944 --> 00:22:41.226
decision-making and local decision-making

00:22:41.246 --> 00:22:42.145
and authority rights,

00:22:42.185 --> 00:22:44.227
decision rights to the clinicians.

00:22:44.886 --> 00:22:46.428
And they do it really, really well.

00:22:46.488 --> 00:22:48.387
And one of the ways I think is

00:22:48.428 --> 00:22:51.109
important is what is their percentage of

00:22:51.190 --> 00:22:53.830
salary, SGA, their overhead percentage,

00:22:54.391 --> 00:22:56.451
general administrative cost as a

00:22:56.511 --> 00:22:57.832
percentage of the overall.

00:22:58.332 --> 00:23:00.073
And what you see is companies that don't

00:23:00.113 --> 00:23:02.394
scale well build up overheads because they

00:23:02.433 --> 00:23:04.174
create more and more functions for

00:23:04.515 --> 00:23:05.275
corporate overhead.

00:23:05.295 --> 00:23:06.776
And that's what drives clinicians in the

00:23:06.796 --> 00:23:07.435
field crazy.

00:23:07.955 --> 00:23:09.317
You know,

00:23:09.336 --> 00:23:12.317
when you see overheads of ten and twelve

00:23:12.357 --> 00:23:13.617
and fourteen percent,

00:23:14.198 --> 00:23:15.538
you have to ask yourself, you know,

00:23:15.558 --> 00:23:16.739
when I had my own practice,

00:23:16.778 --> 00:23:18.259
we were at like ten percent.

00:23:18.319 --> 00:23:20.201
Now I'm part of a bigger group,

00:23:20.221 --> 00:23:21.461
but we're at fourteen percent.

00:23:21.840 --> 00:23:23.001
So that's not right.

00:23:23.021 --> 00:23:25.042
All right.

00:23:25.063 --> 00:23:26.623
If this episode make you made you

00:23:26.663 --> 00:23:27.703
uncomfortable, as always.

00:23:28.527 --> 00:23:30.807
Good, because somewhere right now,

00:23:30.826 --> 00:23:32.127
a health care company is celebrating

00:23:32.167 --> 00:23:33.988
growth while quietly damaging the thing

00:23:34.028 --> 00:23:35.448
that made it valuable in the first place

00:23:35.488 --> 00:23:37.128
and then trying to repair it with a

00:23:37.169 --> 00:23:38.729
pizza party and a T-shirt giveaway.

00:23:39.528 --> 00:23:40.490
Scale isn't the enemy.

00:23:40.670 --> 00:23:42.690
Scale without wisdom or forethought

00:23:42.730 --> 00:23:43.410
probably is.

00:23:43.730 --> 00:23:44.589
If you want to go deeper,

00:23:44.630 --> 00:23:45.131
and you should,

00:23:45.191 --> 00:23:47.131
Larry's full article is linked in the show

00:23:47.171 --> 00:23:47.411
notes.

00:23:47.451 --> 00:23:48.911
And ask yourself, honestly,

00:23:48.951 --> 00:23:49.852
if you're on a platform,

00:23:50.231 --> 00:23:52.731
are you building a health care company or

00:23:52.811 --> 00:23:54.413
just a collection of health care

00:23:54.452 --> 00:23:56.373
buildings, pins on the map?

00:24:00.222 --> 00:24:00.743
All right,

00:24:00.784 --> 00:24:02.765
so I'll edit these into just shorts.

00:24:03.484 --> 00:24:05.246
All right, it's the operator hotline,

00:24:05.486 --> 00:24:07.847
real or very real feeling calls from

00:24:07.907 --> 00:24:09.568
people inside healthcare.

00:24:09.969 --> 00:24:10.849
Call one,

00:24:11.589 --> 00:24:13.692
we doubled locations in two years.

00:24:14.271 --> 00:24:17.314
Revenue is up, but turnover is up.

00:24:17.733 --> 00:24:22.277
Culture feels icky and patients feel less

00:24:22.317 --> 00:24:22.737
connected.

00:24:23.057 --> 00:24:24.817
Is this a normal state or are we

00:24:24.837 --> 00:24:25.638
breaking something?

00:24:27.109 --> 00:24:28.009
You're breaking something.

00:24:28.530 --> 00:24:29.871
A normal state, first of all,

00:24:29.891 --> 00:24:31.111
you need to look at cashflow.

00:24:31.352 --> 00:24:32.872
What is your cash position if you're

00:24:32.912 --> 00:24:34.673
spending all these money either on growth

00:24:34.692 --> 00:24:38.614
of new locations and how does that impact

00:24:38.634 --> 00:24:39.414
your balance sheet?

00:24:40.015 --> 00:24:41.935
When you start paying more attention to

00:24:42.135 --> 00:24:44.797
numbers of locations and acquisitions and

00:24:45.017 --> 00:24:46.317
you have higher turnover,

00:24:46.356 --> 00:24:48.077
that means you're ignoring the operations.

00:24:48.738 --> 00:24:51.180
into in in turn for the opiate of

00:24:51.220 --> 00:24:53.442
buying things which can happen because it

00:24:53.461 --> 00:24:55.523
gets contagious and we all love buying

00:24:55.544 --> 00:24:57.885
things whether it be shirts or things

00:24:57.965 --> 00:25:00.788
online or companies more importantly

00:25:01.189 --> 00:25:02.750
you're a real company when you have real

00:25:02.830 --> 00:25:05.692
operators who handle retention who handle

00:25:05.953 --> 00:25:08.035
engagement of their employees and who

00:25:08.075 --> 00:25:10.297
handle success and organic same clinic

00:25:10.336 --> 00:25:11.818
growth that's what i want to know not

00:25:11.858 --> 00:25:13.119
how many locations you've grown to

00:25:14.104 --> 00:25:15.585
but I can't put how many locations I

00:25:15.605 --> 00:25:15.965
have in my,

00:25:16.165 --> 00:25:17.366
I can put how many locations I have

00:25:17.386 --> 00:25:18.807
in my LinkedIn profile and that's easier.

00:25:20.169 --> 00:25:20.789
Call two,

00:25:21.269 --> 00:25:23.852
our senior therapist trained everybody for

00:25:23.892 --> 00:25:26.734
years, corporate standardized comp,

00:25:26.954 --> 00:25:27.635
and she left.

00:25:28.455 --> 00:25:30.518
Leadership says one person doesn't matter.

00:25:30.938 --> 00:25:31.759
Is leadership wrong?

00:25:33.099 --> 00:25:34.500
Leadership is absolutely wrong.

00:25:34.761 --> 00:25:36.502
That's the difficulty of leadership.

00:25:36.563 --> 00:25:37.923
It's always easy to manage at the

00:25:37.983 --> 00:25:38.505
extremes,

00:25:38.565 --> 00:25:40.226
treat everybody like a widget maker,

00:25:40.246 --> 00:25:40.807
the same.

00:25:41.567 --> 00:25:44.069
more you know enlightened companies treat

00:25:44.109 --> 00:25:46.412
every individual as an individual you have

00:25:46.451 --> 00:25:48.733
to have some parameters that allow for

00:25:48.775 --> 00:25:51.336
variation you might have a public health

00:25:51.376 --> 00:25:53.459
therapist or a public pain therapist you

00:25:53.499 --> 00:25:55.721
might have a spine therapist you might

00:25:55.760 --> 00:25:57.402
have somebody who does lymphedema you

00:25:57.442 --> 00:25:58.742
might have some and you have to treat

00:25:58.903 --> 00:26:00.964
those folks differently i'm very much

00:26:01.005 --> 00:26:03.007
against paying everybody the same i think

00:26:03.047 --> 00:26:03.647
that you know

00:26:04.567 --> 00:26:06.469
plays into the commoditization factor and

00:26:06.489 --> 00:26:08.469
the widget major factor.

00:26:08.868 --> 00:26:09.348
And as you know,

00:26:09.388 --> 00:26:12.509
I'm big on variable compensation for PTs

00:26:12.549 --> 00:26:13.951
and letting our PTs make more money.

00:26:13.971 --> 00:26:15.990
All right, this one.

00:26:16.931 --> 00:26:19.192
We have a dashboard, engagement surveys,

00:26:19.511 --> 00:26:20.692
productivity scorecards,

00:26:20.732 --> 00:26:22.692
but nobody can tell me if our clinics

00:26:22.732 --> 00:26:24.374
are actually better.

00:26:24.953 --> 00:26:25.634
Why does this happen?

00:26:26.567 --> 00:26:28.208
It happens because people love data,

00:26:28.248 --> 00:26:29.368
but not insights.

00:26:29.890 --> 00:26:32.451
The beauty of AI is that hopefully we

00:26:32.511 --> 00:26:35.354
can prompt with appropriate questions to

00:26:35.394 --> 00:26:38.537
create analytic expertise and provide you

00:26:38.596 --> 00:26:39.076
insights.

00:26:39.958 --> 00:26:41.398
For a long time in physical therapy,

00:26:41.459 --> 00:26:42.440
we didn't even have data.

00:26:42.660 --> 00:26:45.221
Now data has probably jumped the shark.

00:26:45.603 --> 00:26:46.202
We have data.

00:26:46.462 --> 00:26:47.984
We have to now create insights.

00:26:48.325 --> 00:26:49.806
By the way, insights,

00:26:50.246 --> 00:26:51.928
they won't serve a purpose unless they do

00:26:52.028 --> 00:26:52.428
one thing,

00:26:52.548 --> 00:26:55.250
lead to actions and behavior and drive

00:26:55.290 --> 00:26:55.651
change.

00:26:56.811 --> 00:26:57.997
All right, perfect.

00:26:58.017 --> 00:26:59.080
All right, let me hit end.