An Entrepreneurial Doctor Isn’t Afraid to Shake Things Up

By on December 12, 2012

Dr. Jeffrey M. Gallups is the founder of the Ear, Nose and Throat Institute, which is based in Atlanta and claims to be the largest ear, nose and throat practice in the southeastern United States. Dr. Gallups transformed a traditional practice into an entrepreneurial enterprise that is growing so fast that its revenue has been doubling every 18 months.

That kind of growth was not on his mind when he started his career in 1995. “It is important to understand,” he said, “that I was a typical, solo E.N.T. practitioner from the time I left training. But I had always been a ‘go-getter,’ working every weekend I could during my residency to make additional money. I doubled my salary doing this. I drove a nicer car than my professors. I had momentum even then.”

But his momentum hit a glitch about seven years ago. “I was booted from a large multipractice E.N.T. group because I was way more profitable than others in the group,” Dr. Gallups said, “and I think they were threatened.” He was attracting patients from the other doctors, and the patients wanted to stay with Dr. Gallups. In effect, he was “flipping” his partners’ patients into his own practice — a classic example of how fast-growth entrepreneurs think differently.

Entrepreneurs like Dr. Gallups don’t always make good business partners, which is one reason I agree with the founder of GoDaddy.com, Bob Parsons, who has said that if you really want to grow your business fast, you shouldn’t have partners at all. The reality is that the entrepreneur has to be in charge, but the partners don’t always understand what it takes, and they will often decide to kick out an entrepreneur who tries to do things differently.

A boot and rejection can be a huge blow to the ego and pride. “When colleagues come to your office after hours and ask you bluntly to leave an eight-year established practice, it is difficult to see a bright spot,” Dr. Gallups said. But the boot can also set the entrepreneur loose. “In the end, we would never have attained our current status without going through this process, painful as it was,” he said.

He hung his own shingle and opened for business as a solo ear, nose and throat specialist — one who, by the way, had become a social outcast in the medical community. He had to start from scratch with no patients, no staff and few doctors eager to join him. Because he needed to build revenue from Day 1, he focused on creating one-stop medical shopping under one roof.

He created what he calls ancillaries to maximize revenue per patient. He started with an audiology center. Today, those ancillaries include his own surgery centers, medical labs and allergy centers. In short, he asked why he should send patients to another practice to spend money when he could provide the same service — especially, he said, when “we can do it better and cheaper than the competition.”

Over the years, he also learned how to squeeze costs out of the system and deliver better health care less expensively. For example, he sought out the insurance companies to work out a one co-pay solution for patients even though they might have received multiple treatments under his roof. Unlike the practice that booted him, he constantly tried new things. If it didn’t work, his attitude was, “That’s O.K. We will figure it out and make it work.”

Of course, he was still something of an outcast, and he was still having trouble recruiting doctors to work with him. That led to a very smart move: Dr. Gallups did not try to convince the doctors that he was right and they were wrong. Instead, he asked them what they wanted. And when he found out, he made it happen. The doctors told him they wanted to practice medicine and not worry about the business side or managing their retirement plans.

So he developed processes that allowed his doctors to see patients 100 percent of the time. He also brought in an expert to develop a customized deferred-compensation retirement plan for all doctors who joined the team. A year ago he had eight doctors; today he has 18. Now the doctors are coming to him.

Like any entrepreneur, Dr. Gallups can overreach. He added a beauty and health spa above his surgery center, but it was not part of his core ear, nose and throat expertise, and he ended up losing money and closing it down after 12 months. “I was naïve,” he said. “I added a spa because I found a great person to run it. When they left, we quickly saw all hell break loose. It was not a great business fit from the start.”

Dr Gallups’s vision of one-stop medical shopping works, in part, because patients like it. They like coming back to a familiar physician. They don’t enjoy the extra start-up time and expense of going to a new specialist. With one infrastructure that services several lines of business, he leverages his staff and overhead. As a result, each line of business operates more efficiently than a stand-alone. Along the way, he saves the patient money by charging one co-pay, and he saves the insurance company money by being a single provider and reducing paperwork processing.

Here are the five questions the entrepreneurial doctor asks before entering a new line of business:

1. Can the deal produce positive cash flow in less than three months?

2. Does it have cross-referral possibilities to the other business lines?

3. Is it a win, win, win for the big three — patients, the insurance companies and his business?

4. Is it core to the business?

5. Does the business have the in-house expertise to at least test the new business before making a major investment?

One thing I have noticed about Dr. Gallups and most fast-growth entrepreneurs: they don’t think they know it all. They want to learn. They especially want to learn what the competition is doing. Needless to say, there is a lot going on in the health care industry right now. It is going to be interesting to watch how services change over the next 10 years. One thing I predict is that entrepreneurial doctors like Dr. Gallups will keep finding ways to make care cheaper, better and faster.

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