How This Entrepreneur Paid Off $400,000 Without Closing His Business
From the outside, fit and photogenic French-born physician Michel Cohen was on his way to becoming the 21st century’s answer to Dr. Spock. In the early 2000s he ran Tribeca Pediatrics, a smart, hip, high-quality New York City practice that catered to the neighborhood’s smart, hip parents, whose children he saw in his signature quirky medical office -- think Pee-wee’s Playhouse meets a Wes Anderson film set. The media loved him and parents appreciated his common sense, low-intervention medical approach to children’s health.
Things were going so well that he opened up another office in Brooklyn.
Meanwhile, the healthcare industry was in flux with expanding regulations, upheavals in technology, rising pharmaceutical prices and dramatic cuts in insurance reimbursements. As a result, many doctors were abandoning their private practices to join corporate healthcare clinics and hospitals. (A report from Accenture shows that the percentage of U.S. independent physicians plummeted from 57 percent in 2000 to 33 percent in 2016.) But Cohen, who spent his days biking back and forth across the Brooklyn Bridge, managing his growing practice, seemed to be bucking the trend.
Or so he thought. One morning in 2008, he received a very disturbing call from his bank. “They told me I was $400,000 in debt,” Cohen says. “I was in complete shock.” To make payroll that month he had to borrow $30,000 from a friend.
Despite the fact that Cohen had built up a popular practice over the course of nearly 15 years, he was broke. To maintain his autonomy and keep his practice independent, Cohen determined that he’d have to be more than just a doctor. He’d have to become a systems analyst, an HR specialist, a customer service expert, a real estate speculator and a construction-site manager -- in other words, a do-it-all entrepreneur.
By 2015 Cohen had not only fixed his business, he’d managed to transform it into New York City’s largest privately owned pediatric practice, with $33 million in revenue. Through 17 offices in the region -- and even one in Los Angeles -- he oversees 40 doctors and 250 employees who handle more than 30,000 patients.
Looking back, Cohen zeroed in on four key aspects of his business that were responsible for turning it around, aspects that he admits should have been in place at the start. “I went from knowing nothing about how my business was run to knowing everything about it at any time,” he says.
Fix the Systems
In a typical pediatric practice, 90 percent of revenue comes from insurance company reimbursements. When Cohen took a close look at the billing system set up by his office manager, he was shocked: “Chaos,” he says. “Unpaid insurance claims worth tens of thousands of dollars were stuffed into folders and binders.” Essentially, he’d been working for free for months. When he confronted his office manager, her excuse was that she’d become overwhelmed. Cohen immediately fired her and half the staff.
Over a grueling yearlong period, Cohen worked as a doctor by day, business analyst by night. He studied thousands of insurance claims, one by one, to learn the Byzantine path they’d need to take for him to finally be paid. Using Excel spreadsheets and charts, he plotted out the data from his antiquated billing system to get it up to date and invested in off-the-shelf billing software to handle new claims.
He designed and digitized a system that accurately tracked each and every claim from initial filing to final payment. And rather than using the conventional 30-, 60-, 90-day cycle of tracking claims favored by most physicians, Cohen supercharged his system to track the status of unpaid claims each week. This allowed him to discover billing issues earlier and solve them quicker.
Once Cohen started getting reimbursed for his services promptly, his busy practice finally began turning a sizable profit. But Cohen didn’t stop there. He applied the operational lessons learned to all of his in- office systems, attacking one area after another: his patients’ medical histories, payroll and drug and medical supply inventory.
Hire the Right Culture
When Cohen was wrestling with how to recover his fiscal health, he decided to radically redesign his staff, as well. Instead of hiring doctors and nurses based simply on experience and credentials, he weighted personality just as highly. The medical staff, who come to the practice mostly by way of referral, have to “get our mission,” says Leslie Pennypacker, Cohen’s practice administrator. “They understand that the parents who come to our practice are knowledgeable people who do their research before stepping in the door. They want our opinions, but they don’t want to be dictated to.” To ensure that happens, Cohen trains the medical staff to relate to patients and their parents with a calm, personable intimacy.
Cohen applied this same “culture fit” principle to his non-medical staff. Instead of employing people who have worked at other doctors’ offices, many of whom often have a jaded attitude toward patients, he hires people with experience in the hospitality industry, such as waiters and hotel staff. Pennypacker, a former bartender, says, “Having a hospitality background usually means that the person is able to multitask with a smile and is willing to get involved in tasks that might be out of their job description. They also know hospitality’s golden rule: The customer is always right.”
Fix the Pain Points
There’s more to seeing the doctor than just seeing the doctor. Everyone has their horror stories of navigating the medical system, but many doctors don’t give much thought to their patients’ bureaucratic travails. Cohen does. He wants to make every aspect of his patients’ healthcare experience as simple and painless as possible. Instead of assuming that he knows what his “customers” (the parents of his patients) want fixed, he asks them directly, relying on feedback and email surveys.
Cohen sends out more than 300 personal emails per month directly to the parents of his patients to get an idea of how the practice is doing. He personally reviews and answers each response, following up with a phone call if necessary. What has he found out? Plenty. Including that when people need something from the practice, such as an appointment, a form filled out, off-hours medical advice, etc., they expect a timely and hassle-free response.
To help fix these pain points, Cohen simplified parent-practice dialogue by creating a centralized, responsive, round-the-clock Tribeca Pediatrics communication center analogous to a customer support department. By calling a single number, parents of patients from any of the offices needing medical advice are immediately connected to a registered nurse. If the issue requires a doctor’s attention, instead of having to worry and wait or play phone tag, the parent is given a specific callback time. When parents run into disputes with their insurance companies, the center acts as their liaison. Completed school and camp medical-release forms are promised back to the parent by the end of the day.
Follow the Customer
Cohen has made a point of setting up his offices in hip, up-and-coming neighborhoods peopled by his core customers, the creative class and urban pioneers. As they move into new neighborhoods -- Boerum Hill, Williamsburg and Park Slope in Brooklyn; Harlem and Chelsea in Manhattan; Long Island City in Queens -- so does he. On average, he has opened two satellite offices per year since 2009, typically in neighborhoods next to neighborhoods where there’s already a Tribeca Pediatrics office. “We pull demographic information from our current patients to see what neighborhoods they are coming from,” Pennypacker says. “Patients also reach out asking us to open an office in their neighborhood.” But, she adds, the final decision is made by Cohen, who bikes or takes his scooter over to check out the area, have a coffee at a local restaurant and get a feel for the neighborhood’s potential.
To mitigate the cost of building out two new medical locations annually, Cohen opened his own fabrication workshop staffed by a crew of four who design and make the furniture and prefab interiors for each office -- from the exam-room pods to the biomorphic-shape front desks. “Everything’s delivered ready to be installed,” Cohen says. “We even deliver the interior walls with the wallpaper already on them.”
To pay for this seemingly breakneck expansion, Cohen is fortunate enough to rely exclusively on cash flow. And he doesn’t plan on slowing down, since the larger his patient pool, the more favorable reimbursement rates he can extract from insurers. He explains that doctors in small practices can be squeezed out of business because insurance companies may reimburse them at much lower rates than what a larger practice gets. And on the other side, the bigger their practice, the better their negotiating power with suppliers of medical equipment and drug companies.
When asked whether he’ll continue what appears to be his own version of Manifest Destiny, expanding to creative-class hot spots nationwide, Cohen shrugs. “Maybe if I find the right partner,” he says. “For now, there are nearly 300 neighborhoods in New York City. Plenty of room for more Tribeca Pediatrics right here.”