How to Build a Successful Business in Medicine with Dr. Matthew Davis

There is not a pot of gold at the end of the rainbow. I've been down that path. I understand it with medical training, everyone thinks that as soon as they cross the finish line, break the tape. After the residency, man, the cash is gonna start. Come flooding in.

Hi, everybody, and welcome to the podcast Muslims Directions md. My name is Stephanie and I'm joined.

Here by my colleague, Dr. Sarah Davis.

And, oh, colleagues, Dr. Matthew Davis, who.

Is also my mother and my father.

Yay.

Yay.

Thanks for having me back on the pod.

Yeah, welcome.

After being banned.

Yeah. So we've had some past negative experiences with this guest, but we decided to have him back.

Well, he did redeem himself. He came back a second time and he was much, much better. And so we're hoping for each even more improvement today.

Yeah. Yeah. So if you haven't listened to my dad on the podcast before, you can go back and listen to him talk about his journey towards becoming a sports medicine doctor for smu. We did an episode on that kind of talking about primary care sports medicine. But just to remind our listeners, do you want to tell them who you are and what you do?

Again, my name is Doug. Dr. Matt Davis. I'm a physician, internal medicine physician, but also have what's called a certificate of added qualification in sports medicine or primary care sports medicine. And so I practice not only sports medicine, but also internal medicine, but in a rather specialized setting. And maybe that's what we're going to get into today.

Yeah, you know, I really. Because the sports medicine is one slice of what you do. But truthfully, you spend a lot more time and energy really doing what your kind of day job is, which is internal medicine, and a real focus on the business side of your practice. You have built up your practice over the past 25 years, 27 years maybe. And so I really kind of want to get into that sort of going through the process of how you built up the practice and sort of where you are now in terms of that.

Yeah, let's start with like, what is your group? What does that mean? What is this practice that you're talking about? And then I kind of want to back up to how you started that. So what is your group?

Sure. So the name of our individual group is called Inpatient Physician Associates. We are at our core hospitalist physicians. And for your listeners who don't know what a hospitalist is, hospitalist is generally a primary care hospital based physician. So generally most of us are either internists or family physicians. And what we do is take care of patients when they're in the hospital. Typically, how I describe it is if you come to the emergency room, you have a medical problem, you need to be admitted to the hospital and stay several days. A hospitalist would take care of you while you're in the hospital. And then when it gets time for you to go home, you would go home, but you would follow up with your regular doctor in his or her office. And that's really our role in the hospital. So our group is called Inpatient Physician Associates. We've been around for about 25 years. We have about 50 different physicians in the group, and we cover about a dozen different hospitals. I also am. So I'm the president of that group. I also am the CEO of a larger organization called Precipitate Management Group, which actually encompasses three separate hospital groups throughout the state of Texas. So I run that organization as well.

Okay.

Yeah.

So backing up, what did you think your day to day life was going to look like as an internal med doctor? Like, where were you going towards and how were you able to be exposed to things that showed you that you were able to kind of build your own thing?

Yeah, that's. That's a really good question. And I think it really all starts back in my residency. I always knew I wanted to do a primary care sports medicine fellowship. And as it got to the to residency, I knew I was going to have to take a year off in between my residency and my fellowship to.

And why was that?

Well, because I was married to a woman who was a year behind me at residency and we were at the University of Florida and I was getting done and she was a year behind me. So I needed something to do for a year. And at that point in time, hospitalists, it was something brand new that wasn't really a concept back then. 25 years ago, most primary care physicians followed their own patients into the hospital, would take care of them while they're there. That model really started to change kind of in the, in the early to mid-90s. And there was a colleague, physician colleague who had done his residency five or six years before me. His name was John Nelson and he had developed or coined the term hospitalist. And he was living really. Yeah, he did.

Wow.

So he's the father of hospital Spence and him and this other fellow, Win Whitcomb, two of them together, coined the term hospitalist. And, and so they had a very small practice in Gainesville, Florida, where they were practicing hospitalist medicine, again, a new thing at the time in a very small town to do it in but there's opportunity for me to join their group. And actually I had two options, to be honest with you. And this goes back to the decision to do either work for myself or work for somebody else. But I really liked playing golf. There was an opportunity for me to work in a town maybe 34 miles south of town, but I would be working for somebody else. And it was an okay opportunity. There was a lot of security in that opportunity, in the sense I knew what I was going to make, kind of knew what my hours were going to be. And there was the opportunity to join John's group, which was kind of a. Kind of more of a loose affiliation of independent doctors. And I really decided because this job working in John's group would give me the opportunity to play some golf during the day, I liked that opportunity better. Your mom didn't like that opportunity as much. So we had a deal. I was going to have to cook dinner every single night of the week. If I took this job in Gainesville as a kind of the trade off.

I would have cooked dinner every night had he taken the other job. The other job had weekends off and was Monday through Friday, 8 to 5. But he didn't have flexibility during the day. This one, he had to go in for a few hours, then he was free for a few hours, then he had to go back for a few hours. So that didn't mix as well with my schedule because I thought we could, you know, have weekends off, go do things. But this way he had to work a lot of weekends. But, you know, it really has paid off because his golf game is so much better.

But anyway, that kind of goes back. So I felt comfortable taking on the risk of going joining this other group. And I think some of your other previous guests, you know, I'm thinking about Dr. Gamboa, who's on a podcast a couple episodes going, even Dr. Milne. It's a lot of. It is appetite for taking risk. And, and.

A lot of people who go down this path don't have that.

That's. That's true. And that's okay. You know, what I've done and what, you know, some of your other guests have done is not for everyone. It is definitely not for everyone. But if you have the appetite of taking risk, you know something, you know, doing what I've done can be very rewarding. And so I took this job in Gainesville. I worked there for a year. And it really without even. And you ask about like intentionality, and I think this goes back to a lot of things in medicine and life is that I hadn't really planned to be where I am now. It just kind of worked out that way in a good way. And so I learned the ropes of the business side, not really knowing I was learning the ropes of the business side. So I learned about what it's like to submit a bill to the insurance company, what it's like to get that money back, what it's like to develop a call schedule, what it's like to work with other people. And then I did my fellowship, and at the tail end of my fellowship, I realized I really like sports medicine in terms of team and event coverage. I didn't at the time. Sports medicine fellowships were a little different than they are now in the sense there wasn't a lot of musculoskeletal, ultrasound, and other types of things. So really, primary care sports medicine ended up being combined with a lot of primary care medicine in the office setting, which I didn't really like, But I knew how to do hospital medicine. And there was an opportunity. At a small community hospital in a suburb of Dallas, Mesquite, who wanted to start a hospitalist program. I was introduced to the CEO there, had a meeting with him, sounded he didn't really know what he was doing, and it seemed like I knew what I was doing, which I suppose I did.

You knew more than he did.

I certainly did, which was very little. But anyway, I joined forces with one other individual who ended up flaking out. We were supposed to start on October 1st of 1999, and. And I called up this guy a couple times. He wasn't returning my calls.

I was calling him a lot.

A lot. Yeah. It was a bad sign that he wasn't answering. Finally, like, two days before we were supposed to start, I said, hey, Henry, man, we got to get this call schedule down, because, you know, otherwise it's just gonna be me. He said, oh, sorry, Matt. I moved to California. I was like, oh, my God, right? And I was like, well, okay, I'm on the hook to do this job, so I'm sure certainly I'll be able to find somebody just to kind of help me out. I did, but it was nine months later, so.

And just to paint that picture, this is taking call 24 hours a day, seven days a week, you know, Saturday, Sunday, holiday, everything. I kept saying this, and your family would come down and they're like, well, wait, it's Sunday. Why is he going to work? I'm like, when I say he's working every day, I mean he's working every single day and pager never turned off all night long phone calls. And we had a four month old baby when this started.

True. All true. And eventually found somebody to join me. And then.

So the group, it started out with just you just.

You were the group.

He was the group of one.

Right, it was a group of one. I found another individual help. She was not all that helpful because he was just as busy as me. So we weren't able to really help each other in any meaningful way. And then found another person to join. And you know, we are we our journey. That's where how the journey started.

Hmm. Well, I think that is important point. We've talked about this on the podcast before of just doing the stuff that other people don't want to do. And I kind of like how, I mean you started at this small community hospital and now your group kind of has found this niche of this perioperative medicine stuff. How were you able to kind of transition and find that niche working for these small hospitals?

Yeah, so going back to the smaller hospital, but that really was where we were at. So when we started our group back then, a lot of the big academic centers had hospitalist programs, but the smaller community hospitals didn't. And so most smaller community hospitals don't have the resources or desire to actually manage and run their own hospitalist program.

Sorry just to interrupt you on that because a lot of times what those hospitalist programs, those people are employees of the big institution. And so. But the smaller hospitals, you know, they are not wanting to have these people be employees. They're looking for people that are independent contractors, but they also end up having to take care of all the patients that don't have insurance. They don't get paid for that anyway. Sorry, maybe I'm getting.

Yeah, no, no. So we. So our role is to contract with these hospitals for that services service. I think times have changed quite a bit to your point that I think most hospitalist programs are owned and run by larger hospital systems, but there are still a fair amount of independent hospitalist groups out there. So what our individual group does a lot of now is we work in specialty hospitals and those are surgical hospitals, psychiatric facilities. Again, these are smaller facilities that don't really have the resources or desire to manage their own hospitalist program. So we actually contract with these groups to provide hospitalist and perioperative medicine services. So that was again a very unintentional thing where we were working very closely, as most hospitalists do with surgeons in hospitals. And we kind of are my practice partners. And it's not just me. I have several partners in the group, our group, who really developed an aptitude and know how and desire to do perioperative medicine. Again, not intentional in any way, but we just found that some surgeons enjoyed working with us. We enjoyed working with the surgeons. There are these small surgical hospitals. We started at one surgical hospital that we did a great job at. And then word spread, said, hey, this group is really good at doing this. And so before you know it, this is what our individual group's doing. So we cover about six or seven surgical hospitals. We also cover the emergency room in these places as well. So it's been, you know, it's been a. Not intentional at all, but it's been really good. I mean we've been doing it for 25 years. We've been around for 25 years. I say our group is kind of like a cockroach. You can't really kill us.

But well, and so just kind of, but, but just sort of talking about the evolution. So I mean you started off working at this one community hospital all by your little lonesome. You added another person. And then, you know, to my recollection, it was kind of this, this evolution where you got a few more. Do you. You would get some more doctors and then you'd be like, oh no, now we have too many doctors, now we need some more hospitals. Then you go and kind of get business at these various hospitals. Then you'd be like, oh no, now we have too much business. Now we need more doctors. And it's always been this push and pull and then sometimes you lose a contract at a hospital and you have to reshuffle people around. But you know, over time it has been, you know, sometimes two steps forward, one step back. But you have, you grown and grown and had more, more locations, more doctors also use nurse practitioners as well that the doctors are supervising and have grown and grown. But during that process you have really been intentional as far as where you are sort of heading with the group in general and have learned more about the business side and how do you build up a success practice that in that, you know, could be sold. And so I guess I just kind of want to talk a little bit about how did you learn how to put together a financial package and that kind of thing.

Yeah, all self taught, I think that. And a lot of it's experience, but a lot of it is working with other good physician entrepreneurs, people like Dr. Melny and Dr. Gamboa and learning from them and listening to them and, and being part of the process in these meetings. And, you know, I think business is not something that any of us learn as physicians, but it's not all that complicated. I always tell people, you know, the basic tenet of running a business is you need more money coming in than going out. And if you've got more money going out than coming in, either you need to plan for more money coming in or trim your expenses. It's not all that complicated. There are other types of terms like accounts payable and receivable and, you know, trial balances and, you know, EBITDA and all these other crazy terms, but the basic tenants of running a business and that's all, that's, that was my basic mantra is, hey, we just need more money coming in than going out. Now, I've learned some lessons along the way in terms of, you know, valuing your group and whatnot, but it's been a journey. I mean, that's not something that I started out with. I go back to my experience though, of Gainesville when, you know, we, that's really where I kind of figured it out. And it was just a kind of a. We had a four or five person group, each one kind of. We, we contract with this lady who did the billing for us. We would submit our charges and the money. The checks would come, if you remember. They would, they would come to the house and then I'd have to send them to her and so she'd reconcile the bill. So I kind of learned about that process. But that was kind of, that was just the start of it. And then it's just, it's, it's from there, it's just scaling it, right? And so it's just, it's just taking it that next level. I think that the other thing is that I've been pretty good at is organizing. I think that's what leadership at its core really is, is being a good organizer. And so being able to organize that and then think a couple steps ahead. And that gets you into trouble too, because you tend to overthink sometimes. But I think all of that has kind of led us to where we are today.

Well, the forecasting thing is really important because, you know, when you're, when you're just a n of 1, you've got money coming in and out and you have a lot of control over your expenses as you keep growing. And then you say, oh, okay, well, you know, this is going to cost us extra. We're gonna, we got to bring this person on that's going to cost us extra money in the short term. We will make money in the long term, but you got to have a, you know, extra, extra money floating around for those types of things and be planning a few steps ahead of like, okay, what, you know, if this goes well, what are we do, going to. To do from there? And some of that is, you know, as you've talked about, like really looking at the accounting side, you've got it. You're always staring at these spreadsheets, you know, you're always like looking at these spreadsheets and thinking about all of these different things rather than just like, oh, hey, a bill came due, we have to pay that. Well, no, I knew a year ago we were going to have that bill due. And I think that that's something that you do Now. A lot of times physician groups have hire out different people to do some of those roles. Can you speak to like how some other groups do part of that or do you even know?

Well, we have people who do all that well.

Right.

And so that was kind of one of the evolutionary processes. I mean, I think that really helped our group in a couple different ways is that I recognize that we needed some organizational help and some financial help. So bringing on people who were able to do that type of work. Now I think if you look at any organization, the CEO or top person is really, really, really involved in the finances of the group because that has to be. Unfortunately, in medicine and any practice you can't sustain yourself if you got more money going out than going in. So I've always been really hyper focused on that, I think, and probably just so everyone has a job really. I mean, so whether our clinicians have work and to your point, hey, we need to bring somebody else on or we've got too many people, we need to make sure we've got enough work for the folks that we have on, but bringing on extra help. So we definitely have that. I think there's, I think good organizations always have that and they'll value that. In other words, somebody maybe who's not, maybe not a CFO level person, but at least an accountant or an accounting level person who's able to help with that because otherwise you're just flying blind and you know, you're hoping that you've got more money coming in than going out. And that's, that's hope is never a plan.

Yeah, well, I, the difference that I see between your group and other groups is that you are kind of driving the bus. You have these other people that you delegate these other tasks to, they, they feed you back information, then you're using that to make these decisions rather than, I think some physicians say, I don't really want to deal with that. I'm going to hire some other people to kind of deal with the finances I. Of my practice, which again, you have to have financial people involved. But, but they can't be driving the bus because if they are, then sometimes you're veering off course from where you really want to take the group and where your vision is going. But if you don't understand the information that they're giving you, then I think it becomes very difficult for the physician to, you know, to, to lead in the direction that the, that you want to lead. So I feel like those people give you information and you give back, but it's not like they, they're leading the group.

Well, I'd agree with that. I'd say that that's probably true, though. And going back to Dr. Gamboa's comments about him being a bridge between the suits and the clinicians is really, really important. And I think in healthcare, healthcare business in particular, I think you need that type of vision. I think that the suits necessarily don't understand from an operational standpoint why what's being proposed may or may not work. And I would say there's also some times, many times, when the clinicians don't necessarily understand why from a financial perspective, what they feel is a good idea might not be a good idea or work. And so I think being able to bridge that has been helpful. I think that's probably one of the reasons our group's been around for a while. I have some fantastic physician partners that they do a great job, and we've got some great clinicians in our group. But I do think that having that ability to bridge that type of gap is really important in any healthcare organization. Whether you're employed at a CMO level, whether you're running your own practice, being able to understand all that information, process it and make some decisions, both from a financial and operational standpoint, is really, really important.

Do you feel like your willingness to be able to, to learn about kind of the business side and being able to be that facilitator has contributed to your success? Or what do you think has been the biggest thing that has contributed to, like, being able to build this man.

Like luck, I'd say, has a lot to do with it. And just having luck, I'd say, in the sense that we've presented with great opportunities and being able to seasonal opportunities, you know, know me doing the call schedules or working with on the financial people. I would ask for engagement for my physician partners who again are fantastic clinicians, some of them pretty good business people, but again, they're like, hey Matt, you know, basically you just deal with it. Like we don't want to deal with it. We trust you to deal with it. I think that's important too. Being fair and honest with clinicians and you know, is really, really important. And I think I have, the, have the trust in my physician partners to be able to do that. And that's, that has been really, really important. And letting them, having them say, hey Matt, you just, you just deal with this because we don't, you don't want to deal with it or don't understand it, but we trust you to deal with it. I think that's, you know, not something I ever intended and quite honestly, going back to the intention, the size of our group, I wouldn't, when we started this, I started this 26 years ago now. Never, ever, ever would have envisioned kind of being in the position that we are now.

Yeah, when you talked about the bigger group, recipient management group, I mean, how many providers are in that group?

Yeah, so we've got about 200 providers and we cover about 50 different sites of care. That was again, you talk about physician entrepreneurs. I have two fantastic physician entrepreneurs, colleagues, partners in that organization, Drs. Swati Juglaker and Arusha Bavari. And they both are fantastic physicians but also very business minded as well. And they started their own, their stories are very similar to mine and started their practices a little after mine, but we formed another business entity to deal with a Medicare program, had great success in that program and kind of kept in contact when that program wound down. And then two or three years ago really decided it'd be better for us to work together. And so collectively the three of us formed pmg, a participant management group. But it's been a fun ride, fun journey. It's always fun talking with like minded physicians and individuals who share that vision and share the same experience of entrepreneurship. It's, it's, it's been fun.

How did you even find them?

Yeah, so it's funny, we had one of my former partners in our group was working at a hospital that we were contracted with again, community hospital. This probably would have been 2014 and he was leaving the group, moving to Houston. And so because he was getting married and his wife didn't want to move to Dallas and had family in Houston, so he moved To Houston about six months later, I called him up just to see how he was doing, how things were going, and asked him about the group he was involved with. And he told me about it. I said, well, I just call them, kind of see what they're up to, too. So just really much random call to swati and just we started talking and hit it off and kind of went from there.

Hmm. Seems like there should be a better process for meeting up.

Yeah, and there are now, I think that, you know, but again, it's just a lot of the business world and a lot of our success is just has to do with connections and people you meet. And that's, you know, that's the other thing about business networking. People love to talk about that. Sometimes I think people get more into the networking process than they actually do to the ends of what the networking's for. I see these networking organizations, people go to these networking events all the time. I don't know, ever. I think they enjoy just chatting to people more than you actually do anything. But, yeah, so it's, it's, it's. Yeah, that's just. Again, going back to the luck statement. I mean, I think just it was lucky that Amit moved to Houston and that I just called him up and that SWATI took my phone call and. Yeah, just kind of the way things go.

Although, to be fair, you've had those conversations with many, many other people where it's been a total dead end. You know, just, you know, it's not like every one of these things results. It has the results that this one did, and that's why you have to keep making those connections.

That's true. I've had quite a few, and I think that some, you know, again, timing is right. Luck has a lot to do with it.

But, yeah, I think it's important for, I mean, especially med students and people early on in their medical career to hear about these sort of things and hear about success in kind of a different way than just being an orthopedic surgeon or a dermatologist. Because I think a lot of people who are at my stage want success and they want to make a lot of money and they want to practice medicine. And they kind of only see the way to do that is to study really hard right now and get the best grades possible and do a bunch of research. So then they can do this specialty, which maybe they like the specialty and all of that, and they want to do that. But I think it's also a combination of just looking at this specialty makes this amount of money, and that's what I want to do. So. So I guess, like, what would you tell people in that position who maybe do want to be successful in medicine but are trying to find other ways to do that?

Yeah, I'd say there's. I think, I think you could certainly use medicine as a springboard. I think there are a lot of physicians, and this is true for our group, too. We're involved in a lot of businesses that are ancillary to direct practice of medicine, for instance, real estate stuff and operational companies that don't necessarily have anything to do with our direct practice, but we've been in connection with other groups. And so I think the practice of medicine is one way to make money. Other businesses just. And again, this is not in anyone's mindset when they go to med school. But you're, you know, you're going to have some extra money and knowing what to do with that extra, hopefully you're going to have some extra, extra money. Okay. And, but, but, you know, knowing what to do or what you might want to do with that extra money, whether it's in. And I think for, for physicians, entrepreneurial physicians who maybe you're even employed but want to be involved in other things, knowing something about your space, for instance, healthcare, real estate, or in our case, you know, other. Other operational entities that might generate income, business opportunities and a kind of a safe space. I think that's one thing in any business that, that, that, you know, I think Warren Buffett has talked about this about really knowing a lot about the business that you're in or the space that you're in makes it much more likely that you're going to have some success as opposed to having some salesperson kind of sell you, you know, an oil and gas well out in Nevada that you don't know anything about or it's going to make any money. And I think physicians do get roped into that quite a bit, to be honest with you. They say, well, it sounds like a good idea. And it might not say that I haven't. You know, I think that anytime there's risk that, you know you're not going to win every time. I mean, that's just one thing about business. But if you win more than you lose, then that's kind of what you're looking for. But I think that either whether it's that or whether starting your own practice, I think you're your guest, Dr. Glaucom, Dr. Flannery. I mean, I listened to his episode and he was certainly a big advocate for owning your own practice and something that he wanted to do. He's been an advocate for that. I think there are certain specialties that really allow for that. And so, you know, that's the other avenue, too. Just doing your own thing. You gotta have an appetite for success or appetite for risk, hopefully for success, too. Everyone has an appetite for that, but. And then a plan that's a sensible plan that's developed either by you or somebody and. Or hopefully in conjunction with somebody you trust.

Yeah, the. And I think it's an important point, Stephanie. It's, you know, they kind of think like, okay, this is the only way to make money. And certainly, you know, as we all know, like, primary care in general makes a lot less money than a lot of these subspecialties. But, you know, sometimes you can find ways to have a lot of financial success rather than just putting your nose to the grindstone and just being like, okay, I'm just going to work. I'm an orthopedic surgeon. I'm just going to operate more. Operate, operate, operate. And now in certainly a lot of those spaces, they do have the opportunity to invest in the surgical centers where they operate, and there's a lot of those types of things. But, you know, like Dad's saying, there's. There's other stuff that people haven't even thought about. I mean, another thing is, you know, tech, like investing in the tech of your practice or similar practices to yours that, you know, there. That can be a benefit. So there's just. There's all kinds of other different ways, but you have to have a little bit of, you know, creativity. And if you are just there, you know, operating all day long, you might not have a lot of time to think and explore those other possibilities.

Yeah, yeah. I'd say that the studying hard part, you gotta. You've got to knock that out first. You got to get your bases covered. So studying hard, whether or not you want to do research is. Is. Is fine. Obviously, doing research in the business world isn't going to help you. But, you know, I. I would also say. Say that there is not a pot of gold at the end of the rainbow. I've been down that path. I understand it with medical training, everyone thinks that as soon as they cross the finish line, Break the tape after the residency, man, the cash is going to start, come flooding in, and everything's.

Going to be easy. The arrival, fouls.

Yeah, and that's 100% true. I would say that if, you know, if you Go back to my story, man. I, you know, I got done and all of a sudden I'm on. Like, it was way harder than any residency that I had taken. Call 247 for nine months. That was way harder than anything I did in residency. But, you know, it's paid off in a great way. And, you know, certainly I could be doing something different now. I've enjoyed the journey and enjoyed what we've been doing and enjoyed what we've put together. I'm proud of that. But it certainly came with a lot of hard work and thinking outside the box too.

Yeah, I think that's a good point is just thinking outside the box and, you know, not everybody wants to do that and that's okay too. But I think, like, if you have the mindset of, you know, wanting to be successful and wanting to build something, I think it's important to, you know, know that there's other opportunities out there rather than just kind of what we're exposed to in medical training.

Yeah, I'd agree with that. I mean, you know, I know there's a big push for work, like life balance, which there's something to be said for that. So if that's your 100% focus, then, you know, it honestly is difficult to be, you know, air quotes financially successful without putting in that work. You know, you talked about mom and you know, working nights and weekends every night for nine months. I don't know a lot of people do that now, but there are some. And those are the people who are gonna, you know, maybe be able to carve their own path in a different way.

I will say, like, I mean, you kind of lucked out because you had mom. Like, that's another luck thing there because like, many reasons, reasons, but also like, you wouldn't have, you know, if you didn't necessarily have mom and have somebody who set up her life to be able to take care of me and my brother. Then like you, you know, you might have been working 24 hours, taking all those calls and like not been able to find a partner and like build a life and do all those things and had to sacrifice that. But since you had her, you know, there's. I feel like there might have been other things like that in your life that set you up to be able to like, have success not only like, financially, but just like as a whole, well rounded family and person.

That is a wonderful observation and 100% true. I mean, your mom just, you know, she allowed me to bet on myself and run that bet out and without Her. I mean, it wouldn't have worked. So you're absolutely right about that. And so some people might not be in that circumstance. You know, certainly we could have hired. Well, we did have, you know, some help at home who helped us quite a bit. And, and, but, you know, just being able to have a supportive spouse really has been wonderful.

Well, yeah, we couldn't have. I mean, if I were doing something the same as you, where I was working nights and Weekends on call 24 7, you know, we would have had to have, you know, live in nannies. You know, you can't just like have both of you gone in the middle of the night when you have a baby at home. Or not have me or not have you. Right, that was the other option.

Well, then we wouldn't have had this podcast here today.

Well, I, I do want to. I do have a. Just a couple of questions. The. Because a lot of these financial terms, people don't know what they mean and they get intimidated when you throw them out. And so I want you to define what is ebitda?

Earnings before interest, taxes, depreciation and amortization.

Okay. What does that mean?

Basically, it's your bottom line number. So there's some exclusionary stuff you got to take out. Basically, if you look at a financial statement or your checkbook, your checking account, do you have more money there at the end of the month than you had, you know, the month before? So basically it's just your, it's your, it's your earnings. You know, if profit and loss. Profit is the extra money you make, losses if you lose money. Everyone wants to have a profit. So it's just math. So you have to have a positive number there at the end of the month. Again, more money coming in than going out. Very simple.

Okay. Yeah. Because the word ebitda, if you don't know it, sounds kind of like intimidating. But it's just the bottom line.

Yep. Yes, the bottom line number.

And then sometimes deep top line revenue is important. When is top line revenue?

Well, it can be important when you're looking at kind of size of the company. So top line revenue is basically just your big picture revenue number. So it's the amount of money that you have coming in before expenses. So in other words, if you've got a $10 million top line company, your company generates or makes $10 million in revenue or money. Now, that's before any sort of expense expenses.

Okay.

But it only matters potentially. It matters for perhaps valuation, how much your company is worth. I mean, but if you've got a big top line number and your bottom line number or your EBITDA is negative, then you don't have a viable company. So you have top line number as big as you want. But unless it's turning some money at the bottom, then it doesn't, doesn't really mean much.

I mean, unless somebody wants to buy you who thinks that they can just minimize a whole bunch of those expenses.

That's true, that's true. Again, more money coming in than going out. That's all you need to know.

Well, I mean, I think that's a great point because I think people get very confused with a lot of this stuff and it's like. No, no, just boil it down to some simple stuff. Well, let's say somebody like wants to start a practice and is hoping to sell that practice someday to. Whether it's to, you know, other physician partners or. I mean, I hate to even say the word private equity because like Glockenflecken does not like private equity. And there's lots of issues with private equity. But let's say that somebody is like starting the practice and you know, has in mind that they want to sell it. What types of things do they really need to focus on? Well, having more money come in than go out.

That's number one. You got to have more money coming in than going out. That's really, you know, 1, 2 and 3. I'd say scale is another thing as well. I think that private equity or any investor for the most part is going to want to see some size in your practice if you're a one off group. Unless there's kind of a different strategy that the buyer, potential buyer has. For instance, a healthcare system may want to buy your practice. Another larger practice in the similar specialty may want to buy your practice. From a strategic standpoint, but having a viable business is the first and foremost thing. So more money coming in than going out. Scale has some play in it as well. So again, a one person practice is not as valuable as a two person practice, as a three person practice, four person practice, five, you just kind of keep going on there. So scale as well.

And if you're trying to scale, the ways to do that are to grow organically and keep getting more business, hiring more doctors or combining with other practices that are similar to yours.

Yeah, absolutely. That's the way most groups do it. I think that, you know, we've just grown organically in the sense that, you know, opportunities just kind of come our way. That's what organic growth is. Where your Practice just keeps getting busier and busier and busier and busier. Hopefully that's true. There's some planning around that. Whether that's marketing or whether that's just be in the right location or you know, you get lucky because the practice down the street there are two doctors retired or quit or left. And so those patients come over to you. So that's organic growth and there's acquisitive growth where again, you would, you would have, you would merge with another practice. Kind of like what we did with my two partners in the Houston area.

Yeah. And so that's either merging or you're purchasing practice to, to make that grow. And then when you're trying to sell your practice, people talk about getting a multiple in order to sell their practice. Explain what a multiple is.

Yeah, basically, if you have a, say your bottom, so your ebitda, your net income number, again, more money coming in than going out. At the end of the day, say you're left with $100 or the end of the year. Okay, so you're netting.

Couldn't we make it a little more than that?

$200. So basically, for the most part, people will pay you a multiple of that bottom line number. So whether it's two times. So they'll. So in other words, if, say again, you've made, you know, $200 and they'll pay you two times that, they'll give you $400 for your practice or a five times multiple, they'll give you $1,000 for your practice. So. Yeah. So the multiple is usually it's called evaluation. That's what the valuation is. And there's different ways to value practices that are being sold. But usually then what. Once they, the value is a multiple or a number on the bottom line number.

Yeah. I mean all of this, like if you can understand neural tracks, you can.

Understand how to run a business.

So, so, so that's the crazy thing in all this, Stephanie, is that everything that we do in medical training, medical schools, physicians, is way more complicated than the business side of things. I mean, it is, it is.

People just get so intimidated by the business side of medicine and. Oh, we don't learn how to do that. But like, I don't know.

Yeah. Can you, do you have a bank account? Can you balance your checkbook?

Yeah, that's. That's right. If you can deal with personal finances now, I know there's some people who can't, then you can certainly run a business.

Well, also, it's not like you're like with you, you started with one person, then two people. It's not like you're automatically just thrown into a CEO role of running a huge company. That's not what anybody's doing, especially. Or if you're starting a practice, like, you start it small and then you build up and you learn as you go. I think that there's not very many situations where somebody is just thrown into.

Yeah, you don't finish residency and then go be the CEO of a. Yeah.

So, like, I think, like people I don't know.

Yeah, yeah. I think paying attention. I mean, when there are meetings and business meetings that go on, and some of us desire aptitude for that, I think both. But paying attention along the way and asking a few questions every now and then, even it's after meeting a sidebar. If you didn't understand something that, you know happened during a hospital committee meeting where they were talking about finances, you know, just ask somebody and they'll tell you. Especially early on in your training. I still ask questions, too, when the terms that come up that I don't.

Really understand, well, I think that's important. And I was going to ask, what advice would you give to young doctors who are looking to build their own thing?

Yeah, I'd say that that's a good question. I don't know that I have a simple answer for that other than to say that it's doable. It is absolutely doable. Despite what other people want to tell you. Despite what the man wants to tell you, that you got to join a big hospital system and that's the only way to do it, which is not true. I'd say that, you know, paying attention along the way, even if you take a job that's in. That's an employed position for your first job, and a lot of people do that right out of residency training, I'd say that's okay, too. Just pay attention and ask some questions. Because invariably, you know, if you're working for somebody, there are going to be times when you're going to have meetings with the accountant or financial person or front office person, but just paying attention to that and keeping that knowledge. And so when you decide, hey, I'd rather do my own thing, that you have that knowledge, I think that's. That's, again, paying attention and being. And asking questions is important to the extent that you want to ask questions or just figuring out how stuff runs, you know, how does. How is it that the money comes? In other words, when you're doing, like, how do claims get submitted to the insurance company, then what happens? How does the money come back to you? What happens when the money goes into the account? Just paying attention to how that stuff works will give you some confidence when you do decide, if you decide you want to do your own thing.

I don't know if you can necessarily speak to this, but do you think it's harder now than it was 25 years ago when you started to be able to build your own thing?

I do. I think that. That a lot of that is because of the big hospital systems, how they've gobbled up so much of the kind of the market share. But I think that in certain specialties, in particular, it's. It's easy. You can do it in any specialty, but I think in certain specialties, it's. It's easier to do. There are some challenges doing it outside, you know, kind of a bigger hospital system, but it's. It's doable for sure, if that's what you want to do. And it. To the extent that it makes you feel better about, you know, building your own practice and making it your own. And I think that even if you maybe don't make as much money or quite as much as you might otherwise make on a base level from, you know, just working for a big hospital system, there is something to be said of pride on ownership and. And doing it your way. And if that's something you want to do and don't want to work for the man, I think go for it.

Yeah, Maybe you should teach a course on, you know, medical business side of medicine. Just have more money coming in than going out. It's a very short course.

It would be a super short course. That'd be one question on the test. Do you need to have more money going out or more money coming in?

Okay, it's pass, fail, super short. Anki deck to study.

One cat, one question.

All right, guys, and you know where to find us at Generations MD on TikTok and Instagram. And if you have any questions or interested in being a guest on the podcast, you can email us@askgenerations.mdmail.com and we will talk to you soon.

Bye, guys.