Martin Penninga was losing the battle to turn the medical practice he managed into a paperless office which would provide more patients with faster, more efficient access to health care.
He had been managing a family practice in Red Deer, Alberta, for three years, but by mid-2009, he was concerned that inefficiencies created by the clinic's paper-based system were responsible for the loss of nearly $6,000 per month in revenue.
"I co-wrote a 70-page business plan, recommending the clinic's 100,000 paper patient records that took up a third of the building space, be converted into Electronic Medical Records (EMRs)," said Mr. Penninga. If implemented, this would free up room to increase patient flow and revenue.
With 12 per cent of the clinic's $1.2-million annual staffing budget dedicated to the management of paper records, he suggested a move to being a fully paperless clinic, would also allow them to cut down on administration staff costs as well.
But further strategic planning was stalled by the majority of the 13 physicians who owned the practice. "Because of not implementing the business plan, we just weren't moving ahead," said Mr. Penninga.
Prior to taking on the leadership role at the clinic, Mr. Penninga, a graduate of Trinity Western University business school, was the co-owner of Blackfald's Family Foods, a successful family business in in Alberta.
He joined the clinic in 2008 for a three-year term as manager to increase its profitability. But halfway through his term, he ran into serious impediments in his quest to maximize the clinic's profitability. Due to the high volume of paper records taking up space, there was no opportunity for growth, he explained.
"Even if we had the space to bring on more doctors, overhead rates as high as 40 per cent of billing revenue per physician likely would have been too high to attract new doctors anyway," said Mr. Penninga.
Costs were further escalated by unnecessary support staff expenses. For each doctor there was a ratio of 1.5 nursing staff involved in administrative work. "This was expensive compared with other paperless clinics in the province, which had already streamlined operations and employed fewer staff."
Since all business decisions at his clinic were made consensually, and the majority – who were late career physicians reluctant to learn and adopt the new technology – stymied Mr. Penninga's recommendations for improvements, his chances of increasing its profitability were dim. He needed an alternate solution.
Mr. Penninga and one of the physicians from the Red Deer medical clinic decided to go it on their own. In January, 2011, he and Dr. Marci Wilson established Horizon Family Medicine in two central Alberta locations, with Dr. Wilson having sole ownership while Mr. Penninga provided his business acumen as manager of the practice. "Three other physicians from the Red Deer clinic joined us, along with two new doctors," he recalls.
Sticking with his intention to create a paperless clinic, he found a smaller space with lower rent that didn't require the extra room for paper files. He implemented Med Access, an electronic medical records system designed to increase clinic efficiencies and as a result, revenue.
The cost of implementing the EMR, that included IT capital purchases and ongoing support, totalled approximately $520,000 for a 4.5-year term. It was a steep initial investment but fortunately, due to Med Access being a government-approved system, he was able to get funding through Alberta's Physician Office Systems Program (POSP) to cover 70 per cent of the costs.
In addition, Mr. Penninga hired professionally cross-trained medical office assistants rather than overqualified nursing staff to handle Med Access and other admin duties. "The MOA skill set is specifically suited to an EMR-based clinic and staffing efficiencies meant that we only needed to hire one MOA per doctor instead of the previous 1.5 nurses per doctor," he said.
Going paperless in a smaller, but better used space with lower overhead, allowed a greater number of physicians to work together at Horizon, which has spurred a yearly revenue growth of 28.4 per cent.
"In its first eight months, Horizon grew rapidly from six physicians to twelve," said Mr. Penninga. "By 2013, annual gross revenue per full-time physician at Horizon increased by $25,000 compared with the previous clinic totals."
Since the clinic's opening in 2011, Horizon's specialized MOAs, who deal with electronic records instead of paper charts, have comparatively saved over $6,500 in per-physician annual costs that were incurred at his previous clinic, he says.
"A more efficient, paperless work flow has meant that individual physicians see approximately 7,000 patients per year, up from 5,800 at my previous clinic," said Mr. Penninga. At Horizon, physician overhead rates are also a maximum of 30 per cent of billing revenue, he added.
In 2012, Horizon Family Medicine was identified by Alberta Health as an "E-Health Champion." Mr. Penninga and Dr. Wilson are now POSP Peer Leaders, mentoring other physicians and managers across Alberta using Med Access.
Special to The Globe and Mail
Jeff Kroeker is a lecturer in the accounting division at the Sauder School of Business at the University of British Columbia.
This is the latest in a regular series of case studies by a rotating group of business professors from across the country. They appear every Friday on the Report on Small Business website.