As Target Corp. packs up and retreats to the U.S., we are reminded that not all American business success stories can be replicated in Canada.
This is a story of a Canadian chiropractor who was surprised by some business challenges when he returned to set up a clinic in his hometown.
Dr. Dan Krueger is a smart, tech savvy, accomplished businessman with an MBA who was involved in his family's electrical company for years in Kelowna, B.C. Roughly 12 years ago, the former paramedic moved his family to Portland, Oregon, where he studied to become a chiropractor. After graduation, he set up his own clinic in a prosperous Portland suburb. He called it Symtrio to reflect the body's symmetry and the three regions of the spine.
Within three months, Symtrio was profitable and on an unmistakably strong growth curve. In five years, the busy clinic employed an associate and five support staff. Then in 2012, Dr. Krueger decided to sell Symtrio 1.0 in Portland to move back home and establish Symtrio 2.0. After two years in Kelowna, why were things so difficult?
Since Symtrio 1.0 was located near a big Intel plant and Nike headquarters, Dr. Krueger opted to take advantage of the good chiropractic coverage that came with the premium insurance plans enjoyed by those 16,000 employees. To build referrals, he forged key relationships with local physicians. The robust uptake of Complementary and Alternative Medicine (CAM) in Oregon was another factor in Symtrio's success where chiropractors' very broad scope of practice renders them as point of entry service providers to the healthcare system.
Health insurance covers chiropractic care and Americans readily turn to it for overall well-being and maintenance. Symtrio 1.0 grew with a mix of about 95 per cent insurance and five per cent cash patients. Since massage and chiropractic fit well under the same roof, he hired four staff massage therapists.
When he decided to return to Kelowna and open Symtrio 2.0 in April 2013, he applied the same assumptions that worked for Symtrio 1.0.
Dr. Krueger knew the ideal clinic layout, patient demographics and the key hours of operation that worked with chiropractic care. He purchased a building in a prime location in Kelowna and kept his overhead low.
But after the first year, the Kelowna clinic was not breaking even.
The challenge was to re-evaluate the underlying assumptions that worked for Symtrio 1.0 and get the new clinic on a profitable track.
The American health-care system is profoundly a collection of publicly-traded, profit-seeking insurance companies who mediate between health providers and patients. These stakeholders wield tremendous power to determine payment for service. A health-care provider can either operate an all-cash practice and avoid insurance hassles, or submit to the insurance industry and fight for every payment.
The Canadian health-care system is vastly different. Although they wait longer for specialized services, Canadians are accustomed to accessing health care at no direct personal cost. Believing health care should be covered by the government, they are less willing to pay for it. Alternative health care such as chiropractic has minimal government or insurance coverage, so Canadians are apt to wait longer to access other paid services, even at the expense of preventative intervention and deterioration of symptoms.
Apart from the narrower professional scope of chiropractic work, Canadian regulations also prohibit massage therapists from working as employees in chiropractic clinics. The relationship in Kelowna could be landlord and tenant at most.
Dr. Krueger would have to find a way to thrive under the Canadian health-care culture and enhanced regulatory restrictions.
Symtrio had no choice but to build a largely cash patient practice. Dr. Krueger's motto continues to be: Under Promise and Over Deliver.
He scaled back his reliance on online marketing. In the heart of Intel country, prospective patients were all online. But this isn't the case in Kelowna.
He spends more time reaching out to local physicians to build relationships. Canadians often think that their family doctor walks on water. If a family doctor refers them to Symtio, patients will come.
He continues to offer custom orthotics since that technology has drastically improved with laser flatbed foot scanners. Many patients in his Kelowna demographic base suffer from foot and lower extremity pain.
For Dr. Krueger, setting up the first Symtrio clinic in the U.S. was a vastly different experience from setting up the second one in Canada. He assumed the two markets were almost interchangeable. The challenge for Symtrio in Canada became simply to survive and grow.
The biggest lesson for this hometown boy has been to question the assumptions that originally determined success abroad. The fundamental difference in attitudes between Canadians and Americans with respect to paying for health care and accepting complementary medicine, as well as the divide between insured and cash patients represent Symtrio's challenges in Canada.
Even with all the advantages and assumptions of growing up in Kelowna, Dr. Krueger cannot take anything for granted. It is difficult to grow Symtrio 2.0 which, after two years of operations, could take up to 18 months longer to get firmly rooted and profitable.
Today Symtrio 2.0 sees about 90 per cent cash patients and 10 per cent insurance patients. The primarily cash practice in Canada will take significantly longer to grow than in the U.S.. Change is gradual in the health care world but an emerging trend toward patient-centred care in Canada will advance such allopathic providers in mainstream medicine. It will also help Symtrio to prosper in Kelowna.
Peter Bowal is a professor of law at the Haskayne School of Business.
This is the latest in a regular series of case studies by a rotating group of business professors from across the country. They now appear every Tuesday on the Report on Small Business website.