Do You Make This Mistake Concerning Competition?

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Mark Weiss"The competition."

When you hear that phrase, even in your thoughts as you read this, what comes to mind?

Most radiology group leaders would say that they envision the competition as another group, whether one from across the county or across the country, whether a local, independent group or a national staffing service model.

I certainly can't fault them because, especially these days, there is tremendous competitive pressure from outside entities, particularly from the publicly financed, national groups.

So, for most group leaders, protecting their practice from competitors involves looking outward.

Accordingly, the best of those group leaders would be doing all they could to create an experience monopoly, the unique experience that the group provides to its "customers:" hospitals, referring physicians and patients, one that, even if the competitors could observe what was going on, they couldn't replicate. And, those group leaders would be taking other action to create barriers to block entry into their market by those outside competitors.

But being so focused on outside competitors can blind you from seeing another, often equally lethal, predator seeking to capture your group's business, a predator so dangerous it might destroy your group's ability to survive.

Let me use two examples from outside of healthcare to illustrate this second category of threat, the first example from national defense and the other from industry in general.

The country can take great efforts to protect military secrets or even physical access to a military base by, among other things, erecting barriers, both physical and virtual, to outside intrusion. Similarly, industrial concerns spend countless millions of dollars protecting their essential trade secrets from competitors.

But that's only part of the story, because as much as the military and industry have to be concerned about protecting their secrets from someone who's on the outside, they have to be equally concerned about guarding against espionage from someone who's already on the inside — by someone who is thought to be "on the team."

Protecting against competition from within is a weak point for many radiology groups. The reality is that most groups don't fail simply because of competition from an outside competitor; they fail from within due to the actions of, and sometimes competition by, members of their own group who break off to directly compete with their former group or who facilitate an outside group's ability to displace it.

Protecting against competition from within requires much more effort and detail than most groups incorporate within their "owner," documents (their shareholders agreement or partnership agreement) and within their employment agreements and subcontractor agreements.

Although in some states, the direct approach to preventing competition, covenants not to compete, are unenforceable, the correct approach is to build a series of protective measures against competition around the relationship between the group and each of its physicians, whether owners or employees/subcontractors. You can conceive of these protective measures as a series of interlocking spines or spears, each designed to provide protection. One particular measure standing alone might be compromised, but together, as a systematic structure, they provide far more potent protection.

By adopting a wide range of protective measures, groups reduce, and if possible, prevent, competition from within, whether it's actual direct competition by group members or their facilitation of direct competition by a third party to whom those group members hand the key to the group's economic engine.

Focusing on threats from without is hardwired into most radiology group leaders. Leaders must be just as diligent in focusing on threats from within.


Mark F. Weiss is an attorney who specializes in the business and legal issues affecting physicians and physician groups on a national basis. He holds an appointment as clinical assistant professor of anesthesiology at USC’s Keck School of Medicine and practices with Advisory Law Group, a firm with offices in Los Angeles and Santa Barbara, Calif., representing clients across the country. He offers complimentary educational materials for our readers at advisorylawgroup.com. Mr. Weiss can be reached by email at markweiss@advisorylawgroup.com or at 310-843-2800.