By David Gonzalez

Harvard Medical School Professor Dr. Atul Gawande was interviewed on NPR’s Marketplace about the rising cost of health care. His recent study – and critique – of the business of health care set his sights on McAllen, Texas, where health care costs are more than $14,000.00 more than anywhere else in the nation.

Dr. Gawande had an interesting hypothesis for the three different types of business models for medical practices:

[W]hen I think about money as a physician there's three ways you can think about it. One is you just try to ignore it, and hope that your expenses come out OK at the end of the month, and you can pay the secretary, and your malpractice premiums, and the rent on your office.

The second way doctors think is, hey, I've got some good money coming in maybe I'll use it to improve the quality of care for my patients. And so they'll hire a nurse practitioner to follow up on the diabetes patients, make sure people are all getting their mammograms like they are supposed to. And then there's a third way you think about the money, which is that you just focus on how do you maximize the revenue.

The interview hit close to home. Since the onset of the Great Recession, we’ve had to be more strategic about the choices our Firm makes. For the past ten years we’ve bounced between the First Option & Second Option. We’ve always believed that if we do good work for clients, word will get around and our business will steadily grow in direct proportion to the quality of our legal work. We have consistently re-invested profits back into the Firm, hiring additional lawyers, paralegals, legal assistants, and social workers to improve the quality of our legal services to clients. Working in a profession that is already highly criticized for an unhealthy devotion to money, we imprudently thought we were taking the moral high ground by avoiding the money issue and just sort of let it take care of itself.

It turns out that we weren’t taking the moral high ground, we were just taking the easy way out. It may not be hard to calculate overhead expenses, breakeven points, regression analysis, standard deviations, and profit margins for somebody who went to business school and loves numbers. But for somebody who still hasn’t found a good use for trigonometry or Pre-Calculus, it was always easier to jump to the interesting legal issues and ignore the boring business ones for another day.

What we realized is that we were jeopardizing the level of care we were providing to our clients. While we used to stay awake at night worrying about our arguments in court the next day, we found ourselves worrying about cash flow and financing. When the recession hit, we realized how little control we had in the professional side of our practice. I have control over the number of times I can practice an oral argument; I don’t have any control when both of our banks stopped extending lines of credit for small businesses.

There has been and will always continue to be an uncomfortable relationship between business and professional service. I believe that all of the businesses that focus on profit and revenue will eventually fail because they have no core purpose other than making money. I believe that businesses that focus on providing the best possible product or service to clients will eventually succeed because they are in business for the right reasons.

The hard part is maintaining the balance in the middle.

(flickr image via daviddmuir)

Labels: mcallen, money, the business of law, the recession

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