Surgical alternative

Executive Summary
Company. Physicians Rehabilitation Industry. Health care Key. Flexible staffing helps offset low insurance reimbursements.

For George Ghanem, a pain in the neck six years ago led to his next business idea.

“I was having a problem with my neck and I was told I'd need surgery,” recalls Ghanem, the owner of Creative Events and Taylor Rentals in Fort Myers, one of the region's biggest event planners.

But like any well-informed patient, Ghanem got a second opinion and found some doctors in Bonita Springs who solved his problem with a procedure called spinal decompression. Ghanem was so delighted with the results that he invested in the business. “I became the managing partner,” he says.

Ghanem saw an opportunity to grow the business because of what he perceived was a lack of alternatives to surgery. He formed Physicians Rehabilitation in 2011 and the company now has four locations from Sarasota to Naples and a fifth location at The Villages, a retirement mecca in Central Florida.

Ghanem is planning more growth on the Gulf Coast. “We're moving into Hillsborough and Pinellas,” he says.

While surgery has become a common remedy for such ailments as knee pain, Ghanem says patients are increasingly looking for less drastic solutions. He estimates that 25% of patients who visit Physicians Rehabilitation have already had one joint replaced and are seeking an alternative for another aching joint instead of surgery.

Ghanem, who views surgeons and hospitals as his competitors, says consolidation in health care is giving patients fewer options. “A lot of hospitals are buying [surgical] practices,” he says. “Instead of seeing more choice, we're seeing less choice.”

That's why Ghanem targets prospective patients by advertising in newspapers and on television, spending $1 million annually on marketing. “We market directly to patients,” he says.

The concept is working so well now that Ghanem is considering franchising or licensing the business for future expansion. “We have barely scratched the surface of what the potential is,” he says, noting the wave of baby boomers with aches and pains is growing every year.

Cost pressures
Private insurance companies and government programs such as Medicare pay for the procedures at Physicians Rehabilitation.

But Ghanem is under no illusion that reimbursements will rise anytime soon. “I built the whole structure knowing my reimbursements would be low,” he says.

For starters, the physicians who practice at Physicians Rehabilitation are part of a group called RGM Regenerative Medicine. That's because the 10 doctors and physician assistants work on their own schedule. “A couple of them have their own practices,” Ghanem says. “We worked together on a program that works for everyone.”

The staff rotates among the offices, which are only open two to three days a week. Moving the staff from one office to another helps to be closer to patients and it's a more efficient use of their time while Ghanem continues to build the business.

To maintain a sense of team among scattered offices, Ghanem books a beachfront hotel and invites the staff and their spouses for a two-day retreat that includes presentations, dinners and team-building exercises. “My whole job is to drive patients to us and their job is to make patients feel better,” Ghanem says.

Physicians Rehabilitation has software that can help coordinate visits, which generally includes 20 visits for knee problems, for example. “We book all 20 appointments in advance,” Ghanem says. “We do not have many no-shows.”

When the phone rings at one Physicians Rehabilitation office, it rings at all other offices simultaneously so that a call never goes unanswered. “I track all the phone calls from every ad,” Ghanem says.

Ghanem only signs a one-year lease initially for space to gauge if it's a good location. Leasing and equipping an office takes about $250,000 and Ghanem is financing that himself. “I just don't want the debt,” he says.

Ghanem doesn't disclose Physicians Rehabilitation's annual revenues, but he says growth has been in double-digit percentage rates. During the busy winter season, his five offices see 6,200 patients a month.

Increased government regulations don't scare Ghanem. In his earlier career, Ghanem oversaw 14 insurance offices in his native Pennsylvania and he says the financial services industry is just as highly regulated. “This is more exciting,” he smiles.

Drawing patients
Ghanem spends $1 million a year to market to prospective patients using newspapers and television, though he grumbles that politicians have helped push ad rates up this year.

For example, Physicians Rehabilitation produces a four-page newspaper called The Health Standard that it inserts into the local daily newspapers such as the Fort Myers News-Press. Informative articles discuss treatment options and alternatives to surgery with small ads that offer a free consultation.

Ghanem also buys time on television. While it doesn't draw patients as effectively as newspapers, he says it reinforces the company's brand. He also has increasingly turned to internet marketing, and he says 40% of prospects viewing his company's web page are using an Apple computer. “The demographic is more sophisticated now than five years ago,” Ghanem
says.

Surgeons and hospitals could get into this business, too, Ghanem concedes, but there's less of a financial incentive for them because surgeries offer higher reimbursements. “They can do a lot of this, but the margins are lower,” he says.

Future expansion
Physicians Rehabilitation plans to expand into the Tampa Bay area with one office in Sun City Center in September, a retirement hotspot in south Hillsborough County, a second office in either Clearwater or St. Petersburg and a third location in southern Pasco County.

The three offices in the Tampa Bay area would function like the ones farther south, with a staff and physicians who rotate among the offices. Ghanem says he's scouting the Orlando area, too.

Ghanem is planning to add services, too, such as pain management. He says that will help fill the offices on days when rehabilitation rooms aren't used.

Ultimately, Ghanem says he may operate 15 to 20 locations and he's considering franchising or licensing other areas. “The further you are from the center, the more difficult it is to manage,” he says.

A key to maintaining the quality of the operation is to have franchisees or licensees with an ownership stake. “How can I keep the culture and the management?” Ghanem says.

Meanwhile, Ghanem says the recovery in the economy has helped the Creative Events business he owns and he's planning to sell it to his employees. “Since 2011 and 2012, I've been minimally involved in the rental business,” he says. “We're hoping employees will transition to ownership.”