The next in our series of posts sharing key takeaways from panels at the Healthcare & Life Sciences Private Equity and Lending Conference discusses dermatology investing. It is authored by our colleagues Royce DuBiner, Timothy Fry and Holly Buckley.

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Investing in a dermatology practice requires thoughtful programs to incentivize partner physicians and align care patterns. Focusing on patient and provider happiness is vital to the long-term viability of an investment in the dermatology space according to a panel of experts who addressed attendees at the Annual Healthcare and Life Sciences Private Equity & Finance Conference in Chicago on February 21 and 22.

Experts included Francis Acunzo, CEO & Partner – Acara Partners; Samarth Chandra, Managing Partner – Enhanced Healthcare Partners; Alejandro Fernandez, Chief Executive Officer – NavaDerm; Daniel Groisser, M.D., Medical Director & Executive Chairman – The Dermatology Group; and John Pouschine, Co-Founder & Managing Member – Pouschine Cook Capital Management, LLC. Timothy Fry, attorney at McGuireWoods, LLP moderated the panel.

Here are five key points from the panel discussion.

1. Get creative on compensating your clinicians. There is a great deal of competition out there from large practices for talent/physicians. Yet most compensation is within a fairly standard, market range. Creative alternatives may assist the physician recruitment process. Residents may be looking beyond a paycheck for other benefits such as a down payment on a home or help with their family care. Investor-backed practices need to consider the unique attributes within a compensation and benefits package. What can the platform provide different from the recruit’s other options? Additionally, consider non-physician employees. What is in it for them? Some investors are actively considering models where physician assistants can also participate in the platform’s upside, through either stock investment or bonuses.

2. Research attracts talent. Many physicians are looking for something more than just a traditional office-based clinical experience. Some want to continue their academic interests and strengthen the practice of dermatology. Running clinical trials or rotations supervising residents can allow physicians to stay academically engaged. It can also help attract top talent and can boost the credibility of a practice in its community. Further, such programs may provide additional revenue for the practice.

3. Compensation is just one aspect of retaining talent. It may be cliché, but doctors coming out of school today are not the same as they were 20 or 30 years ago. Many physicians want some degree of work-life balance in order to raise a family and do not want to work a 12-plus hour day. Some practices create schedule flexibility for physicians to pick up and drop off their kids at school. Some physicians may want evening or weekend hours that can also benefit patients. At the same time, many physicians may be hesitant to invest their savings (or have significant student loans) right out of school to establish a new practice. Platforms may want to develop a schedule and practice around physician needs, as well as equity opportunities to retain key personnel long-term.

4. Know your market before adding cosmetic services. Self-pay cosmetic and spa service models do not work everywhere and may not work for all practices. Not knowing the practice’s patient base could create a large cash outlay on new equipment and marketing a service that will not work well. Additionally, consider what practice physicians want. If a physician group is not on board with cosmetic and spa services, it will be hard to derive a return on investment by adding cosmetic services. Instead, ask what physicians want to offer their community through practice offerings, which could be sub-specialty practices or linking dermatology with podiatry and other primary care offerings.

5. Physician assistants work well, but not all the time. Physician assistants, particularly those with dermatology training, can help practices give patients faster access to care and more available follow up appointment times. Such employees are cheaper to recruit but not all practices need a physician assistant and not all physician assistants are the same. Some physician practices do not have the volume to justify hiring many physician assistants. Having too many physician assistants may limit the ability for a patient to get to know the physicians – making the patient more likely to leave for care from a different practice. Further, some doctors do not want to work with a physician assistant and may not utilize one if assigned. Worse, many physicians worry investor-led practices will seek to replace them with this cheaper alternative – creating skepticism of intentions. Significant communication may be necessary for a practice to use this tool to improve care access and so it should not be seen as a simple fix for not having enough physicians on staff.