My guest today, Daniel Hudspeth, is the CEO of Discover Health, a concierge medical practice business with locations in California, Boston, and soon to be Seattle. During his search Daniel did extensive research on private pay healthcare and eventually developed a thesis to acquire multiple concierge practices across the country.
We talk about this pivot during his search, what the concierge model looks like for patients and doctors, why it’s an attractive business as an investor and operator, and what growth could look like over the coming years. Given my mom is a family physician, this episode felt close to home and I enjoyed the chance to connect with an entrepreneur like Daniel who’s looking to build a better model in patient healthcare.
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Hood & Strong, LLP — Hood & Strong is a CPA firm with a long history of working with search funds and private equity firms on diligence, assurance, tax services, and more. Hood & Strong is highly skilled in working with search funds, providing quality of earnings and due diligence services during the search, along with assurance and tax services post-acquisition. They offer a unique way to approach acquisition diligence and manage costs effectively. To learn more about how Hood & Strong can help your search, acquisition, and beyond, please email one of their partners Jerry Zhou at [email protected].
Oberle Risk Strategies– Oberle is the leading specialty insurance brokerage catering to search funds and the broader ETA community, providing complimentary due diligence assessments of the target company’s commercial insurance and employee benefits programs. Over the past decade, August Felker and his team have engaged with hundreds of searchers to provide due diligence and ultimately place the most competitive insurance program at closing. Given August’s experience as a searcher himself, he and his team understand all that goes into buying a business and pride themselves on making the insurance portion of closing seamless and hassle-free.
(00:03:23) – Daniel’s Search Journey
(00:14:31) – Investor hesitations force the Search to go longer
(00:17:28) – Recruiting Doctors to the Organization
(00:25:57) – Churn dynamics
(00:29:47) – Staffing requirements
(00:31:45) – Establishing a playbook for how these businesses are run
(00:35:18) – Concierge-centric Podcasts
(00:37:23) – Defining Executive roles
(00:40:09) – How the CEO role has changed
(00:43:06) – Utilizing peer networks
(00:46:05) – Tools for hiring and recruiting
(00:50:13) – What strongly held belief have you changed your mind on?
(00:52:47) – What’s the best business you’ve ever seen?
Alex Bridgeman: Do want to jump in and kind of walk through your journey as a searcher and your kind of pivot near the end and then the business you are working on now with MyDocPlus and everything after that?
Daniel Hudspeth: So I started the search fund in 2015 after I graduated from business school. I was living in North Carolina at the time. And I started a traditional search. So I worked with traditional search fund investors. I didn’t go the self funded route and went to work quickly sort of doing an industry driven search. I felt like that was the best approach for me. So I had my set criteria, recurring revenues, customers with high switching costs. I was looking for an industry that was sort of insulated from economic shocks, strong industry tailwinds, had my EBITDA and revenue targets. And I was looking for primarily service businesses. As I mentioned earlier, I’d looked at a little bit of software, but I was mostly looking at services businesses because I was not a particularly technical guy and didn’t have a technical background. And so I wanted something that I could understand easily and shorten my learning curve as much as possible. And so, I quickly kind of zeroed in on private pay healthcare as an industry that I thought was worth really digging into. That started to look like a lot of different things. I looked at home health. I looked at private duty nursing. I looked at home therapy businesses. And this was all sort of during the first year, year and a half of my search. And as part of that effort, I came across a very successful, large concierge medical practice that had really great margins and really checked all the boxes that I mentioned earlier. It was 100% recurring revenue, just a membership based primary care practice. And just for the uninitiated, when I say concierge medicine, because it means a lot of different things to a lot of different people, I’m talking about primary care, internal medicine, peds or family medicine, where a doctor charges an annual membership fee to be a part of the practice. Sometimes they bill insurance. Sometimes they build Medicare. They don’t have to, different models do different things. But in this case, when I’m talking about concierge medicine, I’m just talking about generally the retainer based primary care model. Just for context, what that means is that it’s an alternative option to a traditional insurance driven health care model where a patient, maybe they pay a small deductible, but generally their insurance is covering a big chunk, like 80% or more, of their health care costs. And so they go to the doctor, they get a physical, the doctor bills all that back to insurance, maybe they pay a small copay or deductible up front. But the doctor is dependent on 80 or 90% of insurance revenue to make their financial- hit their financial targets. And so typically, in that traditional system, a doctor sees 25 to 30 patients a day. The visits are very quick. And to get into a doctor like that, you have to generally book that appointment pretty far in advance. And so the concierge model tries to break that mold by charging a retainer fee that allows the doctor to not be dependent on insurance revenue as much. And then they can have smaller patient panel sizes and spend more time with the patient. So it’s a win for the doctor, a win for the patient. The doctors are less likely to burn out, patients get increased access to their doctor for an annual fee. And from a business perspective, again, I was looking at this because I thought it really fit all of our criteria from a search fund model and what we were looking for. So digressing back, I found this doctor’s practice. It was really appealing from a criteria perspective, and it got me interested in concierge medicine and what it might look like to search in that space. And so I ended up searching in that space for a little while. I looked at a number of companies that are sort of on the periphery of the concierge medicine space. We looked at a company that did practice conversions to the concierge model, sort of like a consulting type company, back office services company. We looked at another roll up strategy that was sort of just getting started. And for various reasons, mostly related to cost and the price of equity, these weren’t that appealing from an acquisition perspective. But I was still intrigued with the model and felt like it was really compelling and a business that I wanted to be in. And so I went back to my investors probably around month 20 or 21 during the search and shared with them that I felt like there’s real opportunity here. I ended up drafting a first investment memorandum that kind of outlined what I thought was really unique de novo opportunity to sort of stress raise capital and then start these practices from scratch. What we ended up doing was my investors came back to me, they said, we’re interested in continuing this conversation with you, but we think you have more work to do on the front end. And in order to really flesh out this business model, and to get some of our questions answered, we recommend you extend your search, raise a little bit of extra capital, and focus on this full time and just see if we can revisit it in six months after you’ve done some more research. And we feel like we’ve sort of looked at this from all angles. And so I did that. I raised additional search capital, gave myself another nine months of runway or so. And then I spent time really thinking through the pros and the cons of the model and the de novo approach and ended up calling I think like 50 doctors and doing these doctor interviews and having a lot of conversation around marketing and how long it took them to get to a full panel. That was really the existential question for us.
Alex Bridgeman: Full panel being like a full like book of patients to work with?
Daniel Hudspeth: Exactly, yeah. So, what we found was like full in the concierge world meant about 300 patients. So, you start with zero- if you start with zero, how long does it take you to get there. And at some point, you break even in terms of your cost, but then to get profitable, you really need to reach full capacity. And so we asked ourselves, how long does it take to get there. And we found that it’s typically a two to three year period at least. And that’s if you start with a doctor with an established reputation, really well known in the area, has sort of a cachet with other doctors and other patients in the area and can start to bring people into his or her practice. And so we realized, okay, that’s going to be a very deep investment trough for us. If we start from zero, we’re going to invest in two to three years worth of a doctor salary, not to mention the overhead, hiring a medical assistant or someone else to help manage the practice and the real estate costs and all that. And so we realized that it was going to be more attractive if we could buy some of these existing practices and buy them outright and take on their existing patient panels and then operate them and then leverage that cash flow to buy some more and then maybe one day build our own. So that was the fundamental shift that happened in our thinking around the business model. And so I ended up running a second SIM, investment random, and went back and raised capital in July 2018. We raised money then. And then we were sort of off to the races to go and find and buy the first practice that fit our model. And so fortunately, we found that practice fairly quickly. It was a five doctor practice in San Francisco. And so, we completed that acquisition in December 2018. And then I moved my family from North Carolina to California and started to work very closely with the team there. And one of the founders of that practice became our chief medical officer, which has been an integral part of our business. And he’s been a real thought partner to me and a fantastic business partner. And so we worked together to then kind of lay the groundwork to build out a wider network of like minded physician practices from there. And so then, once we kind of got our feet underneath us, I spent maybe 9 months, 10 months kind of just learning the business and being in the practice every day, all day, we started to look at other acquisition opportunities and started to do small acquisitions around us. And so from that point, in late 2018, early 2019, we started looking at new deals. And we’re just about to complete our ninth acquisition total. So we’ve done two in Sacramento, two in Napa, one in Santa Barbara, one in Moran. And then last year, we did one in Boston, with two additional doctors there. And the backstory of that is we hired another VP to kind of manage our East Coast expansion. And then we are almost closed, fingers crossed, on acquisition in Seattle. And so we’re hopefully going to be in three states very soon and looking to expand more broadly. I forgot to mention we did another capital raise last summer, so we raised some follow on equity investment. And that’s helped us kind of continue the upward trend. And we’re committed to continue to do that and try to be in more states by the end of the year and continue the acquisition cycle. And so we’ve also built up the corporate team quite a bit. We’ve added some great players on the operations and finance side. And we are sort of in this, continuing to kind of be in this growth mode where we’re thinking through, okay, what does the next phase look like? We’d love to do de novos. If at some point, we feel like we can crack the code on how to organically grow these practices from zero without an existing practice there already. So that’s something we’re working on internally. I should mention, we changed our name to Discover Health, which is the name of the first practice we bought in 2020, I believe. And so we use Discover Health as kind of an umbrella brand. And that’s been our customer facing brand, for lack of a better word since then. I think that’s kind of the story in a nutshell.
Alex Bridgeman: There’s lots of places to go with your discussion so far. First though, doubling back, your investors asked for- It sounds like they had a couple of additional questions for you to work on during that six month extension you had in your search. What sorts of questions did they have that you hadn’t fully fleshed out quite yet? Like, what was important to them that you hadn’t gotten measured at that point?
Daniel Hudspeth: Yeah. So I think the big question for them was how confident do we feel that we can grow these practices within a set amount of time, whether that was one year, two years, three years. And the answer upfront was we didn’t know. We didn’t know whether- we speculated that we could grow a practice, as I mentioned, kind of within a three year period, but as I mentioned too, that’s a long time period with a lot of money upfront that it was going to take to break even. And so we wanted to pressure test those assumptions. And when we did do that, we realized that it wasn’t the path we wanted to go down. We didn’t want to just start pure de novo. And so that was a pretty critical shift for us. I think the other questions that they wanted me to kind of wrestle with was like one around geography. Can we do this just anywhere? Where’s the most ideal location to start this? We ended up in the second model coming up with 10 metropolitan areas where we thought we really need to focus on these areas because if we were able to buy a practice in that area, we would have the ability to expand outwardly from that sort of epicenter location. And if we were outside of one of those 10 areas, then we would always be trying to get into one of those areas. Because that’s where really the opportunities were for acquisitions. So generally, most concierge practices across the country are within 30 miles of a major city, and they’re really clustered around areas of high net worth, high wealth. Because traditionally, the people who’ve gone after concierge medicine are folks who have more disposable income, and they want more access, and they’re willing to pay for it. It isn’t always the case. And we have patients who are very much solidly middle class that would not be considered wealthy by most metrics but continue to seek out and pay for concierge medicine. But we knew in terms of kind of our broader growth potential that we needed to kind of be aware of demographics and put ourselves- give ourselves the best chance of success. And so we spent some time thinking through that, too.
Alex Bridgeman: And you also mentioned that the workload for the typical doctor in concierge is a little bit less. There’s a little bit more breathing room in their schedule. Does that make it easier for recruiting or expansion if you wanted to go- if you eventually decided to go de novo or even just adding doctors within your practice, could you go to that doctor in an area who has that cachet and reputation and say, hey, come over concierge, there’s a lot of ways that your life with our team will be better in schedule and anything else?
Daniel Hudspeth: Yeah. So I’m glad you mentioned that last part around your life being better. I think, because I want to make the distinction. I don’t think that the work itself is necessarily less but there’s a lot more balance, and you’re less likely to burn out in a concierge model. And here’s why. So a traditional, let’s say a traditional family practice doctor who works in an outpatient primary care clinic, they’re going to see 25 to 30 patients a day. And they’re going to see whoever comes to the clinic. And when they see those patients, they’re going to bill insurance or Medicare for that visit almost exclusively, unless you’re in like a direct pay practice. And those exist, but that’s not the traditional model. And so, in a traditional insurance driven model, these doctors, they’re seeing such high volumes that they’re spending less- they have to spend less time with each patient. And if they get behind, they get rushed. And they don’t have a lot of time for the other stuff that they might need to do in order to provide a great health care outcome. So for example, follow ups or a more extended patient interview or a specialist referral or doing some research on a particularly complex case, or talking to their colleagues and running ideas by them and running cases, things like that, you just don’t have the time in the day to do a lot of that if you’re seeing 25 to 30 patients a day on a regular basis. So what you see is these doctors, they clock in, they’re clipping through their patients, and then they’re leaving, and they leave, and they feel burnout in a lot of cases, maybe sometimes dissatisfied with the level of care that they’ve been able to offer. On the flip side, patients also feel the same way. They feel like I didn’t get any time with my doctor. Now, if I want to make an appointment, I got to make it another three weeks in advance because that doctor’s booked up, or I’ll go to urgent care or see an NP or PA, which can be fine depending on the issue. But again, they’re not able to necessarily see that same person again for a period of time. And so continuity is limited. And it’s harder for a doctor to track along with the patient on a complicated issue over a longer period of time because they’re not necessarily seeing the same patients on a regular basis. Sometimes those patients are seeing multiple physicians in the area. So they’re only relying on charts, chart notes. And every doctor has a different level of detail on their charting. And so it just kind of depends on who you get and what they put in their chart. And so for all those reasons, back to your original point, with concierge medicine, you can recruit based on work life balance issues and trying to try to appeal to a doctor who wants to practice medicine at a different pace. And I’ll add, primarily, the best fits for us are doctors who really want what we call relationship driven medicine, where the ability to build long term relationships with their patients and then track along with them on their healthcare journey. As opposed to being sort of a one stop let me see if I can fix your problem, see you later, if ever. Those are the doctors we look for. And I think for the right kind of doctors looking for that fit, we can recruit on those aspects of the job. I will note, concierge medicine, when you pay for a membership in one of our practices, you get 24/7 access to your doctor. And so that means you get their phone number where you can reach out to them in off hours, and they’ll answer the phone. Now we have some shared calls. If the doctor goes on vacation or something, you might get the doctors on call, but you’re going to speak to a doctor, and they’re going to talk to your doctor about that call. And your doctor will follow up with you when they’re back. And so, the job of a concierge doctor goes beyond the typical 40 hour workweek in that sense. Again, the doctor that this appeals to is the doctor who wants that. They want that kind of, again, relationship driven care model. They want their patients to call them if it’s Saturday night, and they’re having a critical health concern come up. They want to be the first person they call. Obviously, if it’s an emergency, they’ll send you to the hospital, but they want to be a part of that conversation. They don’t want you to wait until Monday to try to make an appointment. And so from that perspective, like there is kind of an expanded scope of work in the sense that concierge doctors have to be more available. But because you have that other balance in your work, your day to day sort of workflow, that it’s kind of a trade off that a lot of doctors would consider it to be worth it. And it’s worth noting because you have a much lower volume, you can also be a lot more flexible around your schedule if it’s concierge doctors. If you need to take your kids to school, if you need to step out and go to a piano recital or something like that. Like that’s all doable in a concierge model because you have that built in flexibility within your schedule and the ability to move some things around if you need to. And again, doctors who are good fits for us are looking for that kind of thing.
Alex Bridgeman: I think I mentioned before my mom is a family practice physician. So I’ve seen a lot of the things that you’ve described with the insurance driven model. When you think about the other ways that you can make that physician’s life better with concierge, given that you’re working primarily with a higher income clientele, does that give you more resources to improve their life day to day, like scribing, for example, is there better software or some other things throughout the day or within their workflow that you can give them that make things smoother and easier on their end?
Daniel Hudspeth: Yes, to some extent. I mean, we’ve been able to provide dictation software, for example, to our doctors this year. We do have some pricing power. So if we feel crunched because we can’t offer the level of service that we want to, to your point about having a demographic that’s a little more insulated to economic shocks, we have some elasticity with our pricing. So, we can adjust pricing, and even if it means our volume of patients goes down, we can then provide a little more hands on care and still make the same margins. And so we’ve seen that to be true in multiple cases throughout the lifetime of this business. But also, I think the biggest thing we can offer these doctors in that respect is time. Just the flexibility of the schedule allows them the ability to focus on whatever matters most at that moment for their patients. And that, I think, is more valuable than any additional kind of support that we can offer. I will say it’s a fairly physician driven model. We try to operate lean. We don’t have tons of additional staff supporting the doctors. That’s part partially because it just doesn’t make sense economically to add layers, and you don’t need it when you’re not dealing with such high volume. But it’s also because in a concierge model, patients and doctors, they both want the physician to be more hands on. So they want that doctor’s time and they are paying for that.
Alex Bridgeman: With this being generally like from a patient perspective a higher quality service because you have more access and it’s easier to schedule appointments and more one to one relationships, does that have a lower churn compared to other more insurance driven practices? Or like what does churn dynamics look like at Discover?
Daniel Hudspeth: I think we’re still too young to have a lot of data on that. A lot of the doctors that we’ve acquired are doctors who are retiring within a few years. But then as they’ve passed the baton and stepped out because they’ve retired, we’ve hired new doctors. And yeah, we’re hoping that what you say proves out to be true, that if you get the right physicians in there, that they lock in with us, and this is a really long term career for them. And I’d say we were seeing some of that. But it’s still a little too early to tell. We’re only a four year old company. And so we don’t have a lot of long term data. A lot of the doctors you’ve acquired have stayed on for a year or two. And then we’ve had a few people come in and out who stayed on since then. And so it’s hard to measure broadly.
Alex Bridgeman: What about on the patient side?
Daniel Hudspeth: In terms of like will they stay with their doctors long term because of the concierge model? Yeah, patients lock in. Those who really want this service can stay for years and years and years. We have really long term patients in our practice; we have some that have been with their doctors for 20 plus years. And so when you when you do it right, and when everything works well, you can have extremely long customer lifetimes. And so that may be the wrong word. But yeah, your customer tenure, I should say, staying with you, they can stay for decades. In many cases, they have because they found a doctor who agreed again to be their partner in their healthcare journey, and they’re able to lock in with them. And then as things get more complex, as I mentioned earlier, the switching costs are high. You don’t want to uproot from that medical practice and move somewhere else and have to relearn a whole new process and a whole- make 4g relationships with a whole new team of people. So as long as the care’s really great and people feel like the price is commensurate with the value they’re getting, then people will stay for a long time.
Alex Bridgeman: Yeah, I think I’ve only moved doctors when I’ve physically moved cities. I can’t think of a time I’ve moved within a city to a different doctor.
Daniel Hudspeth: Yeah, well, it’s a pain. I mean, you have to have someone transfer your charts, you have to find someone who’s a good fit and someone you’re comfortable with, once you go through all that- by the way, if you’re on insurance, you have to make sure they take your insurance and that they’re part of your system. So once you lock in with someone, unless you’re really dissatisfied with them or the service you’ve gotten otherwise, there’s not a lot of incentive to just move around, to just try a bunch of different doctors. People will supplement. They’ll do things like go to One Medical or something like that, but that’s a little bit of a different thing. And I think especially for older adults, folks who are starting to encounter more serious health issues, they become even stickier. Because now you really want somebody who is closely monitoring you and tracking your history.
Alex Bridgeman: When you go and approach these different practices, I imagine the original MyDocPlus with five doctors and then East Coast and Seattle, are these businesses run by a physician primarily? Or is there a business manager in place at some point or some hurdle rate of size?
Daniel Hudspeth: So some of these doctors do have internal business managers. The typical model that we see is- let me clarify, they’re definitely physician driven. The physician is the, quote unquote, business owner, typically, it’s Jane Smith, MD, Inc. That’s typically the name of the practice. Even if they have a brand, it’s their medical degree and license, which is the business. And they are selling themselves first and foremost. And by the way, typically, the doctors who have stepped out of the traditional system 10, 20 years ago and have been running these businesses for that long, they’re pretty entrepreneurial. They did that because they wanted to create a better quality of life for themselves, earn more money over time, develop some equity in a real business. And so they’re definitely the drivers of the of the business itself. That doesn’t mean that some of them haven’t hired very talented office managers who work with them. Typically, they have staff of two to three people in addition to the doctor. And usually, that’s like a medical assistant or a nurse and then somebody who manages the operational side of the business. And that includes sort of patient scheduling, front desk reception duties, as well as some of the back office stuff, like whether it’s accounting or bookkeeping or billing. And different doctors outsource some of that; some of them do it all in house, it just depends.
Alex Bridgeman: From the years you’ve been operating so far and then perhaps studying peers or getting to know peers in similar industries or other regions, have you found that there’s a core playbook for how to run a properly optimized practice business? Or is it so different region by region or by doctor that it’s hard to say?
Daniel Hudspeth: A little bit of both. So there definitely is a core playbook in the sense that like, look, you have to maintain those patient relationships first and foremost, you have to develop a culture of service excellence, you have to- I say often to our team that we’re as much in the hospitality business as we are in the healthcare business because it’s not- you can get healthcare in a lot of places for a lot cheaper. You could go to CVS minute clinics, or you could go to One Medical or you could go to the ER or you could see a traditional doctor, all at various different price points. You get different experiences, but essentially, you may still get diagnosed for your condition and get a prescription and otherwise get care. What you’re getting when you come to concierge medical offices, you’re getting very hands on support that is both accessible and efficient for you. And you’re getting, again, a partner to walk with you in your journey. So that 24/7 access to your doctor is really the key distinguishing factor there. And so to your point, like we- and over time, we’re refining this, but there’s a playbook, and we’re refining it in terms of like what we want to be central to how we operate practices. And every time we do an acquisition, we look for what’s working really well there that we may want to adopt to bring into our core playbook. And we may see things that don’t work with what we’re doing. And so we adjust accordingly. That said, everybody is a little different. Every practice has their own special way of doing something. And we try to be as hands off with that stuff. If it’s really working for them, we let them continue to do it the way that they want to do it until it doesn’t make sense anymore. So for example, if you have a doctor who routinely sends out newsletters or postcards to their patients because that’s the way that they’ve chosen to engage with their patients, we don’t necessarily get rid of that. We would rather those doctors continue to engage with their patients the way that they have always done it and allow their patients to continue to hear from their doctor the way they’ve always heard from their doctor. We will build that into our economic model so that we can provide the funds for that. We wouldn’t say, from a top down perspective, that it’s a one size fits all. Maybe one day we’ll be at that point where it’s just too much for us to manage individual systems. But right now, I think part of what’s made us an attractive partner to doctors who are selling is our ability to be flexible and let them kind of run things the way that they’ve been running them. We care about backend efficiencies, like billing, getting all that integrated, we want everyone to be on the same EMR eventually. But we don’t have to do all that upfront. We have the ability to be patient. We can wait for the right timing on those things. And so our process is more of a slow integration, and sort of bringing them into the fold while learning from them and having them learn from us.
Alex Bridgeman: Have any of your doctors started a podcast?
Daniel Hudspeth: No, they haven’t. Although I’m sure they would be happy to speak with you or other doctors on this. There are some concierge medicine podcasts. I can’t say I’ve listened to too many of them. But there are some that are out there. And some doctors- actually, I’m wrong. We did have one doctor one time who had- it wasn’t a podcast, it was more of a radio show where he was involved with that from time to time. But I don’t know if he’s still doing that.
Alex Bridgeman: Have most of the podcasts you’ve seen been focused on that doctor to patient relationship? Or is it more of the doctor like talking to or about or with other doctors about running a practice or treating patients?
Daniel Hudspeth: So the case I’m thinking of was much more about doctor to patient. It was like the doctor’s in let me answer your questions, basic wellness tips, things like that. There are doctors in the concierge world who are sort of like enterprising entrepreneurial type doctors who have done podcasts and things like that and newsletters and websites around the latter, how to be a physician entrepreneur, what that looks like.
Alex Bridgeman: Yeah, that’s pretty interesting. I’m thinking like a small version of Peter Atea or Hebrerman or something like that could be kind of interesting from a concierge view.
Daniel Hudspeth: I think there probably are some. I mean, there are a few professional associations. There’s a group called Concierge Medicine Today, which is like kind of a national network of doctors who do- they get together once a year for a conference. And there’s some kind of some shared- a lot of sharing of resources and information through that group. And I think they may have some kind of podcast and newsletter. There’s a group called ROAMD, and that’s more of like just a network of very like minded physicians, all of whom work together to kind of share best practices and support each other. They kind of get into that territory somewhat.
Alex Bridgeman: You mentioned an executive team with the Chief Medical Officer. What other roles on a concierge medicine executive team exist and which ones are fairly crucial to that expansion that you’ve talked about?
Daniel Hudspeth: Yeah, so in addition to the CMO, we have a director of practice administration who essentially is our team leader for all of our non physician clinical staff, so all the MAs and what we call PCCs, patient care coordinators who work alongside the doctors in the clinic locations, they all report up to her. And so that’s a critical role for practice operations. She has clinical training as well as business training. So she’s a nurse and has an MBA as well. And so she works to kind of bridge that gap between corporate needs in terms of like making sure operations are efficient, and we have budgets and we’re keeping an eye on costs and things like that. And then on the other hand, making sure that the service and clinical experience is excellent. And so then she can provide trainings and kind of work with the staff as a clinical leader. We have a VP of growth who is really focused on, again, kind of telling the story of what we do and both bringing new people into existing practices, as well as helping doctors market themselves and tell their stories to potential new patients. And then he’s also working more broadly on figuring out new opportunities for growth, who do we sell to, are there ways that we could package this for, for example, corporate teams, could corporate teams buy group packages of concierge memberships for their executives, things like that. And so, he’s working kind of on the sales side. And then on the finance side, we have a CFO controller, a senior accountant, and we also have a billing specialist. So they also sort of support revenue cycle management and ongoing billing efforts, as well as backend accounting. Whenever we’re doing like an acquisition, there’s always a whole nother layer of accounting work that’s needed from that. We have an EMR specialist that we just hired this year. She’s fantastic. She just got started last month. Her primary role is to work alongside all the various team members to help us with our Athena EMR. We found that it was just more efficient to bring on a specialist who knew that product in house. We have an IT specialist, we have an HR director, and both of those are part time fractional positions. That’s everybody. I thought there was others. If I missed anybody else, I’ll mention it if it comes to me. That’s the bulk of our team there.
Alex Bridgeman: And how do you feel like your life as a CEO has changed over the last couple of years? As the executive team has grown and you’ve added doctors, what do you feel like has changed the most?
Daniel Hudspeth: Well, I’ve been able to focus more on kind of broad scale strategy instead of being just in the weeds all the time. When you first start, and I think this is true for any searcher, you get started, and just by the nature of what you’ve just done, you bought this existing business, and most likely, one or more of the senior team has stepped out as a result of the acquisition, you’ve stepped in. You’ve got to learn the business. And you’ve also got to fill in for various roles. And in a lot of cases, you’re not- you’re buying a business- some people buy businesses at scale. They’re pretty big and they’ve got pre established teams, others don’t. And in my case it was the same. We started with a five doctor practice that had just a few admin roles. They had a practice manager, and they had a couple medical assistants and me and so that was it. So then I started building the corporate team. We hired a controller first, and then we hired a CFO. And then we had several other roles we hired for after that. And so it was a process of slowly starting to hand off details, and every time- then you kind of hit a size threshold where you need to bring on new people. And so then you do that over and over and over again until you reach a point where your team is really scalable and you don’t have to do that as much. But the hiring becomes much more complex because you’re hiring people for more senior roles and trying to make sure that they can really step in and take on real, complex responsibilities. So I will say this, I’m less than the weeds, I’m spending a lot more time on hiring. But the other side is I can now hand off big chunks of the work I was doing two or three years ago to various folks and then focus a lot more on growth, which has been a priority.
Alex Bridgeman: In two years, how do you think it’ll change more? Like which tasks do you do today that will be handed off, or what roles do you think you’ll add? How does that look in two years?
Daniel Hudspeth: So we’re thinking about bringing out a full time CFO. Our current CFO right now is fractional. And so I think that some of that stuff will come off my plate if we’re able to bring on someone full time. We have ambition for growth on the M&A side. And so another key hire that we’ve been thinking through is whether or not to bring on someone to run M&A full time or whether there’s stuff on my plate that can come off that would enable me to focus more on M&A full time. And so that’s something we’re kind of wrestling with right now, trying to think through who that next hire might be.
Alex Bridgeman: And when you’re thinking through those questions, like who is in that circle who you’re asking for feedback on or hey thinking about this question or my role, how does it change, are there peers you can chat with or is it your board? How do you utilize kind of the network of peers you might have to help answer some of these questions?
Daniel Hudspeth: Yeah. So it’s sort of a two sided process for me. I always want to build consensus with my existing team. And so I will have informal conversations with them so that they’re not in the dark about a potential new hire. And I want to make sure that they have the chance to interview critical new hires. If they’re coming on board, I want to make sure that we’re not hiring somebody who’s not a good fit culturally with the team that’s already here. And then I want to make sure that I have buy in from the folks that I work really closely with. I don’t want them to ever feel blindsided by the new hire. That said, on senior level stuff, I rely heavily on the board. We have a small board. And it’s a nimble board. And they’re really accessible to me, which has been fantastic. And so I use them as a sort of sounding board, no pun intended, just working with them closely to navigate those questions of who’s the right fit for us at this particular time and really helping me refine my sense of what we’re looking for. Because there’s sometimes when we’re hiring for a particular role that I don’t always know just intuitively what that person might look like, but their scope and experience is so much wider. And they’ve seen this, these roles develop in other companies, or they’ve seen candidates who really fit the profile, and they’re able to share that with me in a way that gives me a lot more insight into who we want to bring on board, who we are going to look for. And then I do a lot of- we use recruiters. I do a lot of interviewing. We have a pretty extensive interview process. We use predictive index as a- not as a hiring tool per se, but as a fit evaluation tool. When we use predictive index, we’re looking for, again, cultural alignment as well as just to get a sense- just to give ourselves a vocabulary around who each person is sort of at their core, and so I use that also as a kind of a reflection, a tool for reflection, along with kind of board input.
Alex Bridgeman: Yeah, it sounds like the process for that, take the finance example, like a CFO hire versus a controller hire, there’s a lot more diligence for that CFO hire considering how much more senior the role is. What other types of tools or things change about that recruiting process versus the controller hire? For example, I remember this Stanford talk that Andrew Saltoun was on, and he talked about how he would invite search peers of his to come because he was running a larger company than they were, so like come meet my CFO and see what the CFO at this company level or revenue level looks like so that you have like a comp to compare against. Is there anything, any other tools that you can think of that help with those senior hires?
Daniel Hudspeth: Not specifically like what Andrew offered, but our board members sit on other boards. And over the years, they’ve been able to share insights with me like, okay, well, this CEO went through this process, and this is how they thought about it. And this was the kind of candidate they were able to hire at this comp packet. And so having those conversations is always helpful to navigate what you’re seeing and to really test your assumptions, like is this normal? Is this the right price point? Is this the right level of skill for what we think we can get in this area and at this cost? And so those are all the questions that we kind of bat around on a regular basis. And it’s a lot of times just phone calls that I make between me and a board member, and we hash it out over 15 minutes, and then I go back to the grinding stone and try to figure out who fits the bill. But yeah, that’s typically our process.
Alex Bridgeman: For those senior roles, how far ahead are you trying to plan for? There’s obviously a lot of growth that you want to have happen within the company while that person is working on your team. Are you planning for I want to hire someone who I know can run the company three years from now when it’s grown a certain amount or five years from now, like do you think that way? Or is there a different framing you have for finding roles that can scale with the company?
Daniel Hudspeth: Yeah, I will say I try to get out in front and hire people that can stay with us five or more years for sure. I’m always looking for those candidates who can lock in with us and who will be the right person five years or more down the line. Sometimes that means hiring someone with more firepower than we might need today. I’m generally okay with that, knowing that we’re going to put that person to use as long as you can find that person who’s willing to get into the weeds early on and have the chance to kind of grow to their full potential over time. So that’s always a balancing act. As for how we think about it broadly, I’ve heard it said that, at least in the search fund world, that critical hires are often made six months to a year after when you really needed somebody or when you could have had that person. So I’m always aware that like, okay, the moment you think you need chief of staff, like you really needed them six months ago, but you’re just not realizing it. And then you’re kind of behind the eight ball. So, I do have a lot of conversations with the board about who we’re going to need. We do a lot of org chart planning, kind of thinking through, okay, what does the org chart look like in five years, what does it look like in 10, where do we think we’re going to go? The problem is it’s just constantly a moving target. So, for as much speculation as we do, at least I certainly feel like I am just trying to continue to hold on and get people in there as quick as we can. Because the needs of the company evolve so fast. And so, for lack of a better answer, yes, we try to hire well in advance of what we need. It’s always a little bit of an adventure.
Alex Bridgeman: Moving to closing questions, what strongly held belief have you changed your mind on?
Daniel Hudspeth: The one thing that I was thinking about this before this call, and I think something that I do more now than I would have done four years ago when we started this company is trust my gut. I think early on, coming into this role as an inexperienced CEO, and I was really afraid to trust my gut. I knew I had convictions. I knew I had entrepreneurial gumption. But on big decisions, I was really reluctant to trust my core instincts. I think my key view was look, you never know what you don’t know, at least at this stage. And so rely on the instincts and the gut feelings of other people. And so I ran almost all my big decisions by a whole group of people, including my board and anybody else who I thought was an advisor at the time, whether it was another leader on the corporate team or a coach, or my wife, or whoever I was asking, constantly asking for advice. I don’t think there is anything wrong with that. And I think that I avoided a lot of big mistakes by doing that, so I’m thankful. And I continue to do that quite a bit. I’ve just learned, at least something that I’m learning this year is that my core instincts at this point are sharpening and that I can trust myself a little bit more. And so, I’m learning how to do that. And I’m trying to do that more. I’m trying to lean into the gut instincts that I’ve developed over four years because I think that for the first time, I’m starting to feel like they’re trustworthy. And so trying to do more of that.
Alex Bridgeman: How often do you feel like your early instincts were actually correct or at least in the right direction?
Daniel Hudspeth: I think more often than not. This is a very vague answer. More often than not, my gut instincts were correct. I think where I was prone to make mistakes, that I was often too hasty, like my gut would say, make this move now versus like make this move six months from now. I was super impatient. And I wanted to move faster. I think the one of the greatest areas where I think I avoided some pitfalls were in areas where I was encouraged just to operate with more patience and restraint. Even if the decision ended up being the same just because I needed to like let some things play out or prove themselves out.
Alex Bridgeman: What’s the best business you’ve ever seen?
Daniel Hudspeth: Let me issue a caveat here that when I think about the business, the best business, it’s a subjective term. And so the business that I think of when I think about the business that I admire the most and the business that impresses me the most, that’s Patagonia. I think not because of some like arbitrary revenue or performance metric that makes them the best by any objective, but I admire them for their intentionality. I think this is a case of a true, like a truly purpose driven business. I think they get the why better than anyone else; like Simon Sinek says, start with why. Figure out your core identity first. And what Yvon Chouinard has been able to do over the past 50 years in building that business is just an exemplary model of that.
Alex Bridgeman: David Senra put out an episode with Founders Podcast on Yvon Chouinard recently, his book Let My People Go Surfing, that was really good. Have you listened to that?
Daniel Hudspeth: I haven’t. But I’ve read the book and watched some of his talks and kind of followed his career, at least on the periphery from afar.
Alex Bridgeman: Yeah, you might like the episode. I’ll send it your way. I need to read the book too though. Definitely a very unique entrepreneur.
Daniel Hudspeth: Yeah, I think he’s just like ahead of his time on a lot of things like work life balance. For a long time, even in the early days, way before people were encouraging things like extended family leave and things like that, people were bringing their kids to work with them and taking time off for things that they deemed to be important for their health and sanity and encouraging people to do that. For every job opening at Patagonia, they have like 900 applicants. And so it just speaks to kind of the core of the culture I think that he’s built there. It ends up being a brilliant business advantage for them because they can literally skim from the top .1% every time without fail, they can get amazing talent. And look, you don’t build a business, billion dollar business without being like laser focused on outcomes and figuring out what makes this business sustainable and scalable. He’s certainly been able to do that. But I think I admire him most for being a rule breaker and being willing to do things on his own terms.
Alex Bridgeman: It’s pretty amazing the degree of interest that folks have in any Patagonia role. I agree with you there. I think I vaguely remember reading some sort of study, maybe it was a Public Companies, but something about CEOs who had daughters generally had better family benefits, like parental leave, vacation days, a lot of kind of people first benefits were improved with CEOs who had daughters, which I thought was pretty interesting. I’ll see if I can find that and send it to you.
Daniel Hudspeth: Yeah, that’s great. I’d love to read it.
Alex Bridgeman: Well, thank you, Daniel, so much for coming on the podcast. I always enjoy our conversations. I’m glad we got to chat again, but I hope we get to see you at some point in the Bay Area on a new trip.
Daniel Hudspeth: Yeah, likewise, Alex. Thanks for the time. Good to catch up. Thanks for having me on. It’s a super fun and hope our paths cross again soon.
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