When Dr. Kenneth Katz and his sister were in school, they stuffed bills and filed medical charts for their father’s dermatology practice in Manitowoc. Even then, Ken Katz recognized ways to make things more efficient: While still in high school, the incipient entrepreneur developed a computer program to help complete universal insurance forms, says his sister, Tricia Wagner.
Making things work better for patients and doctors has been a constant theme and a driving force behind Katz’s vision. Now he’s founder and president of what has become the second-largest dermatology practice in the United States, and runs it with a team that includes Wagner as the company’s vice president of finance and business development. Amy Katz, Ken’s wife, is the company’s director of marketing.
Manitowoc-based Dermatology Associates of Wisconsin/Forefront Dermatology launched in 2004 with one clinic in Manitowoc, then expanded to include offices in Green Bay and Sturgeon Bay in 2005. The company has expanded to 37 locations statewide and in Grand Rapids, Mich., and Cedar Rapids, Iowa, with plans to keep growing in the Midwest. The company includes 42 doctors (24 of whom are shareholders) and 11 mid-level providers such as nurse practitioners, for a total of 393 employees … and counting. The company grew by 33 percent in 2012, 10 percent in 2013 and Ken Katz projects it will grow between 25 percent and 35 percent in 2014.
“Dermatology’s a specialty that’s not dependent on hospital care,” Ken Katz says. “We don’t do a lot in the hospital – we don’t order MRIs or do big surgeries in the operating room, so to a large extent dermatology was ignored during the consolidation of health care that occurred over the last 25 years. We saw that as an opportunity to consolidate dermatology. When you have more people working toward a common goal, it’s much easier to achieve it.”
First employee: Dad
Katz’s first employee was his father, Dr. Henry Katz, who opened a dermatology practice in Manitowoc in 1977. Henry Katz was a third-generation physician, following his father and grandfather, who were general practitioners in Cedarburg.
Henry Katz, who worked for his son for a few years before he retired about 2005, says he watched the field of medicine shift from mostly private practices to most doctors becoming employees of a hospital (in his father’s day, medicine shifted from virtually all general practitioners to a wide field of specialists).
“I didn’t talk a lot of business with Ken because his ideas were so different than what I had done, and I knew I was going to retire,” Henry Katz says. “He was going to run with the ball, and it’s in a ballpark so different from mine that basically I just let him do it. I also kind of knew that you had to be large to be able to have a significant chance of retaining a private practice model. You’ve got to do it big, and you’ve got to do it regionally.”
One of the other benefits of a large practice is having a network of colleagues with varied experiences, Henry Katz says. “They have a system where the beauty of it, over a private practice like I had alone, is that you can email or talk to your colleagues within the system in a matter of minutes on a difficult problem. Whereas for me, I almost had nobody – I had to call somebody in Marshfield or Madison.”
The Katzes’ only plan was to set up a dermatology practice in Manitowoc, which they did in 2001, purchasing the dermatology practice from Henry, who kept working for his son.
“Then a couple of years later the local hospital hired their own dermatologist, and then all of a sudden we were in this competitive situation,” Ken Katz says. It’s not that the practice wasn’t busy – quite the opposite, in fact. “We thought that being booked out three months was fantastic, but the reality is that if people can’t come see you for three months, they’re going to go see the other guy. That was kind of an awakening moment for me.”
He built Dermatology Associates’ first clinic in Manitowoc, then convinced Dr. David Bertler, who was working for Prevea at the time, to join him.
“I told him, ‘I don’t have any money, but I promise you it’s going to work out,’” Ken Katz says. “His wife thought he was insane. My wife thought I was insane, and we borrowed a whole bunch of money and opened up a clinic in Green Bay and opened up a clinic in Sturgeon Bay, and between him, myself and my dad, we spent the next year and a half driving all over the place trying to get this up and running.”
And they did, decisively. The practice has grown to the point where it’s second only to Advanced Dermatology and Cosmetic Surgery, based in Florida. You might say they were at the right place, at the right time.
“As the practice grew, it was less expensive to run on a per-doctor basis,” Ken Katz says. “So I went to the gas station and bought a map, and I outlined all of the counties and looked at where all the dermatologists were, where all the population bases were, and wrote a business plan, and said, ‘Hey, all of Northeast Wisconsin is underserved.’”
Dermatology in general is an underserved specialty. Back in the early 1970s as managed care grew, the number of specialists was capped to prevent oversaturation – but the specialty of dermatology expanded its scope dramatically, and the number of people in the United States with skin cancer has just kept growing, Ken Katz says. One of Dermatology Associates’ challenges has been recruiting doctors to move to Wisconsin, though the company has brought in some from the East and West coasts and continues to recruit doctors for new clinics.
“I’m fairly conservative, and I would’ve thought three clinics would be all two people could handle,” Bertler says. “At a max, maybe a clinic in Green Bay, Sturgeon Bay and Manitowoc. And Dr. Katz just had a vision that he pursued and he thought about it 24-7 on ways to make it happen and he made it come true. He’s been the driving force and I give all the credit to Dr. Katz, because a lot of us say we could do it. Very few of us achieve what we say we can do.”
“We’re a completely private practice, so we are fully dependent on patients calling our office based on reputation and selecting to see us,” Ken Katz says. “We’re not part of any multi-specialty groups, we don’t have a built-in referral pattern. We do get referrals from a lot of other physicians, but we’re dependent upon quality of care, customer service and reputation.”
The call center staff receives customer service training once a month, for example, and clinical front desk receptionists don’t answer phones when you’re checking in for your appointment, Bertler says. “We always believed that when that happens – a receptionist answering a phone when you have been waiting – is like having someone cut in front of the line,” he says. “To alleviate this we have a central nursing department in Manitowoc where phone calls are answered. Our goal is to have all phone calls answered within three rings. We also elected to implement having a person answer the phone instead of having our patients go through a ‘telephone directory tree’ as we believe this is simply better customer service.”
Dermatology Associates also prides itself on quick turnaround, Ken Katz says.
“If you go in to see a doctor and he says, ‘Oh, you might have cancer on your face,’ and they do a biopsy or take a sample of it, you don’t want to sit around for two weeks to figure it out. You want to know in two days.”
The company also has been successful because of its focus on doctors, the Katzes say.
“We make sure that all the doctors are fully supported with a medical staff team and a support team so that all they have to do is diagnose, treat and take care of patients,” Ken Katz says.
Amy Katz, who met Ken Katz while working as a histotechnician (examining human tissue) at Penn State, had an idea how to run a practice more efficiently. While he was completing a one-year fellowship in Mohs surgery (in which cancerous tissue is removed while preserving as much healthy tissue as possible), she prepared the manuals, policies and procedures that still stand today.
“Because I was a medical assistant, because I brought that aspect to it, we were able to weed out a lot of unnecessary things that doctors don’t really need to focus on,” tasks the medical staff or nurses can do, Amy Katz says. “So we set up procedures and wound care sheets and everything to make life easier for the doctor – which, in return, means the patient visit is a lot better.”
Initially, the practice experienced turnover because some staff resisted the higher expectations, which they assuaged by introducing responsibility more gradually. “I’m gung-ho, and Ken’s gung-ho, and sometimes it’s a little bit too much to ask of someone right off the bat,” Amy Katz says. “So we just had to implement more of a training process.” Since then, they’ve found it’s been a successful way to run the practice, Amy Katz says. “All the doctors love it, and the nurses love it because they actually get to do a lot and they learn a lot.”
Dermatology Associates’ doctors can become owners/shareholders in the practice after about two years, and everyone who has been with the company long enough to qualify as an owner has become one, except for a doctor with longtime experience who isn’t sure when he’ll retire, says Ken Katz. The for-profit model, common among most non-hospital-based medical clinics, incentivizes doctors to control costs. It also encourages physician shareholders to commit long-term to the organization, he says.
As the organization grew, it cost less to operate per phone call, per visit, per clinic, he says.
Strength in numbers
“It’s very difficult to take on the competition of hospital-owned doctors and to take on the insurance companies, but the only way to be able to successfully compete with them and be your own boss is to be big – just like almost everything else is big now, in medicine or industry or in shopping centers,” Henry Katz says.
Bertler says he expected the company to grow to a point and level off, but it continues to grow, partially because single providers are interested in partnering up to protect themselves. The future will likely see a wider reach of single specialty clinics like Dermatology Associates or possibly multi-specialty clinics as a way to cut or share costs, Bertler says.
As Dermatology Associates expanded into other states, it added the Forefront Dermatology division that operates under its own website. It’s a non-geographic-specific name that works better for the clinics in Michigan and Iowa, Bertler says.
The city of Manitowoc provided about $2 million in tax increment financing for the construction of Dermatology Associates’ new five-floor structure, completed in 2010 to accommodate growth and to house a massive computer record system for all of its clinics. Mayor Justin Nickels said it was a key project at the time because it was important to keep the growing company headquartered in Manitowoc.
“Fortunately, we had the local home-grown boy who wanted to stay in this community,” Nickels says, and the expansion of Dermatology Associates has facilitated the growth of several other businesses in the city. Ken Katz has contributed in other ways, serving as the current United Way chairman and donating $100,000 to the Capital Civic Center, the largest individual donation to the center’s renovation project, Nickels says.
“He is really invested in downtown, specifically, but also personally in the area where we need it most, so he’s putting his dollars that he earned back into the community,” he says.
Tricia Wagner says her brother’s dedication to his craft, the company and its success have made it happen.
“He likes to say, if you’re not going up, you’re going down, and he has a very internal drive to make things happen,” Wagner says. “He’s very passionate about dermatology, he’s very passionate about high-level standards of care.”
Most of the Katz siblings have gone into medicine. Peter is a dermatologist in Appleton. Tricia was trained as a physical therapist. Tom manages the physical therapy department at the Marshfield Clinic. Another brother works in insurance.
Goal: To be No. 1 in the nation
Ken Katz categorizes Dermatology Associates as a small regional player that is starting to expand into surrounding states. “I think that when you’re the best at what you do, becoming the biggest follows naturally, because physicians want to join your group, patients want to be seen by your group, and that just continues to develop the business model.”
Tricia Wagner says the company is planning to open more clinics in Wisconsin, has been doing some legwork in Indiana, and is interested in North Dakota because of the population growth with the oil boom.
“We’re maintaining our focus just on dermatology and the services that support dermatology, and as of now there are no thoughts or plans of deviating from our core business,” Wagner says. “Some businesses do diversify, and certainly there are reasons to do that, but strategically our focus is just to try to be the best in dermatology that we can.”
“By surrounding yourself with good people to help manage the business and develop the business aspect of things, you can continue to grow,” Ken Katz says. “In medicine, it’s all about reputation and quality of service, and if you have those two things plus a well-run company, you will continue to grow.
“My goal is to be the best, but I think in five years, we’ll be the largest dermatology practice in the country and we’ll have 300 to 400 dermatologists across the Midwest.”
About Dermatology Associates of Wisconsin/Forefront Dermatology
Locations: 37 in Wisconsin, Michigan and Iowa