A growing practice can outgrow its leadership structure long before anyone realizes it. In this episode, hosts Brad and Michael share the story of a successful neurosurgeon who built a thriving multi-state medical practice. What appeared to be a well-governed organization on paper quickly revealed deeper issues when new board members began asking questions. Tune in to learn what board members are actually responsible in a practice. Discover how fiduciary duties, active oversight, and clear leadership structures can help reduce risk and support the long-term success of the practice.
Listen to the full episode using the player below, or by visiting one of the links below. Contact ByrdAdatto if you have any questions or would like to learn more.
Transcript
*The below transcript has been edited for readability.
Intro: [00:00] Welcome to Legal 123s with ByrdAdatto. Legal issues simplified through real client stories and real-world experiences. Creating simplicity in three, two, one.
Brad: [00:13] Welcome back to Legal 123s with ByrdAdatto. I’m your host, Brad Adatto, with my co-host, Michael Byrd.
Michael: [00:19] As business attorneys for health care practices, we meet a lot of interesting people and learn their amazing stories. This season’s theme, Brad, is “What Now?” Each episode will involve a real client story with a high pressure moment for that practice.
Brad: [00:35] All right. Before we get today’s show going, I have to let the audience know that we’re off the rails already before we start recording. Michael, you sent me an article that personally attacked me.
Michael: [00:46] That’s not true, Brad. It’s historical, and I thought you liked history.
Brad: [00:52] Yes, I like history, but this is clear harassment, and this article is pure propaganda.
Michael: [00:59] Okay. Audience, so for everyone listening and for the very few of you who would actually care about what we’re about to talk about, there is a story out of Ireland where a counselor wants to build a statue honoring who allegedly killed Oliver Cromwell.
Brad: [01:17] Yeah. Hold on. First off, for those who aren’t history fans like myself, Oliver Cromwell was an English statesman, farmer, and soldier widely regarded as one of the most important figures in British history, so kind of important to England. He came to prominence during the Wars of the Three Kingdoms, initially as a senior commander of Parliament Army, and later as a politician. He died in 1658. Now, Michael, I think you buried the lead here as to why I dislike this article, as to who they believe killed Oliver Cromwell.
Michael: [01:48] I’ll just have to say after listening to you for a moment, you truly sound like a history geek. I mean buff right now. Wait, did I say that out loud, or was that in my head?
Brad: [01:59] All I heard was I’m buff, so thanks. But let’s get back to who killed Oliver.
Michael: [02:05] Fine, Brad. A mosquito. The statue is going to honor a mosquito.
Brad: [02:12] Yeah, yeah, a mosquito. Let me pause you right there. For all the things to memorialize, they chose my mortal enemy.
Michael: [02:20] I don’t think you have any mortal enemies, Brad. I think you like everyone. You’re the classic Labrador.
Brad: [02:27] No, absolutely do have a mortal enemy. It’s mosquitoes. They hate me, but they love me, so I don’t know which it is, because they attack me like I owe them money.
Michael: [02:36] Well, they hate you, they love you, your tail is wagging.
Brad: [02:39] True.
Michael: [02:39] Either way. But I have seen this. I’ve witnessed it. I’ve traveled with you, and you could be in a group of 100 people, and somehow the mosquito will find you. Now, I do have a curiosity, because my wife is the same way, and I wondered if we stuck the two of you out in the Texas summer, who would win or lose?
Brad: [03:04] I guarantee it would be me. But I wonder if I’m on some kind of mosquito VIP blood list. Maybe it’s because I taste like red wine and vodka.
Michael: [03:14] Well, I will say there is no doubt that every mosquito that gets some of your blood probably explodes within 30 seconds.
Brad: [03:21] Or they’re too drunk to fly ever again. Well this isn’t funny, though. You get to the point where like, “Oh, whatever. I got bit.” You’re like, “It doesn’t matter.” It starts swelling up, itches like crazy. I’m basically doomed for the next several hours.
Michael: [03:37] Okay. All right. Let’s get the little violin out. Let’s get back to the article for a moment. So the idea is this mosquito apparently may have given Cromwell malaria during a siege, and for some reason they want to honor it with the world’s smallest statue.
Brad: [03:55] Yeah, and that’s where I draw the line. First off, why are we awarding a mosquito for just doing its job? I mean, it’s not like you could see it on Indeed or ZipRecruiter, the job description for mosquito: show up, ruin Brad’s life, leave.
Michael: [04:07] Brad, I’m thinking we all are starting to get the point. You are definitely starting to sound like a diva.
Brad: [04:12] Oh, I thought I was a diva, but okay, thanks. Second of all, if they’re building a statue for mosquitoes, they should have a monument for me, because I think I’ve sacrificed more blood than Cromwell, and it could be interactive. Children can press the button and hear me complain about mosquitoes.
Michael: [04:27] I think that exists. It’s called this podcast.
Brad: [04:30] Ouch. Okay. Here’s the real takeaway. If there ever is a statue built honoring mosquitoes, I will not attend the unveiling.
Michael: [04:39] You won’t—because you won’t survive the unveiling?
Brad: [04:43] No, I mean, if there are a lot of mosquitoes there, probably not. But if there are mosquitoes there honoring that statue, then I’m going to be the guy covered head to toe in bug spray with a hazmat suit on, waving from a distance with my sign protesting, saying, “Kill all mosquitoes.”
Michael: [04:58] Okay. Let’s move on. Let’s transition into today’s topic, which fortunately, audience, has nothing to do with mosquitoes.
Brad: [05:05] As far as you know. All right, Michael, it is well established that I love history, and today we’re going to talk about what happens when your business history starts catching up to your presence. As we said earlier, this season is where we’re concentrating on “what now,” so today’s question is: I’m a board member, what now?
Michael: [05:23] Yeah, and just for a little primer, we’ve talked a lot about the different hats that can be worn inside of a business, and a board member is one of the hats. Depending on what type of business entity you are, it might be a director if you’re in a corporation, so you hear board of directors. Or if you’re in an LLC format, it might be called a manager, but the gist is the same. The role of a board member is to help with that vision and strategy of the business. They are the epicenter for decision-making. And even for smaller businesses, the board sometimes has a more active role in the details in the day-to-day. But hopefully that gives us a framework.
Brad: [06:12] Yeah. Good context there. I know you love context. So today’s story is about a group practice. We’ll call them the Three Kingdom Medical Practice, and it centers around Dr. Ireland, who is an incredible neurosurgeon, and the founder, basically an absolute powerhouse of a guy.
Michael: [06:30] You must have been inspired in a moment of creativity to use those names from our story. Yes.
Brad: [06:35] Very, very creative. Now, they start with one location, and they’re actually now operating in three states.
Michael: [06:43] Okay, that’s impressive when we see a practice scale, especially scaling across state lines.
Brad: [06:48] Yeah, I totally agree. It’s incredibly impressive, and to be clear, this is not a cautionary tale about failure. It’s a success story that does hit a point, and Dr. Ireland built this business by making fast decisions, big moves, expansions, et cetera.
Michael: [07:06] Okay. I want to hear more.
Brad: [07:10] Okay.
Michael: [07:10] Keep going.
Brad: [07:11] Yeah, so it worked. It really worked. He built something extraordinary. But here’s the key. He never stopped acting like a solo operator.
Michael: [07:20] Is that the warning cue that I’ve been bracing for? Even after bringing in partners?
Brad: [07:28] Yep.
Michael: [07:29] Okay.
Brad: [07:29] By the time our story starts, there are nine board members. A lot of them are partners obviously, but basically one decision maker. Dr. Ireland is still steering the ship like it’s just him that he has to answer to.
Michael: [07:43] This does not sound good. Regardless of what role Dr. Ireland was acting in, even if the board appointed him as an officer to run with things, the officers are still accountable to the board, and if he was doing this as one of nine board members, that’s even more problematic if he’s just kind of a lone wolf doing things.
Brad: [08:11] Yeah, and on the surface, everything looked fine. They had their annual meetings. They shared financials. They actually had board meetings four times a year, and they were growing, and all the owners were real happy because they were making a lot of money.
Michael: [08:28] Well, you said on the surface. I’m guessing since you’re telling the story that we’re about to go beneath the surface?
Brad: [08:34] Ooh, I like your water reference there, Michael. So yes, let’s provide more information. All was going great, but as these meetings were going, no one really asked any questions.
Michael: [08:47] You think it was because everybody just deferred to Dr. Ireland?
Brad: [08:50] Yeah, it could be that they were deferring to him or that that’s how it’s always been. This is the way it’ll always be. And now in our story, we’re going to enter two new partners who then became board members, which are Dr. Oliver and Dr. Cromwell, and they were very successful surgeons, but they also had a business background and were sharp and curious.
Michael: [09:18] Well, I do too. I’m wondering why we didn’t name one of these Dr. Mosquito after all your carrying on.
Brad: [09:25] My mortal enemy?
Michael: [09:26] Yes, exactly. But you said curious, so every good board member should have that level of curiosity, so I think that’s a good thing, right?
Brad: [09:35] Yeah, I agree. And so they started asking questions like, “Why is this happening over here? Why is this happening there?” And, “What is going on with this location that’s underperforming?” And, “Why don’t we have the contracts?” And, “Who is actually accountable for making all these decisions?”
Michael: [09:54] Okay. These seem like fair questions. Is this where things started coming to a head?
Brad: [09:59] It is. So one of the newest offices started losing money—significant money—actually draining the profitability of the Three Kingdom Medical Practice. It was losing so much money. And when Doctors Oliver and Cromwell asked why, there weren’t many great answers coming from Dr. Ireland. They were frustrated that there was not more planning that went into this new location, including a huge number of staff and providers that were hired.
Michael: [10:33] Everything’s working until you start losing money and then everybody starts paying attention.
Brad: [10:39] Exactly, and other board members started to join Doctors Oliver and Cromwell, wanting to better understand the numbers and who is supposed to absorb all these losses.
Michael: [10:52] Yeah, I mean, the, these are not only fair questions, uh, they’re questions they should’ve been asking all along. I mean, as a board, you know, part of the accountability is, is understanding, um, you know, the, these, the accounting and the financials. Um, and, and so in a medical practice specifically, there’s different compensation systems or different distribution systems that can be in place, and so it becomes important to understand first, you know, how, how did you set it up, and then how is the money actually being tracked? And, uh, and, and so they can start to understand, you know, where is, um, you know, who’s at risk for, for a loss like this.
Brad: [11:42] Yeah, and so just trying to better understand, Michael, accounting, is not doing well and losing money, is that bad?
Michael: [11:49] I’ve heard that that’s frowned upon.
Brad: [11:52] Okay. All right.
Michael: [11:53] Yeah.
Brad: [11:53] So just making sure I was on the same page. All right. So then this is where Doctors Oliver and Cromwell really started to see that the Three Kings Medical Practice had all these agreements and governance structures that they signed when they became owners and partners, but really in reality, everything ran through one person. Dr. Oliver—Dr. Ireland
Michael: [12:17] I’ve got a concept that is pretty novel. We’ve never talked about it before, and it’s actually groundbreaking.
Brad: [12:24] Okay.
Michael: [12:24] There’s something called form and substance.
Brad: [12:26] No, I’ve never heard of that.
Michael: [12:27] Yeah. Seriously, audience, we’ve talked about this a lot, and this is yet another example of a risk really coming to life when you have a set of documents that say one thing. As you said earlier, Brad, they on the surface were doing all of the things the right way. They were having their meetings, they were having the minutes, and they had all the corporate governance stuff happening. But in reality, what was happening was Dr. Ireland was doing everything. And there can be a big risk when you have that kind of disconnect.
Brad: [13:08] Yeah, I agree. I mean, this so far does definitely sound like they had everything in place from a form standpoint, but it doesn’t seem like they’re following it. So as we assisted the board members to really better understand the model, we started to learn a lot. They had a lot of outdated contracts they were using, undefined and no true delegation of the leadership roles. Basically, no real accountability structure, not talking financially, but from a leadership perspective. And their leader, Dr. Ireland, still a good doctor, was still practicing medicine almost full time while running this multi-state enterprise basically alone. And as you can imagine, Michael, he became a bottleneck for a lot of decision-making and analysis.
Michael: [13:57] Yeah. So common. You’re the doctor making things happen, and he did make things happen, got this thing to three states. But at some point, every human reaches their limit. And if you don’t do something about it, then you hit that bottleneck moment where you’re stretched too thin and you’re kind of doing everything poorly to try to manage things. Hopefully not patient care poorly, but—well, let’s go into break and catch up on the Three Kingdoms Medical Practice and what it could have done differently.
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Brad: [15:08] Welcome back to Legal 123s with ByrdAdatto. I’m your host, Brad Adatto, with my co-host, Michael Byrd. Now, Michael, for those who don’t know this season, our theme is What Now? And this show, we’re exploring: when I become a board member, what now?
Michael: [15:24] Yeah, so our context, our story is built around the Three Kingdoms Medical
Practice. Dr. Ireland is kind of the OG for this practice, and he really built it up and was able to scale it to three locations in three different states. And it was highly reputable and successful. As he grew and added partners, they were kind of on paper getting ownership and a board seat, but things were just continuing to run through Dr. Ireland. Until we met two of the newest partners, Dr. Oliver and Cromwell, who asked questions, particularly as they noticed that there were some financial losses happening. And that’s where we started to talk about the friction and see that there were a lot of questions being asked and a lot of problems surfaced by the fact that Dr. Ireland was kind of a one-man show in a nine-man setup.
Brad: [16:33] Yeah, absolutely. To your point, we’ve got new owners, lots of people, and Dr. Ireland didn’t change anything. In fact, he was acting just the same even with all the growth that they were having. So just hearing this story, I’m going to put you on the spot right here, Michael—what was your initial takeaway as to how you think Dr. Ireland was acting?
Michael: [16:58] Oh, I think he was a pirate, Brad. He was in pirate mode early on. It was just him, and he was treating patients and also trying to grow a business. We know how that works—you’re going fast and breaking things just to make everything happen, and he was. He was growing successfully, probably with so much success that he eventually became a pirate. That’s just how things went. You did things your way and kept going full throttle. So yeah, that’s what I think, Brad. I’m curious what you think.
Brad: [17:48] Yes, I actually agree with you. This is a perfect example of sticking with pirate mode because it works until it doesn’t. And the other board members and owners—we’ve talked about this before—who doesn’t like hanging out with a pirate? It must have been fun to be with Dr. Ireland as he was moving so fast and doing so many things, and they were along for the ride. But like you said, the practice kept growing, and as they kept adding new locations, Dr. Ireland didn’t change anything because that’s the way it had always been done. So definitely a pirate.
Michael: [18:25] Yeah, we were talking to one of our friends about the risk of being a pirate. Let’s pretend, and this is probably true for Dr. Ireland, that he’s right 90% of the time.
Brad: [18:38] Yeah.
Michael: [18:39] And clearly he was on a roll. The problem is when you’re a pirate, you’re on your own, making decisions, moving fast, and you have a 10% blind spot. The benefit of having partners—there’s actually a benefit to having you as a partner, Brad—ear muffs.
Brad: [19:02] Should we just spend the rest of the conversation on that?
Michael: [19:04] So the 5% of the time that I’m wrong, I’ve got you. You’re there to hold a mirror up to the situation and see where the blind spots are. When you’re a pirate like this, you’re not taking advantage of the fact that you have a room full of partners who could be helpful. So you end up making some bad decisions, and bad decisions have legal consequences. It could be a contract that blows up, and now you’ve got partners with unmet expectations because of money issues. It can create quite a bit of risk.
Brad: [19:50] Yeah, I totally agree. Dr. Ireland did what he wanted to do. He ran a very successful practice and wanted it to be successful. However, he was no longer just acting like a pirate—he became a pirate. It’s not about his personality; it’s about his behavior. He had other leaders in the organization, but they weren’t making major decisions. They were relying on him to run the business and make them money. That’s why it’s fun to hang out with pirates. But let’s take a step back and remind our audience: what is the role of a good board of directors, what are their duties, and who are their responsibilities to?
Michael: [20:42] Yeah. You can extend where we started—talking about vision and strategy—but it’s even bigger than that. They are overseers of the organization, in many ways the protectors of the organization. They are accountable to the owners, but they also have a fiduciary duty to the company. They are responsible for making sure everything is buttoned up—strategy, financial and legal compliance, and stakeholder considerations. So you have a couple of issues. If you’re a board member acting like Dr. Ireland and being a pirate, you could be creating risk. And if you’re a board member who just shows up, drinks coffee, and signs off because “that’s the way we do it,” you’re also creating risk because you’re not carrying out your responsibility. It often gets treated as a formality—“our lawyers told us we need a board”—but it’s actually a critical role for a successful practice.
Brad: [22:15] Yeah, I agree. And for our audience members, Michael mentioned fiduciary duty. That’s a true board member owes a fiduciary duty to the organization itself rather than to the individual. They don’t owe that fiduciary duty to the shareholders or the founders or any other interest group. It’s only to the organization itself. Meaning as a board member, some people call it asleep at the wheel, where if you show up and you don’t ever really ask any questions or you’re not really curious, you’re not really doing your duty as a board member. You’re supposed to ask those questions. You’re supposed to better understand why they are doing what they are doing. Is that decision in the best interest of the corporate entity? You’re generally expected to, at the end of the day, protect the entity and protect the financials. That doesn’t mean you won’t make bad decisions, but you’re supposed to be part of it and care about it. And a lot of times you’ll hear people talk about the duty of care, the duty of loyalty, or the duty of obedience. All these are factors when you’re a board member that mean you have more than just the “drink the coffee and show up” requirement.
Michael: [23:27] Yeah. A lot of states have a standard they call the business judgment rule where a board member doesn’t have to make the right decision necessarily, to your point, but there needs to be some soundness to it. We talked earlier about an absentee board member who’s just drinking coffee. They may not pass that business judgment test if they’re not engaged and asking questions. You have to be careful. And I’ll also add, you’re right that the fiduciary duty generally is to the corporation, but there is some nuance there. Some states will look at your documentation and may interpret that you intended to create a fiduciary duty to the shareholders. There’s a great responsibility, and generally, that risk is to the practice.
Brad: [24:28] All right. So we’ve now established how pirates run a board. Let’s switch to how a cruise director runs a board or operates as a board member.
Michael: [24:41] Yeah, so you’re going to have formality, Brad. Cruise directors love boards because that is a formal part of governance, and they really lean into it. You’re going to have your meetings, sometimes more than you need to be compliant. You’ll have rules, bylaws, and add-ons to those. From a governance perspective, everything is going to be tight and structured.
Brad: [25:18] Yeah, that’s fair. And I feel like sometimes when you’re dealing with a cruise director, they have so much structure that it actually becomes a stalemate. They can’t decide anything. There are nine or 10 people in a room debating every issue. They’re no longer running a business—they’re hosting meetings about meetings. Let’s discuss some of the negative impacts that could have. For example, they identify a compliance issue in delegation or supervision. Then they schedule recurring meetings with legal, operations, and clinical teams, re-debate it repeatedly, and analyze the regulations, but avoid making a decision without total certainty. This confuses risk management with risk elimination, which is impossible in Health care. There’s always risk, but they feel productive because they keep meeting. So Michael, what other negative effects can a cruise director-style board have?
Michael: [26:35] This is a leading question because you know exactly what I’m going to say. You and I learned over the years, pre-ByrdAdatto, that there are definite traps. You never make a decision—you just keep talking and scheduling meetings. Our favorite was when you take an agenda item, can’t decide, and put it in the parking lot.
Brad: [27:02] The parking lot.
Michael: [27:03] That’s where ideas go to die. They don’t go anywhere. You never come back to them. That’s a good test—are we acting like cruise directors, or are we actually taking action?
Brad: [27:34] In this case, they need to act like Navy SEALs. That means clarifying leadership roles, appointing a CEO or chief medical officer or operations leader, and defining their authority and reporting responsibilities. Committees like finance, compliance, or growth need clear ownership and accountability to move things forward. What are your thoughts?
Michael: [28:11] I agree, there’s a strategic element there. But I’m curious—what happened with the Three Kingdoms medical practice?
Brad: [28:20] It was a struggle. Each time the board tried to implement changes pushed by Dr. Oliver and Cromwell, Dr. Ireland pushed back. He was a pirate—he lived that way and couldn’t shift. Eventually, it all came crashing down because several board members, including Oliver and Cromwell, left the practice since they couldn’t get him to change. What are your final thoughts?
Michael: [28:53] It’s tricky because you can have great doctors clinically who don’t have interest in the business side, yet they’re given these roles anyway. It’s important to be intentional and strategic when building your infrastructure and to have clarity on the purpose of your board and meetings. Otherwise, you end up in this situation. You want to avoid being a pirate or a cruise director.
Brad: [29:38] There you go. All right, audience members, next Wednesday we’ll be back with “A Physician Is Leaving My Practice, What Now?”
Brad: [29:46] Thanks again for joining us today. And remember, if you liked this episode, please subscribe. Make sure to give us a five-star rating and share with your friends.
Michael: [29:54] You can also sign up for the ByrdAdatto newsletter by going to our website at byrdadatto.com.
Outro: [30:00] ByrdAdatto is providing this podcast as a public service. This podcast is for educational purposes only. This podcast does not constitute legal advice, nor does it establish an attorney-client relationship. Reference to any specific product or entity does not constitute an endorsement or recommendation by ByrdAdatto. The views expressed by guests are their own, and their appearance on the program does not imply an endorsement of them or any entity they represent. Please consult with an attorney on your legal issues.
