Michael P. Broxterman & Terry Lane
Opening your own private practice can seem like a daunting task. Although it is indeed challenging, with careful planning and the right resources, you can move smoothly through the process and get off the ground running, so to speak. We’ve asked Craig Hunter, Associate Partner (The Coker Group), what is required to start-up a new practice. We’ve also added our own insights from years of talking with physicians about their own challenges and successes.
Pre-Planning
We cannot stress enough how valuable it is to invest in pre-planning analysis. Outside resources, such as The Coker Group, are available to perform various analyses that will help you to decide whether or not to set up a practice in a given geographical area and/or projected patient base. The two primary types of analyses are:
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- Feasibility/Demographic Analysis – includes review and analysis of the alternatives available for the physical location of the practice. Population distribution and demographic analysis as well as competing practices are considered.
- Pro Forma Analysis – serves as a budgeting tool for the first two years’ operations. Includes an analysis of estimated patients, procedures, revenues and anticipated expenses required to sustain the practice. It is also necessary for securing your start-up capital from a lending institution or supporting documentation for the recruiting hospital.
Cost of Start-Up & Cash Flow
- Plan to have at least enough startup cash to cover three to four months of business costs (amounts will vary based on the specialty).
- Often, hospitals will contribute toward the expenses of starting-up a new private practice.
- You may want to consider contacting a lender to establish a line of credit.
- Hire an accountant during the planning phase.
Start-Up Phase 1: The Nitty Gritty
Papers, papers, and more papers. Call this your “year of the forms.” It’s time to get all of your ducks in a row. You have a lot of very important decisions to make and it’s a good time to bring in your accountant, your attorney, and your practice management consultant (if you have one).
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- Insurance purchase (malpractice, office overhead, office liability, business interruption, fidelity bond, workers’ compensation, etc.)
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- Licensure and credentialing (business license, occupational license, change of addresses on medical licensure and DEA certification, Federal and State Employer Identification Numbers, etc.)
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- Provider Number applications (Medicare, Medicaid, other managed care, etc.)
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- Utilities
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- Office and medical equipment, including manual medical records system
- Selection of medical supply vendors and general business vendors
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- Selection of service vendors (page, answering machine, janitorial, biohazard waste pickup, etc.)
- Selection of practice management information system solutions – a system to complete the day-to-day business functions in the practice including: billing, collections, scheduling, etc. This may be accomplished through the purchase of a software solution or through utilization of an Application Service Provider (ASP) which accesses the practice’s protected information through the Internet.. ASP’s can minimize the initial out of pocket expense incurred for the purchase of both hardware and software.
- Establishment of an appropriate fee schedule
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- Establish staffing needs, salary ranges, benefits for employees (health insurance, life insurance, 401k plan, disability, etc.), job descriptions for staff members, assist with selection of staff and training as needed
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- Marketing and patient-base
Start-up Phase II: Policies and Procedures
Successful practices establish and maintain effective Policies and Procedures and Compliance Manuals. The benefits of documenting your policies are many-fold. These include: standardization of job tasks and duties, serve as excellent orientation and training resources, and are a fundamental part of risk management.
- Develop policies and procedures for the practice (Employee handbook; financial policies and procedures, including internal controls for clinical and non-clinical procedures; and operational policies and procedures)
- Compliance Plans should be developed to protect the practice in areas of billing and collections as well as to comply with the Health Insurance Portability and Accountability Act (HIPAA).
Start-up Phase III: Information Technology Development
What kinds of computer hardware and software solutions do you need? What kinds of peripherals do you need (zip drive? fax machine?); what kind of back-up system?; how many workstations? Do you need a website? What sort of electronic medical records system do you plan to use, if any? Will you automate your billing system or out source it? How will you store patient records?
Summary
You can successfully launch your private practice if you plan carefully and maintain reasonable expectations. Occasional obstacles are par for the course, but by following a carefully thought-out plan, these obstacles will quickly be resolved and you will be able to proceed smoothly, on-time, and on-budget. Although challenging, most physicians agree that having their own practice was well worth the effort they invested in start-up.
Craig Hunter is Associate Partner for The Coker Group, a leader in healthcare consulting, helps providers attain improved financial and operational results through sound business principals. Their nation-wide client base includes major health systems, hospitals, physician groups, and solo practitioners in a full spectrum of engagements. Contact: 678.832.2002, chunter@cokergroup.com, fax 678.832.2016, 11660 Alpharetta Highway, Suite 710, Roswell, GA 30076, www.cokergroup.com