“Experts need checklists–literally–written guides that walk them through the key steps in any complex procedure.” – Malcolm Gladwell in his...
“Experts need checklists–literally–written guides that walk them through the key steps in any complex procedure.” – Malcolm Gladwell in his review of Atul Gawande’s book, The Checklist Manifesto.
The word “checklist” probably elicits one of two reactions from you: glazed eyes or eager anticipation. If you fall into the “glazed eyes” camp, you probably didn’t read this far…If you’re reading this, then you recognize the power of a checklist to help you do things right! Starting your own practice is a complex process that involves many steps and having a checklist will help smooth the process.
A medical practice is a business. And starting a business takes planning. The Small Business Administration (SBA) says that around two-thirds of businesses with employees make it to two years, and only half survive after five years. The more organized you are, the better chance you’ll open on schedule, with limited surprises, and beat the odds.
The first thing you’ll need is time. Time to come up with a plan and time to execute that plan. The key thing to remember here is that you’ll be working with a number of different people to make your practice come to life and they won’t all feel the same sense of urgency you do to get everything done. And some of the steps take a while. For example, the credentialing process will take you up to six months.
Expect things will take longer than you’d like, whether it’s getting a loan, renovating your office space, hiring staff, or any number of the other steps that are involved in getting a practice up and running. Prepare for the worst and incorporate a time cushion into your schedule. Expect the entire process to take anywhere from six to twelve months.
Don’t be afraid to ask for advice. That might mean talking to a doctor who’s already established their own practice, or it could mean hiring a consultant who specializes in helping doctors set up their own practices. Or it could mean talking to anyone you think can help you in the process. This is not your area of expertise, so don’t hesitate to ask for help from people who are knowledgeable in the space. It will save you time and money.
If you’re finding the following list(s) overwhelming, there are consultants who specialize in helping doctors open practices – you can hire one to advise and help you. Whether you find hiring a consultant worthwhile will depend on how much help you need and how much help they’re able to give you. Ultimately, you’re going to have to do most of the work yourself while getting assistance from others at different steps along the way, but a consultant may make the process easier and more efficient.
An accountant will provide important assistance in managing the financial side of your business. They won’t run it for you, but they’ll help keep your books (revenue, expenses, etc.) in order. Look for one with experience with medical offices. While you’ll need to stay on top of the financial health of your practice, your accountant will be your financial assistant. Your accountant will also be very helpful in getting a number of the important steps on this checklist done (and ideally, they’ll also bring experience with other medical offices).
An absolutely crucial step is to incorporate your practice as a legal business entity. This shields you and your personal assets if you’re sued. There are different types of business entities that you can choose from (sole proprietorship, general partnership, limited liability company (LLC), a corporation, or a cooperative), each of which offers different structures in regard to ownership, legal liabilities, and tax benefits. The type you choose will depend on a number of factors and this is where a lawyer and your accountant can help you decide what makes sense for you.
A business plan lays out what your practice will do and how it will make money. Think of it as a three-to-five-year roadmap for investors – the clearer your map is, the more likely you are to get the funding you seek. A business plan not only assures potential investors that you’ve thought through your goals and the potential obstacles for your practice, it will also help you crystallize your thoughts on what your practice will need to be profitable. You’ll be forced to consider and calculate what expenses you expect to incur, as well as how you’ll make money.
You’ll have to make monthly or quarterly estimates for three to five years into the future. It’s a good idea to come up with three forecasts: a base case, a best case, and a worst case. Pay close to attention to the worst-case scenario – what if you don’t have as many patients as expected in the first year? What if you aren’t properly reimbursed by the insurance companies? Consider all the eventualities.
This will give you an idea of the range of potential outcomes and will help you see where your plan might have some holes or flaws. It will also give you an idea of how much money you’ll need to borrow.
Opening a practice is expensive. You might need a loan to do it and your business plan can help you get financing. Depending on your specialty and where you practice, you might need anywhere from $50,000-$500,000 or more to cover your initial costs. Start-up costs include renting office space, securing equipment, furniture and medical and office supplies, acquiring practice management and electronic health record (EHR) software, and more.
You’ll also need money to live and eat. There’ll be a delay from the time you open to the time you start getting paid, so you’ll need money to both keep the practice running, as well as to live your day-to-day life and you might need a loan to help you bridge that gap.
Where are you going to locate your office? As the maxim goes, the choice of location is paramount. Do you need to be close to a hospital? Where are your clients located? Where are you competitors located? Is convenient parking available? Medical office building or multiuse? These are just some of the questions you need to consider when choosing an office.
When you’re looking for an office, the space you find might be “raw” or “gray box” (completely unfinished), “white” or “vanilla box” (partially finished with basic infrastructure of HVAC, plumbing and electrical and fire protection), or already built out. If your office is going to be in a medical office building, your basic infrastructure needs will likely be well understood by your landlord. If not, you may have to upgrade HVAC, plumbing, electrical, and fire protection to meet medical requirements.
Your landlord will likely be open to negotiating a “tenant improvement allowance” (TIA), which essentially gives you a break on your rent to help cover the costs of improvements you make to the space. TIAs are usually expressed as an amount per square foot. Often, you’ll have to pay for the improvements yourself and get reimbursed by the landlord later. TIAs can take different forms so pay close attention to the details of what’s covered and who’s responsible for what. For example, if you’re able to secure the right to use your architect and contractor, you’ll be able to maintain better control over costs and the design and construction process – but you’ll have to specify that in the TIA agreement.
What kind of equipment will you need for your office? Are you going to buy it new or used? What’s your budget?
You’re going to need somewhere for your patients, and for you, to sit.
You’ll need both office and medical supplies. The following are sample, but by no means exhaustive, lists.
You’re going to need help. Start by adding just the people you need. You can add more employees as you grow. You’re probably going to need a receptionist and a medical assistant or nurse to begin with. Additional staff will be determined by patient volumes and the extent of the services your practice offers.
Practice management software helps with the administration of your practice, handling appointment scheduling, billing, organizing patient records, generating reports and other administrative needs. All of these functions are important, but billing is a crucial component of your practice – if you don’t get paid, you won’t be in business very long. You can choose to handle your billing inhouse or you can outsource it to a billing management. Your practice management software should also work seamlessly with your EHR software to ensure better efficiency. The software can be installed on a computer on a standalone basis, or on a network server, or in the cloud to allow multiple users.
A good electronic health record (EHR), or electronic medical record (EMR), system is essential to organize and secure your patient’s medical records. It will help make it easier to access their information and keep it accurate and up to date, which should hopefully lead to safer and more effective care and treatment. It should also work seamlessly with your practice management software.
Make sure your licenses are up-to-date and in good order. If you’re planning on moving to a different state to open your practice, research what the licensing requirements are for your new location and sign up for your exams well in advance of your planned opening date.
You’ll need to go through the credentialing process in order to be able to accept private and government health insurance. This process can take up to six months and is an example of why you need to budget enough time when you set up your practice. Each state has its own credentialing laws and regulations, so be aware of what the specific rules are for your area.
There are two main steps involved in this process. The first is credentialing, where you get networked with health insurance companies. The insurers will want to know about your medical education and residency, as well as confirming that you’re properly licensed and have appropriate malpractice insurance. The second part is contracting, where you’ll negotiate a participating provider contract that defines the terms of your agreements with insurers. The second part is critical to ensuring your practice’s viability—this dictates how you’ll get paid for your services by the insurance companies—so pay close attention to this step!
Whether you plan to accept government health insurance and what type, will depend on your patients, where your practice is located and what type of services you’ll be providing.
A third step is to obtain hospital privileges, which involves credentialing by the hospital which you want to access.
Proper insurance coverage is critical. As a business owner, you’re on the hook for more eventualities than when you’re an employee working for a hospital or at a large healthcare provider. That being said, you may not need every type of insurance coverage on the list. Coverage for malpractice, disability, business liability and workers compensation are either mandatory or highly recommended, while the others may be considered depending on their applicability to your practice. For example, commercial auto insurance may not be necessary if you don’t use a car for anything related to your practice.
Unless you’re going to have a backlog of patients when you open your doors, you’re going to need to invest in marketing yourself and your practice. The Small Business Administration (SBA) recommends as a general rule that “small businesses with revenues less than $5 million should allocate 7-8 percent of their revenues to marketing,” while the CMO survey shows that healthcare and pharmaceutical companies spend an average of 9% of revenues on marketing.
The correct amount will be unique to you and will probably be the result of some trial and error.
These are the steps you’ll need to consider when opening your own practice. As you begin to drill down into each one, you’ll find that many of them have additional components, which is why it’s critical to give yourself enough time to work through them. Although this list may be daunting, it’s manageable if you’re organized and ready for the challenge. Being your own boss brings with it great challenges as well as great rewards – are you ready?
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