Starting your own medical practice is an exciting way to take control of your medical career. Unfortunately, it is also difficult and complicated. To keep things moving forward in your medical practice, you’ll need a clear and detailed plan from the start. This step-by-step guide will assist you in establishing your own medical practice.
If you already have a strategy in place and want to concentrate on selecting the products and services you’ll need to run your practice, read our reviews of the following medical practice services:
Why start your own business?
The inherent risk, upfront costs, and difficulty of starting your own practice may explain the healthcare industry’s rapid consolidation. 60 percent of community hospitals are part of an enterprise health system, according to Becker’s Hospital Review.
As control of the industry has become concentrated in fewer hands, large enterprise systems and big-name hospitals have increased their influence over healthcare providers. Joining these conglomerates appears to be the only viable option for many providers. Indeed, why risk and trouble starting your own medical practice after spending so much money and time in medical school when you could simply step into a well-paying job where business operations are already established and you have no overhead or startup costs?
For starters, more competition and a more evenly distributed profit distribution throughout the industry result from the opening of smaller, private practices. It also means that more healthcare providers will have more autonomy in determining their own workflows. Another significant benefit of the proliferation of smaller practices is that they help to expand healthcare access to previously underserved areas.
The ability to “be your own boss” is also a big draw for entrepreneurs who want to start their own practice.
The good news is that, as difficult as starting a practice can be, it is well within your grasp if you have the right information.
Medical practices to think about starting
When you decide to open a private practice, there are five different types of medical practices to consider.
Practice alone
You take on almost all of the responsibility when you start a solo medical practice. This gives you complete control over how your practice runs, but you may face higher startup costs for things like marketing and medical equipment, and you’ll almost certainly have to work longer hours because you’re handling both the business and clinical aspects. You’ll also take on all of the other risks that come with starting a business.
Practice in groups
You’ll work less if you start a group medical practice because you’ll share the workload evenly with other medical professionals. These shorter hours come at the cost of having complete control over your practice, but you may have easier access to working capital, lowering your startup costs.
Hospital-owned
If you open a medical practice within a hospital network, you will be bound by a schedule and certain employee restrictions, but you will have access to the hospital’s working capital and marketing resources. You’ll also reduce the risk of starting a new business, though you might not have as much personal flexibility and freedom; you might have to work within medical board guidelines. Hospital-owned urgent care clinics account for 16 percent of urgent care clinic ownership, so if you’re interested in urgent care, a hospital-owned business might be right for you.
Health clinic with federal approval
If you open a medical practice in a federally qualified health center, the process will be nearly identical to that of a hospital-owned practice. Working capital limits may apply to federally qualified health centers as a result of federal resource allocation.
Center for Academic Health
When you start a medical practice within an academic health center, you minimize risk while sacrificing autonomy, just like when you start a hospital-owned practice. However, unlike a federally qualified health center, there are few restrictions on working capital.
How do you begin a medical practice?
There is no one-size-fits-all approach to launching a medical practice. Hiring professional medical practice consultants who have started medical practices before, is familiar with the pitfalls and challenges, and can advise you on medical malpractice insurance and workers’ compensation may be worthwhile. After all, the specifics of starting a business differ by specialty, and some state laws and regulations differ. A professional consultant will be able to identify the variables and assist you in making informed decisions. Some new practices may need to hire contractors to furnish their offices, while others may be able to find a turnkey location. When starting a practice from the ground up, many common items must be on your checklist.
Step 1: Create a pro forma and secure funding
A pro forma is a simplified version of a full-fledged business plan, with realistic revenue and debt projections. Include all of your medical clinic’s expenses, debt, and expected revenues in your pro forma. Bankers can tell which projections are realistic and which aren’t; it’s their job to make sound financial decisions, so you’ll want to back up any numbers you use. A strong pro forma will forecast at least three years ahead, and sometimes even five years.
Here is some financial advice:
Track down the experts:
If the bank has a medical/dental division, submit you’re pro forma and loan request to them. These professionals are experts in the healthcare industry and are familiar with its risks, costs, and revenue models.
Do some research:
Send five to ten banks your pro forma and loan request. You’ll get several offers with slightly different terms this way. Determine which terms are most important to you – interest rate, amortization schedule, etc. – and then base your decision on those criteria.
Maintain your conservatism:
Take a conservative approach to purchase equipment and furniture when creating your pro forma – and stick to it. All of that will come with time and success; the focus right now is on preparing for that success.
Make the most of your waiting time:
While the banks review your pro forma and decide whether to approve your loan request, you can get started on the next steps, which include signing a lease, determining whether you’ll need to hire a contractor to modify your space, forming a legal entity, obtaining a tax ID, purchasing liability and medical malpractice insurance, and credentialing with your payers (see below).
Step 2: Investing in your practice’s equipment and personnel
You’re ready to start putting together the meat and potatoes of your practice once you’ve secured a loan and opened a line of credit – hiring your team and purchasing the office and medical equipment you’ll need. Setting yourself up for success is only a matter of effort with little planning and the right information. Here are some of the things you should think about.
System of electronic health records
Electronic health record (EHR) systems are becoming increasingly important tools for medical professionals. The modern healthcare provider places a high priority on digitizing records and streamlining communication. An all-in-one EHR keeps track of your patient’s records and histories, as well as communications with other providers, lab and prescription orders, and revenue cycle data. Furthermore, to be eligible for federal incentive payments, you’ll need a well-functioning EHR system. See Business News Daily’s guide to electronic health record systems for more information on how to choose an EHR system and our recommendations.
Practice administration system
The lifeblood of your practice is your practice management system. A practice management system, which is linked to your EHR, keeps track of all your front-office data and streamlines operations. Conducting and monitoring your billing and revenue cycle is one of its most important applications. Not only will your staff use the practice management system to bill patients and send claims to payers, but any relevant data will be shared between the EHR system and the practice management software, removing the need for duplicate records. See Business News Daily’s guide to practice management systems for more information on how to choose practice management software and our recommendations.
Provider of medical billing services
Of course, you can always hire a third-party company to handle your billing. Although you’ll still need a practice management system, your staff won’t be in charge of the billing process. When you use a third-party billing service, that responsibility is transferred to the company with whom you’ve contracted. Even so, there are issues with using a third-party biller. Visit Business News Daily’s medical billing services guide for tips on selecting a service.
Software for medical transcription
You should think about how medical transcription will fit into your practice. A medical business can perform transcription in-house with a staff member, using voice recognition software, or outsourcing it to a medical transcription service. The most important factors are speed and accuracy; you want your dictations in print as soon as possible, but only if they’re accurate, especially if they’ll be sent to another healthcare provider or uploaded into your EHR system. Consult Business News Daily’s medical transcription guide if you’re considering medical transcription and aren’t sure which method is best for you.
Services for background checks
Trust is the foundation of medical practices. They not only deal with a lot of sensitive patient data on a daily basis, but they also have people who entrust their lives to them. Exams, diagnoses, and treatments are just the start. You’ll want to know and trust your employees, so a background check system will be necessary. Of course, you’ll be interested in candidates’ criminal and employment histories, but healthcare providers must consider more than just what a standard background check provides. Certifications and licenses are also necessary. Failure to ensure that your employees are properly credentialed could spell disaster for your business.
A processor of credit cards
Although you’ll make the majority of your money from insurance companies and Medicare, your practice will require a credit card processor for when patients must pay at the time of service. Not only has the world of credit card processing changed recently with the addition of EMV chips and other security measures, but some systems are better suited to medical applications than others. Our top pick provides extra security and is a member of the American Medical Association’s Member Value Program, which partners with vendors to offer discounts and perks to doctors. Learn more about the best credit card processor for medical practices as chosen by Business News Daily.
Support services
You should also think about any additional services you might want to provide your patients, depending on your specialty and their needs. It could be a great way to supplement your income while also distinguishing yourself from the competition and keeping your patients happy. The necessary medical equipment and staff training are, of course, additional costs.
Step 3: Getting ready to open
Before you can open your doors, you must complete several logistical steps. These activities should be carried out in tandem with steps one and two. Allow plenty of time before opening to incorporate as a legal entity, obtain insurance, and establish policies and procedures. Credentialing, for example, can take a long time and is dependent on how quickly other organizations work.
Obtaining a tax ID and incorporating as a legal entity
This is self-explanatory but vital. The main reason for incorporation is limited liability, which means that if you’re sued, you’ll only be liable for the assets held by the company. You’ve exposed your personal assets to the risk of being sued if you don’t incorporate. In addition, as Medical Economics points out, each type of entity has its own set of tax benefits. Whether you choose to incorporate as an S-corporation or a limited liability company (LLC), a corporation (C-corporation), or a general partnership, it’s critical to research each type of entity and the advantages it can provide your practice.
Obtaining payer approval for physicians
In order to submit claims to the payers you’ll be working with, you’ll also need to get your healthcare providers credentialed. The credentialing process can take up to three months, but Physicians Practice recommends allowing 150 days just in case something goes wrong. Each payer’s process will require you to provide information on each physician’s work history, proof of malpractice insurance, hospital privileges, and attestations.
Establishing policies, procedures, and documentation of compliance
A set of responsible, current, and verifiable policies and procedures, as well as adherence to all legal regulations, are critical to the success of your practice. These guidelines should apply to all of your daily operations, including data entry, billing, and patient interactions.
Getting insurance
Insurance is important for any business owner, but it is especially important for medical professionals. You’ll need medical malpractice insurance first and foremost. Aside from that, the bank issuing your loan is likely to require you to obtain additional coverage, such as workers’ compensation, though the type may differ from bank to bank. “You need to think about insurance.
