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How to Start a Medical Practice.

How to Start a Medical Practice.

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Published by: dolhun on Jun 06, 2011
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Despite dire predictions trumpetingthe imminent demise of the U.S.healthcare system, you could still doalot worse than to go into privatemedical practice. In fact, we’vespoken with plenty of physicians who’ve recently made the leapand couldn’tbe happier.Take Beth Santmyire-Rosenberger,MD, PhD, who opened her Fairmont, W.V., dermatology practice two yearsago. Now, she says she’s financially stable and, more importantly, has “agenuine feeling of enjoyment andaccomplishment at the end of the day.”“As long as you do your home- work and take all of the stepscorrectly, it’s really hard to fail,”says consultant Keith Borglum, who’s advised hundreds of nascent practices. “The reason peoplefail is they’re either obliviousto some step and they make a mistake, orthey don’t do properplanning.” Ahh, the plan-ning — not much fun, weknow, andmore easily said thandone. Thisarticle and thenext in theseries will focus,respectively, ongeneral planningand financial planning,aka budgeting.Planning,of course, underpins all elementsof starting a practice. Your philoso-phy, in turn, will guide all planning. Aword of advice from family physi-cian Eduardo Peña Dolhun, whosepractice has also been open for two years: “There’s too much riskinvolved in medicine [togo into it and] to not love it. You’ve got to tap into that core of passion.”So what is it about medicalpractice that truly floats your boat? What drew you to theprofession inthe first place?For Dolhun, whoruns a small but thrivingcash-only practice, people them-selves are the draw — so much sothat spending ample time with each
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Have you been pondering strikingout on your own, making the leap fromemployed associate to practice owner? Or areyou just starting out in practice and wonderingif it’s worth going even deeper into debt to startyour own venture rather than getting “a job”?Whatever your situation,
Physicians Practice
is hereto help. Welcome to the first installment in ourcomprehensive six-partguide to starting amedical practice. In addition to the preopeningday planning advice you may have seen in othersuch guides, we’ll delve deeper into the keymilestones you’ll need to meet for successlong after you cut the ribbon.
After reading this article, readers willbeable to:
Integrate a physician’s personalpractice philosophy into thebusinessplanning process inorder to maximize satisfactionwith medical practice.
Assemble a core team of qualifiedprofessionals who will performstart-up functions that are essentialto the success of a practice.
Prioritize key tasks, such aslicensure and credentialing, toensure a smooth and timelypractice opening.
Excerpted with permission from the March 2008 issue of Physicians Practice.
Copyright 2008 Physicians PracticeInc./www.PHYSICIANSPRACTICE.com.All rights reserved.Republication or redistribution of Physicians Practicecontent, including by framing, is prohibitedwithout prior written consent. Physicians Practice shall not be liable for any errors or delays in the content, or for any actionstaken in reliance thereon. For more information call 800781 2211 ext. 35101, write to info@physicianspractice.comor for practice management advice, visit www.PHYSICIANSPRACTICE.com.
patient dictated a business in whichhe contracts with no insurers andopted out of Medicare. Some might call this a concierge practice (sansretainer), but Dolhun says simply,“For me, it’s a back-to-the-future typeofthing. I see [everyone from] richindividuals to lower socioeconomicand middle-income individuals. But the model is very simple — ‘I’m payingXamount of money for him to treat me’ — and that’s refreshing.”Everyone
Physicians Practice 
talks toabout starting a practice stresses theimportance of knowing what you want out of it — now, five yearsfrom now, 10 years from now —and putting serious thought into how you’ll go about getting there. “Theplanning stage is a very intense period.It’s expensive and time-consuming,”notes retired ophthalmologist  William Hutton, now chairmanof MedSynergies, a revenue cyclemanagement firm. “I recommendusing your training and residency period to think about the kind of lifestyle you want and where you will search for opportunities that are aligned with your goals.”
“I teach at a lot of residency pro-grams,” says Borglum, “and they all want to know where the best location is. I tell them to first decide where you want to live.” Unless you’re, say,aplastic surgeonconsidering setting up shop inBeverly Hills, odds are you’ll beable to establish a successful practicesomewhere near your chosen home. Your family’s preferences shouldcarry significant weight in that choice,says Hutton. Borglum is more specific,noting that most physicians wouldprobably do well to consider locations within 50 miles of home.Hutton suggests interviewingdoctors in the area to gather initialdata and get the lay of the land. “Get an idea of the physician community,”he says, “because they’re very, very different. Some are quite adversarial;others are quite cooperative.” What political quirks are in play? How well will a new physician be accepted? “It’samazing the differences in different areas of the country,” Hutton notes.Next, Borglum advises, moredeliberately assess the competition.“There are all of these surveys you canbuy, and demographic information you can pay for,” he says. Like many consultants, though, he recommendsasimpler approach: “Call at least fiveor seven of the competing practicesthose in your chosen area andspecialty — and ‘mystery-shop’ them,pretending to be a patient, the daugh-ter of a senior, mother of a child,depending on your specialty.Find out how long their wait for a new-patient appointmentis. If all the competitorshave no waiting time, it’sgoing tobe harder to open there.” You’ll almost certainly need
formal demographic informationfor financial and other backers, but according to Borglum, “For strategicplanning purposes, your wait list willwithin six to 12 months — equal
As a physician, your timeis your most valuable commodity;you shouldn’t spend it trying tobecome an expert in every areaof running a practice. Consider,instead, hiring a consultant.
There are plenty of readily availableresources for sorting out the detailsof setting up a practice — specialtyassociations, the AMA, state and localmedical societies, hospital liaisons,and the Small Business Administra-tion, for starters. As dermatologistBeth Santmyire-Rosenberger says,however,“What you need to run asuccessful practice is not just nutsand bolts. It’s an extension of life.”
have to do — or know —everything. Enlisting expert help withcredentialing is strongly encouraged,and is a must for the legal structuringof your business. You won’t abdicatedecision making, but a supportteamof specialists in their respective fieldsaccounting, law, and finance —will save untold wasted effort foryou, particularly if those people havespecific experience in the world ofprivate medical practice.
Formulate a business plan evenif you’re not seeking third-partyfinancing. The exercise will helpyou crystallize your vision for thepractice and ensure that you haveat hand the necessarytools to getyou to opening day and beyond.This information, in turn, will be afoundation for subsequent decisionsover the life of your practice.
Make sure your chosen locationwill accommodate your practice,specialty,and philosophy.Startbysimply talking with other physiciansin the area, then gather basicdemographics from sources likethe local chamber of commerce.
everyone else’s.” He also points out that a location as few as 10 or 20 milesaway could be dramatically different.Philosophy plays a big part in thedecision-making process. In additionto simply connecting with patients,having the freedom to make housecalls, and avoiding a position as“a bargainer with the insurancecompanies,” another thing that excites Dolhun is cross-culturalmedicine. It was partly this passionthat led him to practice in an areatoo expensive for many physiciansto even consider — San Francisco, which boasts a multiethnic populationand plenty of opportunities foracademic research on the subject.Because he insisted that his philosophy guide everydecision along the way,he’ssucceeded despite a difficult insur-ance market and a high cost of living.
Many physicians delay starting theirown practices for a few years while they store up cash, real-world experience,and all-important confidence. Most of those daring enough to launchpractices shortly after residency willneed to seek financing, a topic we’llexplore in more depth in the next article in this series.Either way,one crucial (if seem-ingly obvious) bit of advice is tokeep costs as low as possible. “Youcan inadvertently buy too much[equipment],” notes Dolhun, “andif you get a little dip for whateverreason, you can go into the red.That becomes very stressful.” We’ll discuss ways to reduce costs at greater length in future installments.In the meantime, though, it’s worthnoting that competent professionaladvice is one thing you don’t want toskimp on. “People think they can doit themselves and they don’t want to spend the money on CPAs andlawyers,” says Hutton. “But unless they already have a business background,it just isn’t going to work.”In addition to an accountant andan attorney, both of whom shouldideally specialize in working withprivate-practice physicians, you’llneed to establish a relationship withabanker (and not necessarily a localone). How to find the right one? Askother physicians who’ve started theirown practices, say Hutton. Apractice management consultant is not an absolute must, but thisperson can save time on the front end. As a physician, your time is your most valuable commodity; youshouldn’t spend it trying to becomean expert in every area of runningapractice.The biggest mistake Borglum hasseen would-be practice owners makeis undertaking too much researchtoo soon. You could waste a lot of time on dead ends because thereare too many unknowns in the early going. “It’s like when a patient walksin with an inch-and-a-half stack of Google printouts on their rash, and you know immediately by lookingat it that it’s poison oak,” explainsBorglum. That patient was barkingupthe wrong tree, er, researchingthe wrong thing — if he’d gonestraight to the expert, you thephysician, he could have savedhimself lots of time and angst.
Even if you’re not seeking financingfor your new practice, most expertssuggest undertaking the exerciseof writing a business plan. Thisdocument will cover everythingfrom philosophy and marketing tolists of equipment and projectedfinancial scenarios. Many nowrecommend adding a disasterpreparedness strategy as well.The business plan should bringsharper focus to the future of boththe business and its stakeholders.The Small Business Administration(www.sba.gov) offers a basic onlinetutorial to guide you through theprocess, and your banker can alsohelp. Many specialty societies andstate associations offer sample plans,too, and the earlier you make con-nections with these resources, thebetter.Find additional guidance at PhysiciansPractice.com by typing“writing a business plan” into theSearch Articles box.
Visit this story onPhysiciansPractice.comfor additional tools to helpyou start a practice painlessly:
Compare and contrast the tax andliability implications of the most com-monforms of business organizations.
Get a good head start by typing“Writing a Business Plan”in ourSearch Articles box.
Opening a new practice? Prepareyourself before the doors open bydownloading our “New Practice Start-up Checklist”from our Tools section.
“We refer to [thepartnership] as a marriage. It can beas stressful as a marriage, take asmuch time as a marriage, you can loveand hate the person at the same timethe way you do with a spouse.
Family physician Andrea Cady

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