CME START IT UP: PLANNING

HOW TO LAUNCH
Excerpted with permission from the March 2008 issue of
Physicians Practice.® Copyright 2008 Physicians Practice
Inc./www.PHYSICIANSPRACTICE.com. All rights reserved.
Republication or redistribution of Physicians Practice
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taken in reliance thereon. For more information call 800
A PRACTICE
781 2211 ext. 35101, write to info@physicianspractice.com
BY L AURIE HYL AND ROBERTSON, BA
or for practice management advice, visit
www.PHYSICIANSPRACTICE.com.

WORRIED THAT HANGING

OUT A SHINGLE MIGHT
BE SUICIDAL IN TODAY’S
BUSINESS CLIMATE? NOT
SO! HERE ARE THE FIRST
STEPS TO STARTING A
PRACTICE AND COMING
OUT ON TOP.
Despite dire predictions trumpeting
the imminent demise of the U.S.
healthcare system, you could still do
a lot worse than to go into private
medical practice. In fact, we’ve
spoken with plenty of physicians
who’ve recently made the leap
and couldn’t be happier.
Take Beth Santmyire-Rosenberger,
MD, PhD, who opened her Fairmont,
W.V., dermatology practice two years
ago. Now, she says she’s financially
stable and, more importantly, has “a
genuine feeling of enjoyment and
accomplishment at the end of the day.”
“As long as you do your home-
work and take all of the steps
correctly, it’s really hard to fail,” practices. “The reason people A word of advice from family physi-
says consultant Keith Borglum, fail is they’re either oblivious cian Eduardo Peña Dolhun, whose
who’s advised hundreds of nascent to some step and they practice has also been open for two
make a mistake, or years: “There’s too much risk
they don’t do proper involved in medicine [to
planning.” ABOUT THIS SERIES go into it and] to not
LEARNING OBJECTIVES
Ahh, the plan- Have you been pondering striking love it. You’ve got
After reading this article, readers will ning — not out on your own, making the leap from to tap into that
be able to: employed associate to practice owner? Or are
much fun, we you just starting out in practice and wondering
core of passion.”
• Integrate a physician’s personal know, and if it’s worth going even deeper into debt to start So what is it
practice philosophy into the more easily your own venture rather than getting “a job”? about medical
business planning process in said than practice that
Whatever your situation, Physicians Practice is here
order to maximize satisfaction done. This to help. Welcome to the first installment in our truly floats
with medical practice. article and the comprehensive six-part guide to starting a your boat?
medical practice. In addition to the preopening
• Assemble a core team of qualified next in the
day planning advice you may have seen in other
What drew
professionals who will perform series will focus, such guides, we’ll delve deeper into the key
you to the
start-up functions that are essential respectively, on milestones you’ll need to meet for success profession in
to the success of a practice. general planning long after you cut the ribbon. the first place?
• Prioritize key tasks, such as and financial planning, For Dolhun, who
licensure and credentialing, to aka budgeting. Planning, runs a small but thriving
ensure a smooth and timely of course, underpins all elements cash-only practice, people them-
practice opening. of starting a practice. Your philoso- selves are the draw — so much so
phy, in turn, will guide all planning. that spending ample time with each

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CME START IT UP
patient dictated a business in which
he contracts with no insurers and
opted out of Medicare. Some might
call this a concierge practice (sans
retainer), but Dolhun says simply,
“For me, it’s a back-to-the-future type
of thing. I see [everyone from] rich
individuals to lower socioeconomic
and middle-income individuals. But
the model is very simple — ‘I’m paying
X amount of money for him to treat
me’ — and that’s refreshing.”
IN SUMMARY
There are plenty of readily available
resources for sorting out the details
of setting up a practice — specialty
associations, the AMA, state and local
medical societies, hospital liaisons,
and the Small Business Administra-
tion, for starters. As dermatologist
Beth Santmyire-Rosenberger says,
however, “What you need to run a
successful practice is not just nuts
and bolts. It’s an extension of life.”
• You don’t have to do — or know —
everything. Enlisting expert help with
credentialing is strongly encouraged,
and is a must for the legal structuring
of your business. You won’t abdicate
decision making, but a support team
of specialists in their respective fields
— accounting, law, and finance —
will save untold wasted effort for
you, particularly if those people have
specific experience in the world of
private medical practice.
• Formulate a business plan even
if you’re not seeking third-party
financing. The exercise will help
you crystallize your vision for the
practice and ensure that you have
at hand the necessary tools to get
you to opening day and beyond.
This information, in turn, will be a
foundation for subsequent decisions
over the life of your practice.
• Make sure your chosen location
will accommodate your practice,
specialty, and philosophy. Start by
simply talking with other physicians
in the area, then gather basic
demographics from sources like
the local chamber of commerce.
74 | PHYSICIANS PRACTICE | MARCH 2008
Everyone Physicians Practice talks to
about starting a practice stresses the
importance of knowing what you
want out of it — now, five years
from now, 10 years from now —
and putting serious thought into how
you’ll go about getting there. “The
planning stage is a very intense period.
It’s expensive and time-consuming,”
notes retired ophthalmologist
William Hutton, now chairman
of MedSynergies, a revenue cycle
management firm. “I recommend
using your training and residency
HELP! As a physician, your time
is your most valuable commodity;
you shouldn’t spend it trying to
become an expert in every area
of running a practice. Consider,
instead, hiring a consultant.
period to think about the kind of
lifestyle you want and where you
will search for opportunities that
are aligned with your goals.”
LOCATION, LOCATION
“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, a plastic surgeon
considering setting up shop in
Beverly Hills, odds are you’ll be
able to establish a successful practice
somewhere near your chosen home.
Your family’s preferences should
carry significant weight in that choice,
says Hutton. Borglum is more specific,
noting that most physicians would
probably do well to consider locations
within 50 miles of home.
Hutton suggests interviewing
doctors in the area to gather initial
data 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’s
amazing the differences in different
areas of the country,” Hutton notes.
Next, Borglum advises, more
deliberately assess the competition.
“There are all of these surveys you can
buy, and demographic information
you can pay for,” he says. Like many
consultants, though, he recommends
a simpler approach: “Call at least five
or seven of the competing practices
— those in your chosen area and
specialty — 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
appointment is. If all the competitors
have no waiting time, it’s going to
be harder to open there.”
You’ll almost certainly need some
formal demographic information
for financial and other backers, but
according to Borglum, “For strategic
planning purposes, your wait list will
— within six to 12 months — equal
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everyone else’s.” He also points out
that a location as few as 10 or 20 miles
away could be dramatically different.
Philosophy plays a big part in the
decision-making process. In addition
to simply connecting with patients,
having the freedom to make house
calls, and avoiding a position as
“a bargainer with the insurance
companies,” another thing that
excites Dolhun is cross-cultural
medicine. It was partly this passion
that led him to practice in an area
too expensive for many physicians
GET A PRENUP? “We refer to [the
partnership] as a marriage. It can be
as stressful as a marriage, take as
much time as a marriage, you can love
and hate the person at the same time
— the way you do with a spouse.”
Family physician Andrea Cady
to even consider — San Francisco,
which boasts a multiethnic population
and plenty of opportunities for
academic research on the subject.
Because he insisted that his philosophy
guide every decision along the way,
he’s succeeded despite a difficult insur-
ance market and a high cost of living.
THE MONEY MAN
Many physicians delay starting their
own practices for a few years while they
store up cash, real-world experience,
and all-important confidence. Most
of those daring enough to launch
practices shortly after residency will
need to seek financing, a topic we’ll
explore in more depth in the next
article in this series.
Either way, one crucial (if seem-
ingly obvious) bit of advice is to
keep costs as low as possible. “You
can inadvertently buy too much
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[equipment],” notes Dolhun, “and
if you get a little dip for whatever
reason, 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 worth
noting that competent professional
advice is one thing you don’t want to
skimp on. “People think they can do
it themselves and they don’t want
to spend the money on CPAs and
lawyers,” says Hutton. “But unless they
already have a business background,
it just isn’t going to work.”
In addition to an accountant and
an attorney, both of whom should
ideally specialize in working with
private-practice physicians, you’ll
need to establish a relationship with
a banker (and not necessarily a local
one). How to find the right one? Ask
other physicians who’ve started their
own practices, say Hutton.
A practice management consultant
is not an absolute must, but this
person can save time on the front
end. As a physician, your time is
your most valuable commodity; you
shouldn’t spend it trying to become
an expert in every area of running
a practice.
The biggest mistake Borglum has
seen would-be practice owners make
is undertaking too much research
too soon. You could waste a lot of
time on dead ends because there
are too many unknowns in the early
going. “It’s like when a patient walks
in with an inch-and-a-half stack of
Google printouts on their rash, and
you know immediately by looking
at it that it’s poison oak,” explains
Borglum. That patient was barking
up the wrong tree, er, researching
the wrong thing — if he’d gone
straight to the expert, you the
physician, he could have saved
himself lots of time and angst.
IN WRITING
Even if you’re not seeking financing
for your new practice, most experts
suggest undertaking the exercise
of writing a business plan. This
document will cover everything
from philosophy and marketing to
lists of equipment and projected
financial scenarios. Many now
recommend adding a disaster
preparedness strategy as well.
The business plan should bring
sharper focus to the future of both
the business and its stakeholders.
The Small Business Administration
(www.sba.gov) offers a basic online
tutorial to guide you through the
process, and your banker can also
help. Many specialty societies and
state associations offer sample plans,
too, and the earlier you make con-
nections with these resources, the
better. Find additional guidance at
PhysiciansPractice.com by typing
“writing a business plan” into the
Search Articles box.
READ MORE
ABOUT IT!
Visit this story on
PhysiciansPractice.com
for additional tools to help
you start a practice painlessly:
• Compare and contrast the tax and
liability implications of the most com-
mon forms of business organizations.
• Get a good head start by typing
“Writing a Business Plan” in our
Search Articles box.
• Opening a new practice? Prepare
yourself before the doors open by
downloading our “New Practice Start-
up Checklist” from our Tools section.
MARCH 2008 | PHYSICIANS PRACTICE | 75
CME START IT UP
You’ll need a business plan even
if you’re not borrowing money,
though in that case the plan may
be less formal. The written report
that results from the planning
process is merely the tip of a much
larger iceberg. You might be sur-
prised to learn that the business
plan should be a work in progress
throughout the life of your practice
— one that you revisit as often as
quarterly and revise to reflect new
realities — not a static document
that collects dust on a shelf.
Plan for the unexpected, too.
“We made arrangements to borrow
more money than we hoped we’d
need,” says family practitioner
Andrea Cady, in group practice for
two years. “You’ve got to have some
contingency money.” Those extra
funds came in handy when she and
her partners decided to bring on a
physician who specializes in sports
medicine. The original budget didn’t
include X-ray capabilities, which
would cost an additional $40,000,
but ultimately the group felt the
expense was justified by bringing
this physician’s expertise to the
practice. Despite such a massive
unexpected outlay, all was not lost
because the Bozeman, Mont.-based
partners had planned properly.
“We’ve earned that back already
and are making a profit on the
service,” says Cady.
76 | PHYSICIANS PRACTICE | MARCH 2008
Speaking of partners, one thing
you’ll need to decide early is
whether you want any — and, if so,
whether to have them on Day One,
or to consider adding them later.
Although Cady’s experience starting
out with partners was a positive one,
caveats abound. “I knew both of my
partners quite well,” she explains,
“and we had the luxury of being
able to sit down and brainstorm
and say, ‘What do we really want
our practice to be?’ and get
comfortable before we made a
financial commitment.”
Of the partnership, Cady says,
“We refer to it as a marriage. It can
be as stressful as a marriage, take
as much time as a marriage, you
can love and hate the person at the
same time — the way you do with a
spouse. … You need to remember
to treat each other with respect even
when you’re not feeling so pleasant
about each other.”
The partnership question, which
you’ll note brings us right back to
philosophy, is just the first element
of structure to consider.
CHICKEN OR EGG
The business organization of your
practice is one planning question a
qualified professional — an attorney,
in this case — should help you
answer. For example, despite its
increasing popularity since the 1990s,
the relatively new limited liability
company (LLC) structure may not
be the best choice for every practice.
For a rundown of the tax and liability
implications for each type of organiza-
tion, see the online version of this
article at PhysiciansPractice.com.
Unless you’re able to devote
yourself to planning full time for
at least six months in advance of
opening your practice, yet another
area in which to enlist help is creden-
tialing. You might think you have
other, bigger fish to fry first, but
you can’t start the licensing and
credentialing processes too soon.
For instance, notes Hutton, “Some
states have certain idiosyncrasies.
Texas requires you to complete
a course of jurisprudence before
you can begin your practice. These
[courses] are only given at certain
times, so you have to plan far in
advance to ensure you can practice
when you arrive.”
Sherry Migliore of PMSCO Health-
care Consulting, recommends starting
on credentialing the day you decide to
open a practice. “We’ve had people
start eight months in advance,” she
says, “and it’s still not done by the
time they’re ready to open.”
You’ll need a physical address
before you can get very far with
most payers, but you can usually
list a temporary address, such as a
post office box, and change it later.
Payers will also require that you
have tax ID and NPI numbers set
up, and some will want to know
details like your office hours and
whether your building has an elevator
for accessibility. If you’ve previously
had a Medicare number, even if it
was under your own name in another
practice, you’ll need to apply for a
new one.
Fortunately, says Borglum, assuming
you’re not going cash-only, “In most
marketplaces you only have to give
serious consideration to one or two
IPAs, Medicare, and maybe three or
four other insurance plans.”
There’s no doubt that starting a
practice is complex, but the potential
payoff is enormous. “You have more
opportunity for more earnings than
in group practice,” says Borglum.
And more importantly, you’ll have the
personal satisfaction that comes with
being your own boss.
Having successfully launched his own
practice, Dolhun voices a sentiment
we wish we heard more often: “I
am really happy being a doctor!”
Wouldn’t that be nice? •
Laurie Hyland
Robertson, BA, is
a senior editor with
Physicians Practice.
She has been in the
medical publishing
field for 10 years,
working editorially
on both clinical and business-oriented
healthcare topics. She can be reached at
LCHRobertson@physicianspractice.com.
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