Advance Planning a Must when Starting a New Medical Practice

As with any new business, the start up of a private medical practice takes a lot of planning that should begin months before the office opens. “Many physicians think starting a practice should happen automatically — you just get your license and walk into a practice,” said Gerry Kassouf, CPA, director of Healthcare Services Group of Kassouf & Co. “It requires about six to nine months of planning time to develop and open a practice. Too many physicians begin operations without having all of their provider numbers assigned, which slows accounts receivable collections. Establishing internal controls and benchmarks up front and operating the medical practice in a business manner will help the success of the practice.” Kassouf says that there are a number of things to consider when planning a new practice — advisors to help with each part of the business, location, personnel, equipment, bookkeeping/accounting and billing/collections — just to name a few. “It takes months to get things in order. You need to locate a space and have it developed to the needs of the practice. You need equipment, staff and even those little prescription pads,” he said. “These are all pieces of a puzzle. The more time you take to plan the better off you are.” James A. Stroud, CPA, a member of Warren, Averett, Kimbrough & Marino, LLC, advises physicians starting a new practice to think in a minimalist mindset. “You don’t need the most expensive furniture and equipment when you start your practice,” he said. “And hire only the staff you need for today. You can grow your staff later as needed.” Kassouf agrees that minimizing expenses from the beginning makes good business sense. “Physicians can hold down major expense by having a correct office size. If you cut out that extra 1,000 square feet of office space you don’t need, it could save you $18,000 to $22,000 a year in rent,” said Kassouf. He adds that the physician should also consider equipment, billing and an electronic health records system, purchasing only the items that will cover current and mid-term needs. When evaluating billing and collection needs, carefully evaluate your options. “Your specialty generally will dictate whether you handle these tasks within your practice or you outsource it to another company,” Kassouf pointed out. “For instance, a plastic surgeon’s practice with small volume but larger numbers may find it more cost effective to handle billing and collections internally. Other specialties may not want to burden the staff with these tasks at the beginning of a practice.” Personnel and benefits will make up a significant portion of the costs in a medical practice. “Hire trained, expert staff and budget ongoing training time,” Kassouf advised. “Keeping good staff will pay off in the long run. When the practice is off and running and you are operating efficiently due to the work of your staff, reward them for a job well done.” He adds that continuing education for the staff is a must as well. “The doctor must encourage the staff to continue learning about what they do and how they can do it better,” Kassouf said. “The practice and its patients will benefit from that knowledge.” As far as benefits are concerned, Kassouf recommends doing what is affordable for your new business. “Most practices start out offering only a portion of health insurance, and people are used to this,” he said. “Eventually, as the practice becomes more profitable you may be able to add life insurance, disability and retirement plans.” Once the medical practice is established, marketing is a must to attract and retain patients. Stroud points out that while many physicians don’t like marketing, there are many tasteful ways to promote a practice. “I heard about one doctor who calls patients at night to check on them after seeing them in the office the same day. That means a lot to people, and they will tell their friends,” he said. “It is a good marketing technique that makes people proud to be your patient.” Stroud says he knows of another doctor who personally visited about 16 referring doctors’ offices over the holidays. “He took food and visited with the staff and doctor at each office and told them how much he appreciated their referrals,” Stroud said. “A practice is driven by referrals, and you need to cultivate those relationships. Everything works better when referral relationships go well.” Kassouf says some doctors market by talking to certain groups from time to time. “A lot of ob-gyns give talks to church and high school groups. Plastic surgeons may have a seminar on liposuction, for example,” he said. “It’s common, too, for orthopedists to have relationships with high school and college athletic teams, and that can be a good marketing tool for their services.” Finally, make sure to always focus on the patient. Too many practices focus on increasing volume and attracting new patients, but keeping existing patients is the lifeblood of a practice. “Make sure every patient has a wonderful experience in your office,” said Stroud. “The most common complaint from patients is excessive waiting times, so make sure each patient is seen timely.” He adds that each patient also should be treated with dignity. “It’s how you want to be treated, and your staff will pick up on it,” he added. “Treating patients well will give you more patients than you can see.” Stroud points out that occasionally “firing” some patients could be good for the practice as well. “If you have patients who are rude to your staff or don’t follow your treatment recommendations, dismiss them. That probably will motivate your staff,” he said. “Periodically pruning these types of patients will give you more time to spend with the good ones.” It is easy for private practice physicians to concentrate on delivering the best possible treatment for their patients, but they also need to pay attention to the workings of the business. “You need to see that procedures are being followed and things are being done as they should be,” Kassouf pointed out. “Physicians need to understand that they are business persons, too, and as such they need to routinely focus on the business side of the practice.” March 2008