Practice Start-Up Guide

Without a business plan, you’re essentially treating this like a hobby rather than a business you hope to one day retire from or sell.  It’s critical that you take time to identify your goals and how you hope to accomplish them.  We’ve included some resources and steps below to get you started.  Remember a business without a plan is just a lemonade stand.

• Identify where you want your practice located and begin looking at locations
• Decide on a name and form your entity within your state.  Typically, it’s best to go the LLC or PLLC route (PLLC is required in some states) and have your entity taxed as an S-Corp by filing form 2553.
• Remember that you can always create a DBA (doing business as) name if the name of your entity doesn’t line up with your goals or marketing strategy.
• Consult with an accountant and prepare your budget.  Additional Resource: Budgeting 101
• Develop your pro forma with best, expected and worst case scenarios.  We’ve included a link below to a video on using the Medicare fee schedule tool so you can include Medicare reimbursement in pro forma – Additional Resource: Entrepreneur Article 

Our Articles:

How to Select the Right Name For Your Medical Practice

26
Oct

How to Select the Best Location for your New Medical Practice

18
Aug

Lean Start-Up Method for New Medical Practices

06
May

12 Keys to New Practice Success

15
Feb

If you had many conversations about business plans or financing then you’ve likely heard someone ask you about your pro forma.  Most new practices don’t really know where to start or how to build a pro forma, it’s not like they teach you that in medical school.  Well, we’re here to help and don’t want anything in return.  This cost over $3500 to create and we really hope that you find it helpful.

Pro formas are not just for those practices seeking financing but is for every practice that desires to be successful.  Pro formas take the surprise out of running a business.  With a detailed proforma, you are literally predicting different scenarios and how each will affect your income and profitability.  Have you ever considered why most banks require a pro forma before they give you a penny?  It’s not because it’s some magic solvency document but it does show that you’re thinking through different scenarios and not blindly opening your new practice. 

There are primarily three types of pro forma statements and we’ve included all three in this comprehensive template.   

Types of Pro Formas:

• • Income Statement (included)
  • Balance Sheet (included)
  • Cash Flow Statement (included)
• This is a very detailed document but if you’re familiar with excel then you shouldn’t have difficulty using the majority of it.  If it’s too much, at least you won’t have to pay your account to create this for you.  Instead, you can schedule a meeting with your CPA and go through the various aspects of the new business.  
• Here is a helpful overview of a pro forma: Pro Forma Financial Statements

Contact us if you do not have an experienced healthcare CPA and would like us to connect you to the firm we recommend.

Credentialing and contracting is incredibly challenging for a new practice.  Our team of professionals are here to help you navigate through the process.  Credentialing is certainly one of those things that is money well spent due to the relative low cost and efficiencies gained by using professionals.  We intimately understand the process and have the payer relationships to get things done quickly and correctly.  We have included some resources below you decide that you want to do it on your own.

Timeframe:

It’s important to know that credentialing and contracting takes 4-6 months to complete.  Even if you’re currently working in the same area, your new practice will need to be contracted and enrolled with all of the plans under its own tax id.  Please don’t believe some of the stuff you hear from these fly-by-night companies claiming that they can complete the credentialing in 30-90 days.  

Credentialing Costs: 

We included an article below that outlines the costs associated with credentialing and contracting.  On average, you can expect to pay around $3,000 to outsource this function to a professional company.  There are some companies that outsource the job to an overseas team that can do it for less but I would be very careful going this route.  The money you may save isn’t worth the disaster caused by them or having your personal information like banking and SSN go overseas where our laws can’t protect you.  Get assurances in writing that your work isn’t leaving the US.  

Insurance Contracting: 

Once the credentialing has been completed, you then move to the contracting phase of the process.  Learn more about this by reading our insurance credentialing process article below.  Contracts are essential as they dictate how exactly you’ll be paid by the various insurance companies. As one of the most sought after contract negotiation companies in the industry, we understand the importance and work with the payers to get the best rate.  However, it’s important to understand that as a start-up, you have very little leverage to negotiate your payer agreements.  This understanding is why we recommend renegotiating your contracts after 1-2 years of being in business.  Click here for more information on payer negotiations

Selecting an EHR and billing platform is one of the most important decisions you will make as a start-up.  EHR & billing are two areas where you really do get what you pay for.  Buying table paper from McKesson or Henry Schein will not change the way you practice or the profit you generate but practices often spend more time looking at these costs than they do evaluating the efficiency of their EHR & billing department.  We have worked with over 40 different EHRs over the years and probably around 100 different billing companies.  Over the years, we have certainly seen our fair share of nightmare companies and have even watched a few practices go out of business because of their billing partner.  Through these experiences, we have narrowed down who we refer to and choose to recommend. 

At this time, we only work with a few select companies depending on the specialty of the practice.  You’re never going to make everyone happy or be a fit for every practice but our partners have a success rate of over 90% which is better than what we’ve experienced with other vendors.  Our referrals receive preferred pricing, and for anyone that signs with one of our partners, they receive 10-20% off of our start-up/credentialing package.

Keys to Selecting the Best EHR & Billing Service for Your Practice:

• Cloud based is critical
• Fast and free interfaces with the companies you work with (labcorp, quest, pharmacy, etc)
• Excellent clearinghouse with rules engine to optimize clean claim submission resulting in faster payments
• Eligibility Verification and real-time claim adjudication so you can collect patient responsibility on the frontend.  This is really important with the rise of high-deductible plans
• Patient portal that can be integrated with your website
• Online Payment Gateway to ensure prompt online payments from patients
• Reporting is critical and you need to have standard reports in addition to being able to easily build custom reports
• Great templates that can easily be customized based on your practice style
• You should be able to quickly share notes directly with the referring provider or collaborating physicians 
• Comprehensive training for you and your staff
• Integrated patient appointment reminders to cut down on no-shows
• Intuitive, you shouldn’t need months of training to feel proficient using your EHR
• Quality and timely support is key when starting your practice and it should be part of your billing/ehr agreement, not an hourly fee
• Ultimately, it needs to be efficient for you to use while also having the tools necessary to run your business on the billing/management side. 

May seem like a simple thing to cover but you may be surprised to learn how many new practices overspend on equipment and supplies.  It’s natural to want to be prepared for your patients but what that looks like may surprise you.  The bottomline is, buy what you absolutely need for the first 1-3 months of services and add from there.  You buying a ton of supplies and equipment based on the hope that there’s an army of patients waiting to come see you. It would be the same thing as a new restaurant buying a ton of perishable food based on a hope that every table would be miraculously filled.  Let’s say you’re presented with something simple like how much table paper and gloves to purchase, you’re probably thinking that the amount is inconsequential and it’s not something you can afford to run out of. 

1.  More than enough vs enough:  First. every major medical supply company can get you essential supplies within 1-3 business days so availability is not a concern.  Unless you’re running an urgent care, you have a schedule which allows you to proactively ensure you have the staff and tools necessary.  It just requires a little more foresight and planning on your part.

2. Does it really matter: When you’re starting your practice, every dollar has a name on it because every dollar has a purpose.  The money spent on supplies should be proportional to the money spent on actually generating new business.  If you can save $100, that is not just money saved but it’s money you can assign to creating revenue.  $100 in marketing could easily result in 5-10 new patients.  

Before you buy a single item for your new office, please make sure you have a budget.  When you overspend in this area, it has to come from another bucket and that is often on the business development side.  You might say that your new exam table is more important that marketing but regardless of the equipment you possess, it does nothing for you’re sitting on your hands instead of seeing patients.  If you save $1000 on equipment and supplies, that is $1000 in your pocket that can be reallocated to marketing.  That $1000 saved could easily convert to $10,000 in new business over the course of a year.   Each patient has three components of revenue that need to be recognized when making decisions. 

We break down patient revenue into three categories of value: 1. Tomorrow’s value 2. Lifetime Value 3. Referral Value

Your goal should be to save as much money as possible when starting, not having the latest and greatest equipment.  This doesn’t mean compromising or handicapping your ability by purchasing inadequate tools, but it does mean that you should ignore the urge to buy the shiny new toy your salesmen will inevitably show off.  This is why we recommend looking at used equipment for things like exam tables or at least getting three quotes for any new equipment .  This is also why we provide 100% free access to our practice portal for any medical practice.  Our membership portal does not require you to be a client of ours in order to take advantage of the savings.  Our portal offers you free access to reduced pricing from hundreds of vendors that on average will reduce your costs by 20%.  Vendors include well known companies such as AT&T, Office Depot, BestBuy, MedLine Supplies and hundreds of other vendors.  Our arrangement with these companies is very similar to a GPO or Costco model(without the membership fee) and we provide this to any practice free of charge.

Additional Resources:

• Physician Practice- 10 Ways to Save Your Practice Money
• OBP Medical Corporation- 8 Ways To Save

10 Common Mistakes When Starting a Medical Practice

03
Dec

Step-By-Step Practice Start-Up Guide & Checklist

20
Aug

When opening a practice, you’re confronted with a world of decisions that all fall on your shoulders.  One decision that could be new to you and may even seem a little scary, is the hiring of your first team members.  Making a decision to be responsible for someone isn’t something most of us get excited about.  Like it or not, this is a decision you have to make and the ramifications of making a poor choice can be far reaching.  Before you even think of interviewing someone, you first need to have a very clear understanding of what your practice needs to be successful.  We have seen plenty of new practices stumble their way into major debt by over-hiring or find themselves with empty waiting rooms by under-hiring. This topic is addressed in more detail in our article 10 Things You Should Never Do When Starting a Practice.

What We Recommend:

• Employee Handbook. This is a must have, no exceptions.  It doesn’t matter if your practice is only open one day a week, if you have employees, you need a policy handbook. We do offer a handbook which covers everything that you could need but regardless of where you purchase it, you simply must have one.  Holding staff accountable is impossible if you’re not setting clear expectations.
• Outsource payroll.  This means that you’ll pay a little more in administrative costs for each employee but it’s definitely worth it.  The payroll service will handle all of the payroll taxes, unemployment insurance, workers compensation administration and the countless other regs associated with having employees.  
• Be Thorough.  Think of each employee as someone that you’re interviewing to babysit your kids.  I know it sounds weird but you need to think of your new practice as your newborn baby.  Even seemingly inconsequential decisions, if made while your practice is in its infancy, can have long-term, detrimental consequences to your business.  Think about this, if a patient during your first month is unhappy with the way the receptionist spoke to them, and decides to let you know by leaving a review on Google, do you know how long this review will live on the internet?  Indefinitely for the most part.  Or how about this, you hire someone but don’t do a background check because they seem like a good person only to find out that they’ve been stealing patient SSNs and selling them on the dark web.  Please, have them complete an actual application and complete a background and drug test.  
• Do a working interview.  This is straightforward and is a great way to get to know your potential hire.  Just have them come in for 1-3 days depending on their availability and see if they’re a fit.  It’s tough to do with people that are currently working but they can typically take a day off if they’re serious about getting a new job.