Starting your own medical practice can be an extremely rewarding and profitable endeavor. Physicians are not typically taught how to run a medical practice when going through medical school. Here are 10 steps to starting a medical practice in Florida.
1. Start with Planning
The goal with a strategic plan is to define your goals with your practice and take you from where you are now to where you want to be. The planning stage should not be overlooked. You may find as you go through this that owning a practice isn’t right for you or you may find this is exactly where you need to be.
Create your business plan
A business plan is nothing more than a roadmap of your practice. The more detail you can go through here the less surprises you will have in the future. If you have ever done a renovation on your home, you know that it likely took longer than expected and cost more than you planned. Starting a business is no different and having a business plan will help to keep you on track.
Pro Forma Financial Statement
This is something that is a part of your business plan. Pro forma financial statements are just projections over time that include an income statement (revenue and expenses), balance sheet (assets, liabilities, equity) and cashflow.
Your business plan and pro forma will be used by banks if you are getting a loan to start the practice.
As you think through your expenses for the next year, here are a few items to consider
- Will you lease or buy a building for your practice?
- What type of buildout is necessary to get your location ready to open? Tip: if you lease a space that used to be a medical practice, the buildout costs could be much lower.
- Other start-up expenses include payroll, software, insurance, advisory team, marketing, office equipment, medical equipment and medical supplies.
Once you get through the initial start up expenses the 2nd part is creating a monthly expense breakdown. Then project that out over the next year along with your revenue. When your revenue catches up with your expenses, you are now at a break-even point and projecting out when that might be will help you to determine how much start up capital you need.
Not only do you need to estimate your business financials, but you also need to take a look at your personal budget as well. Your personal income will likely change as you start your practice, and you need to prepare yourself for that change and think through how you will cover that.
- Are there any unnecessary areas in your personal spending that can be cut?
- Are you able to do locums a couple days a week while you build up your practice?
- Can you live on your spouse’s income for this year?
- Do you need to take a loan to cover your expenses while you build up your revenue?
Put together your Advisory Team
When it comes to starting a practice, you need qualified professionals on your team. These will consist of a CPA, business attorney, banker, insurance agent, credentialing and license specialist, a commercial real estate agent, marketing, and IT Specialist. Each of the team members will come into the picture as you go through the next steps.
2. Choose a Location
Now that you have you have identified your advisory team and put together your business plan., it’s time to start thinking about your location. Leaning on a good commercial real estate agent here will help.
Choosing a location is dependent on so many factors.
- How much space do you need?
- Do you need to be close to the hospital?
- Will any referring physicians be close?
- Are there any available spaces in this area that have been previously built out medical practices?
- Is leasing the best option or are you thinking of buying? If you buy, what sort of other expenses will go along with that?
- Are there any physicians in the area that are looking to share a space to reduce your costs?
The number one rule with real estate is location, location, location. Although finding the right location may be time consuming it’s well worth the effort. Location is not something that you can easily change, so this step is very important. Meet with your CPA here and go through your business plan rent and buildout numbers and how they will fit into your overall budget.
3. Legal Requirements
The next stop on your journey is sorting out the legal requirements necessary for starting your own medical practice. Due to the complexity of the legal requirements, you may be facing, we highly recommend hiring and retaining a qualified local medical attorney & CPA.
Choosing a Business Entity
First, you need to decide what legal business structure is right for you. Your options are sole proprietorship, partnership, corporation, S corporation and Limited Liability Company (LLC)/ Professional Limited Liability Company (PLLC). Every option has its strengths and weaknesses but there are two areas that are affected by each option----liability protection and tax planning. Here are a few questions to think through and provide to your advisory team.
- What do you envision your practice will look like in 5 years?
- Are you purchasing a practice and taking on debt to do so?
- Will you be starting the practice with a partner or just you?
Many solo medical professionals choose to be taxed as an S corporation. S corporation owners receive some liability protection for the actions of the corporation and receive potential tax savings on profits.
Now that you have a business entity chosen you can get your businesses employer Identification number (EIN). It’s just your businesses identification number like your social security number. This can be done online on the IRS website.
You can take your entity and EIN paperwork to the bank and open your business bank account. In the startup phase you will incur business expenses prior to opening this account. We generally recommend to just use one of your personal accounts to pay for those expenses so it’s easier to track those expenses. Then it can get added to your accounting when that gets setup, so you don't miss out on those tax deductions.
4. Licenses and Credentialing
When it comes to licensing and credentialing, this can take months to get setup. This process is longer than expected so having a good credentialing specialist here can help you avoid mistakes, negotiate the best rates, and get you up and running as timely as possible.
You will need to apply for your national provider identifier and your DEA number if you haven’t done so already, you can do it online. (www.nppes.cms.hhs.gov, www.deadiversion.usdoj.gov).
You will also need to go through a crucial process called "credentialing". Credentialing is the start of dialog with government backed and third-party private insurance companies, but before you can do that you need to decide what insurance companies you plan to work with. Since Florida is home to many retirees, it may benefit you to accept Medicare and Medicaid. (www.cms.gov/Medicare, www.medicaid.gov) Some of the larger third-party insurance companies in Florida are Aetna, Assurant, Blue Cross And Blue Shield Of Florida, Cigna, United and Humana. While government backed insurance companies pay a flat rate, you must negotiate contracts and payment schedules with each third-party insurance company separately If this isn’t a process you have done before I would highly recommend a credentialing specialist.
Be prepared as this can take a few months to get through. Starting this process as early as possible is crucial to getting revenue to your new practice. Having a specialist be on top of this is well worth the cost to get setup.
You will also need to implement a billing and coding department within your business to collect your revenue from the insurance companies. When starting out this may be better to outsource as many billing companies will take a percentage of what they collect. You will likely be collecting less in the beginning which means it should be costing you less.
Other licenses that you will need to get is occupational license with the county. This is a good time to contact your insurance agent to discuss your medical malpractice insurance to get in place.
5. Build your Team
Now it’s time to start building your practice’s team. Payroll will be one of your biggest expenses in your practice annually, so being strategic on how many employees you need in the startup phase is crucial.
Many medical practices have an office manager, a medical assistant, front desk, billing and coding specialists, and a nurse practitioner or physician’s assistant. This may be what you also need to have when your practice is thriving. Right now, focus on the minimum number of staff you need to get going. Can you outsource your billing while you ramp up your practice rather than having someone in house? Can your medical assistant double as the front desk person in the first couple months?
As an experienced physician you likely know what team members you need and how crucial good ones are to your practice’s success.
Focus on software that you can access whether you are at the office or your house. Think of your bank online access. You don’t need a server or to be at your office to access your bank accounts. When reviewing your software needs look for software that is cloud based. It’s not always possible but if you can try to avoid needing a server that can reduce your IT costs. Either way getting a good IT consultant will help you get setup and going.
What software do you need?
Start with your practice management / EHR system and build from there. Many practice management systems are an all-in-one suite of electronic medical records, scheduling, billing and analytics.
Systems and software:
- Practice Management / EMR
- Computer Systems
- Accounting Software
- HR / Payroll Software
Patients are a necessity to building a profitable practice. Although many physicians may be accustomed to being referral only. Having multiple marketing systems in place is crucial when you own your practice. Not all will work for your practice, but finding that ones that do and building on those is a good place to start.
At a minimum you need to develop a SEO Friendly website that targets local patients, build out your google my business and get reviews. Focus on your target patient when developing your website. A patient will likely check you out online before making an appointment regardless of how they have heard about you. This is why an online presence is so important.
Here is a list of marketing channels
- Physician Referrals
- Patient Referrals
- Organic Website Traffic
- Google Ads
- Facebook Ads
- Direct Mail
- Local Advertisements
- School or Sports Sponsorships
When it comes to marketing, the costs can add up quickly. As an owner you know you need to spend money on marketing, but I have found that many docs spend on marketing without necessarily having anyway to track whether it is working or not. Not whether you are busy as an office, but whether that particular marketing channel is working.
My advice is whatever marketing you are doing, have some sort of tracking so you can measure whether it is working or not. One method is having your front desk ask each new patient how they heard about you and entering that into your system. Then do a review of that report.
8. Equipment and Supplies
Getting your location ready to open may entail doing a buildout of the space. Even if it was a medical practice before, you may find that it’s in need of some updating.
Filling your practice with the necessary equipment and medical supplies is the final step before opening. Depending on your specialty the cost can range significantly and by now you should be able to refer to your business plan to see what those expected costs will be.
Start to develop the systems you want and write them down. Think of a chic fil a, they are not successful with 1,000’s of location because they make a great chicken sandwich. They are successful because you know what to expect with whatever location you enter. Its all about systems that make then so consistent. I'm not trying to compare your practice to a fast food restaurant. I'm also not saying you need to be corporate or have a stale feel at your practice. I'm saying that it's important that you develop system’s so your patient experience is consistent and your staff knows exactly what you expect. You can still be unique while being consistent. This will save you lots of money in the long run.
Here are some systems that I recommend to start writing down and developing
- How will they answer the phone when its rings?
- How will they greet a patient as they walk in the door?
- How do they hand off a patient from waiting room to the exam room?
The more you can detail this out the less issues you will have as you hire new front desk professionals.
How does that save you money?
For one, training will be easier and likely much faster as a result. But it also may allow for you to have less staff. Remember payroll is your biggest expense so making sure that you don’t overspend will likely depend on how you well you run your practice.
A traditional office new patient goes something like this. A new patient calls your office to get their questions answered, makes an appointment over the phone, fills out paperwork and emails it back or when they get to the appointment, which gets entered manually into your practice management system. How much time of your front desk did that take?
What if instead a new patient checks out your website before calling your office. (I get that this is dependent on the age of your patients). Let’s say you have all of your frequently answered questions there and they are then able to click a button to make an appointment. They make an appointment and then are able to fill out your new patient paperwork online. Once complete that info auto fills into your practice management system. Then your front desk takes it from there.
This process could potentially save you a part-time salary of a front desk professional. I’m not saying this the right process for your practice. What I am saying is the more systems dependent you can make your practice rather than staff dependent the better you will do.
10. Think like a Business Owner
The last step is to always be improving and developing your business acumen. You have trained extremely hard at being a great clinician. Being a business owner is no different, it takes time to develop that skill.
I have found that many docs are concerned that if they focus on the business too much it somehow makes them care less about their patients. Or if they just care so much about their patients the business part will take care of itself. None of this is true. In fact, I would argue the opposite. If you are staying up at night worrying about cash flow, finding a new employee, how you will train them, whether you are overspending on expenses, then your ability to focus on your patients may go down. As a patient I want my doctor to be profitable so they can focus on my care and be there in the future when I need them.
Make time per week to become a better practice owner. You don't need to start taking MBA classes. You will get on the job training as go. If you follow the steps above you will get to where you want to be faster than you think.
Starting your own medical practice can seem like a an extremely daunting task, but it also is very rewarding. You are absolutely capable of doing this.
Do not be afraid to reach out and utilize the external resources available to you. Building professional relationships with CPAs, bankers, lawyers, marketing firms and staffing services can provide invaluable information to someone considering starting their own business. Contact us today and add us to your advisory team.