How to Start Your Own Medical Practice
Starting a medical practice is an exciting experience. It provides the freedom to work for yourself and stay independent of larger health systems. Whether you are fresh out of residency or moving away from an existing medical practice, there are many items to consider before, during and after launching a new medical practice.
This article is designed to walk you through the various items you will need to account for when starting your own medical practice. Before we begin, it is good to note that purchasing an existing practice is a viable alternative to starting a medical practice from scratch. Before you start planning, it may be useful to determine whether purchasing an existing practice or starting from scratch is right for you.
When starting any business, it is important to consider the challenges you’ll face.
Some of the most common challenges include cash flow, patient vs. payer collections, time management, work/life balance, hiring, setting up systems, and marketing your practice. Some of these will be harder than others and much of that variance will depend on your network and level of experience.
Identify your strengths and weaknesses early on so you can delegate the work that is outside of your purview.
You can’t start a successful business without a business plan. Pre-planning can be one of the more challenging yet rewarding times in the lifecycle of starting a medical practice. During this time you’ll need to establish your goals, objectives, mission, and values. This is where you will start your financial modeling and budget planning in addition to creating a timeline for your practice to work against as you build. This plan should be your guiding light for the next few months as you progress towards opening your doors for the first time. Steps during business planning include:
- Create a timeline
- Determine plans/objectives
- Create a financial plan
- Determine your budget
Now that you’re ready to go, business plan in hand, it’s time to establish the business entity.
The first step should be determining how you’ll finance your business. Without capital, you won’t be able to start the practice and your journey would end here. One of the most common methods for funding medical practices is a small-business loan, but this should be discussed with a financial advisor.
There are many considerations when forming a business and unless you have significant experience it is best to speak with a small business attorney/consultant. There are easy decisions to be made such as the name of the practice, but considerations such as organizational structure (LLC, S Corp, C Corp, etc.) can have major implications on the business long-term. These decisions should be advised by a professional.
Other important steps when forming your business include hiring an accountant, setting up bank accounts and obtaining the appropriate tax identification numbers. Steps during entity setup include:
- Find an attorney
- Find an accounting firm
- Obtain financing
- Decide on a practice name
- Determine organizational structure
- Obtain tax identification numbers (i.e. Federal, State, Local)
- Setup Bank Accounts
- Obtain Sales Tax Certificate (varies by state)
Office Setup & Location
There’s a lot to consider when setting up your physical location. How much space do you need? What location would be most accessible to your existing patients or ideal for finding new ones?
Once your preferred location has been identified, you’ll need to negotiate lease terms, undergo the relevant inspections (fire, safety, etc.), furnish your office and even determine the hours of operation. Steps for setting up your office location include:
- Determine space requirements
- Site selection
- Negotiate/Sign lease terms
- Certificate of Occupancy (i.e. Fire Inspection, Safety Inspection, etc.)
- Determine office hours
- Purchase indoor/outdoor signage
- Get office furniture/decorations
Administrative setup is crucial in determining how you want to run your medical practice. This covers creating compensation models for yourself and employees, establishing procedures/workflows, determining your fee schedules for all services you’ll provide to patients and more. A lot of care and deliberation should take place in this stage, as processes are very difficult to change once they’ve been adopted. Steps include:
- Create employment agreements
- Build a compensation model
- Prepare office policies
- Prepare procedures/workflow manual
- Develop Fee Schedule
Equipment and Technology
For your new medical practice to operate effectively, you will need best in class solutions that can adapt to your business needs. The primary systems a new medical practice will need for peak efficiency are Electronic Health Records (EHR), Practice Management (PM), Medical Billing, Patient Experience/Intake, Communications, Computers and specialty-specific medical equipment/office supplies.
It is important to do a careful analysis of the various vendors of these systems as their strengths/shortcomings will become your own. Select a system that is aligned with how large you anticipate your practice to be, not necessarily where it is today. Some providers are better for individual practices now, but struggle to deal with physician growth and increased staffing. What to consider:
- Determine equipment and technology needs specific to your practice
- Select a Practice Management Software (PM)
- Select a Medical Billing Software
- Select an Electronic Health Record (EHR) Software
- Select a Patient Experience/Intake Software (PXM)
- Purchase photocopier, transcription equipment, and fax machine
- Phone System
- Internet Services Provider
- Purchase computer and other office equipment
- Purchase initial medical equipment and office supplies
There is no understating the importance of insurance for a medical practice. Getting the appropriate types and the right amount of insurance coverage is more important in the medical field than most others. Understanding which forms of insurance are mandatory and which are optional is critical to having the appropriate amount of protection in times of need. You will want to consult with a trusted insurance agent/business advisor to determine what combination of insurance policies provides your practice with the proper coverage. Types of insurance your medical practice may need to include:
- Health, Life and Disability
- Workers Compensation
- Employee Practices Liability (EPL)
- Disability Coverage
- Employee Fidelity Bond
- Business Interruption
- Umbrella Policy
Medical Credentialing and Hospital Privileging
There are a variety of requirements you will need to meet in order to legally practice and to submit claims to payers/collect on them.
The first steps include applying for a National Provider Identifier (NPI) number and obtaining state medical licenses. Once you are licensed and know that you want to accept insurance, you will need to go through the credentialing process. Credentialing is a process for verifying your qualifications inclusive of education, licensure and more.
Completing medical credentialing will allow you to accept insurance from government programs (Medicaid and Medicare) and private insurance providers (Blue Cross Blue Shield, Aetna, etc.). Determining which insurers you will work with and negotiating contracts with each of them is critical to you getting paid, should you choose to accept insurance.
Also, in order for physicians to treat patients in a hospital setting, they will need to go through a rigorous hospital privileging process. Medical Credentialing and Hospital Privileging steps include:
- Apply for an NPI Number
- Obtain state medical license
- Submit provider enrollment and credentialing applications
- Get memberships in associations (i.e. state, county, specialty specific)
- Apply for hospital privileges
Compliance training for your staff is also vital to your practice’s success. Staff compliance with OSHA, CLIA, HIPAA, Stark and more can save you thousands over the lifetime of your medical practice. Setup the systems needed early on to ensure that everyone has the training they need to keep your practice safe from non-compliance. Compliance Training includes:
Human Resources and Staffing
Human resources and staffing are the foundation on which your practice will grow. Finding, hiring and retaining good talent can prove to be challenging but is critical to your practice’s success. Formulating a hiring plan, setting up employee benefits, creating an employee handbook and implementing a payroll solution are all important steps in building a functioning HR process.
According to CareCloud’s Practice Profitability Index Survey, staffing is the second largest profitability challenge practices face. This came in only behind Billings/Collections processes. Human Resources and Staffing steps include:
- Determine all staffing positions needed
- Create job descriptions and salaries
- Determine employee benefits
- Implement payroll services
- Create HR policy and employee handbook
- Recruit, physicians, administrators, and nurses who can educate staff and understand the importance of value-based care
Marketing is often forgotten when establishing a new medical practice, but what is a practice without patients. Empty. Whether you have an existing client base or are starting from scratch it is a good idea to have a solid marketing foundation for acquiring new customers and satisfying existing ones. This includes everything from branding to website design, networking and social media. Solidifying a strong marketing presence will pay dividends for years to come.
- Create Marketing Plan to acquire new customers
- Develop logo
- Create various marketing materials (i.e. letterhead, print collateral, etc.)
- Build website (may be easier to outsource)
- Join Local Business Organizations (i.e. Chamber of Commerce, etc.)
- Network with colleagues in person and online
- Build Online Presence (i.e. Social Media, Review Sites, etc.)
Setting up accounts with additional vendors should be one of the easier parts of the process. Most of these are commoditized services that are quick to setup and easy to monitor. Additional vendors you may need to setup include:
- Office Supplies
- Janitorial Services
- Medical Waste
- Credit Card Processing
This article is not meant to be an exhaustive list of steps to take when starting a medical practice. Every case is unique and will require a variety of tasks that were not mentioned here. It is simply meant to help you reduce the time it takes to get on the path to success when starting out.
If you would like a simplified version of this article, you can download the New Medical Practice Checklist for free.