How to Set Up Your Own Medical Practice

Since the blog has gained a decent amount of popularity recently, I’ve been asked many times how to start up a medical practice.  In the past, I did make a previous post about why I started up my practice. Well, it is time for a post on how to set up a medical practice. Looking back, I had no idea what I didn’t know. Luckily I had a bit of business background, I have family that owns several businesses, and I have a great lawyer. This helped me weather any storm and realize that no business is without some waste spending. ***The top pic is on the farm. This Texas boy still knows how to deal with cattle****

 

So, if you have ever wondered how to set up your own medical practice, here it is. A guide on how to set up your own medical practice.

 

Write Up A Business Plan:

This is where most businesses already start off on the wrong foot. They either don’t create a business plan or spent way too long pontificating over their plan tweaking the numbers. Anything longer than 2 months spent on this planning stage in my opinion is a waste of time. If you find yourself constantly going back to the numbers and altering your excel spreadsheet, then it is time to move to the next stage if you really want to move forward.

A business plan should be just long enough to prove feasibility but short enough to not bog you down on getting started when opening your practice. 

In your business plan have the following chapters:

  1. Pick a name for your company and ethos
  2. Pick a location and do a competition analysis. Look who is practicing within 1-5-10 miles from where you want to open. Get to know what type of insurance, if any, that they take.
  3. Look at what the demographics are for your surrounding area to see if there are enough patients to open a practice. I have used this government website in the past.
  4. Create a projected income spreadsheet and projected expenses. This is where most people get stuck. The point here is to figure out how many patients you need to see to break even or make a profit. Or how much hospital paid call you will have to take to get the practice cash flowing until outpatient volume picks up. Once you do that, you can see how feasible it is to open a practice here. Do not get bogged down in the numbers. NO one knows how many people are going to show up the first month. Hell, my first month I had more friends show up than actual patients.
  5. Create a 5 year plan at the end of your business plan document. This doesn’t matter so much what you put in it. I want the 5 year plan there so you can tell yourself where the future is going for your practice. Are you going to go solo forever or is the plan to get 50 doctors working for you? Will you cash flow forever or try to take on VC money? Define what your long term goals are with your practice.
  6. Know that no one but you cares about your plan. When I started my practice, banks were more than happy to give me a loan. I never did get a loan but not ONE single bank asked for a business plan. They just asked for a personal guarantee. The business plan is for you and for you to use as a guide how to open in an area.
    The business plan is a guide. Try not to think of it as right or wrong but something that is said for you and for you alone.

     

 

Find A Commercial Real Estate Location To Rent

I started my practice for just over 15k dollars. Start searching on commercial real estate sites such as LoopNet or talk to an agent. Better yet, start calling other practices in town that are solo docs and see if you can sublease from them. It is a win-win for both of you. You won’t have to sign a 5 year commercial rental agreement and they get extra income for space they were not using anyway.

Location matters. If you find a location to rent that is hard to get to or hard to find then skip it.

I subleased for my first space and had a month to month contract. Even if the business didn’t work out then I was not on the hook for long term obligations.

Keep in mind that you also can not start the credentialing process with insurance until you have a business address.

 

Find A Good Lawyer And Form Your Company

 

I am located in Texas and I can not rave enough about Jim Kelso.  This is not even a paid plug for him. He was so kind to me and for about a grand spent an hour on the phone laying out what I need to do. We formed my company, he sent me a binder with all the documents and stock certificates I would need. He then sent me a list of things I needed to do to send in more forms for the federal government and how to file with the state and federal government for various required forms that need to be filed.

 

You can go the legalzoom route but I have found the extra $500 I paid him in fees worth its weight in gold.

 

Find a good lawyer who does health care and set up your company. You most likely will set up a PLLC company that is exclusive to professions such as doctors or lawyers. Then you will elect to be taxed as an S corp (in most cases). Once this is done, you can also get a tax ID number from the government. You can get yours here same day.

Moving cattle on the ranch

 

Open A Bank Account

Once you filed for your PLLC and have your TIN (Taxpayer Identification Number), you then can open a bank account. Go to a bank of your choice and open a business bank account. You will absolutely need this and order checks right away. Get a debit card for deposits and make sure you ask about fees. Fees for business accounts are way different than personal accounts.

 

Start The Credentialing Process

Sigh

This is the most difficult part. Get ready for lots of frustration.

After 4 years of medical school and 3 years + of residency plus numerous exams you would think that it would be easy to get in network. Wrong.

Websites such as Aetna make it seem easy to join. However, the process is long, there also is a lack of communication and you may find out 60 days later that you accidentally submitted the wrong form only to start over. This is how I lost $30,000 from Aetna when they revoked my in network status when they claimed that an employee did not have the authority to put me in network since my form was not done correctly. I had to start over and it took 9 months to get in network with them.

Medicare is the easiest. They retroactive claims. Commercial insurance will not retroactive claims. Do not say you are in network until you get an executed contract and see the execution date. This is a big deal. When I got my Aetna final contract, even after 9 months of going back and forth, the executed contract had an effective date for 3 months in the future!

You can not start this until you have a phone, fax and business address. Get this set up early. You can get a phone number and fax number online for cheap.

This can be done yourself but I would hire a company to do this for you. It is hours of waiting on hold on the phone each day. Pay someone to do this for you. I paid $2,000 for a team to do this for me.

 

Find An EMR And Billing Software

Start searching online for which EMR and billing software you are going to use. Most of the time you will have to pay a monthly fee for each and pay per doctor or provider. We pay $400 a month per doctor currently for our doctor for EMR plus billing software.

Some EMR are designed with Derm in mind while others are geared more for surgery or primary care. Find which one suits your needs best.

Be very cautious of EMR that do both. In my experience they tend to down code your visits or do not go after patients who have outstanding balances.

In my opinion you are better contracting a billing team who can take anywhere from 4-9% of receivables. They do not get paid unless you get paid. They have a huge incentive to get paid. Read the fine print. I have my front staff collect up front and my first billing team was taking 4.5% of money we took in during office visits. I was furious since they had nothing to do with us collecting this money but in our contract we were still on the hook for paying them because when we got paid, they got paid.

Currently, we use Practice Fusion and Kareo. It is definitely not perfect but I’m happy overall.

 

Credit Card Payment Processor

Taking credit cards will be key to opening your business. Try to take payment at time of service.

We use square. We love them and yes if you sign up through the link I get some transactions for free as a referral bonus. They are easy and I have found them to be wonderful to deal with. Just make your life easy and use them for your credit card payment processor. We have a tablet that uses a wireless chip reader and charge patients. Payment is next day and fees are minimal.

Cows walking through our pecan grove

Create A Website

Get on Wix or Godaddy and make a website. You do not need to pay 5k for a website. Watch some YouTube videos and get your website up and running. Put all your info on their website.

Then create a Google Webmasters account. Put your business on there with your business location so you can be found on google maps with hours you are open and phone number.

Then rinse and repeat for Bing and Yelp.

Fair warning, when I created my apple account for apple maps, they kept moving my business address to the wrong location and it took them 4 months to fix. For the first 4 months people would call me saying something like…um we are in the Time Warner office, are you located in the cable company?

Thanks Apple maps but if they haven’t fixed this problem yet, then be ready for some headaches. Google was easy. You log in, move your bubble to exactly where your practice is and click save.

 

Hire An Employee

Post advertising online for free via Indeed for a medical assistant and interview a few candidates. Offer someone a job, sign up for quickbooks to keep track of payroll and benefits. File a new hire report with your state and local agencies and have them fill out a W-4. Collect 2 forms of ID, one needs to be social security card or passport and store the copies in a secure space.

 

 

Open Your Practice!

You’re all set. Open your practice, start seeing patients and be your own boss.

It sounds like a lot of work but in less than 6 months you should be able to go from nothing to opening a practice. Some insurance companies will take a while to get you in network but in the meantime you can open and see someone which is better than no one.

 

Good luck and congrats on taking back medicine for doctors!

2 thoughts on “How to Set Up Your Own Medical Practice

  • January 30, 2020 at 5:26 AM
    Permalink

    InvestingDoc, thank you for continuing to write this series! It has been so informative to learn about your practice. I don’t know of another source where I could read about the challenges and successes of a new independent primary care practice in 2020. The lack of doctors opening their own practice makes it seem impossible. Thanks for showing us all how you are doing it!

    Reply
    • January 30, 2020 at 8:15 AM
      Permalink

      Thanks for the support! I’ll keep posting more about my experience so that it hopefully gives more doctors the courage to go out and start their own practice if that is what they desire to do.

      Reply

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