Owning A Medical Practice. Year 3.5 Update

Here we go! A raw update at my private practice. It has been some wild ups and downs. I can’t believe that this February 2023 will be four years of my office being open full time. Time is flying by.

I have been doing these updates on student doctor network for a few years now. For those who might be new to my journey. Here is the TLDR for the background: I am the first in my family to be a doctor. Our family grew up not well off financially with no one other than me who is in the medical field. All members of my family own some sort of business.

I trained in internal medicine. After graduating residency, I was a hospitalist for 2.5 years working the typical 7 on and 7 off shift in the hospital. After deciding to leave that profession, I decided to open my own practice outpatient. I did everything by myself and created everything from scratch (including my website). Let’s check in to see how things are going.

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Workload:

I have scaled back my workload. At the peak, I was seeing 100-150 patients a week. Now I am seeing about 90 to 110 patients a week. I’m working more on admin time, high level things like adding more hours to our office hours, adding new services, and adding more doctors or PAs. I now do about 6 or 7 hours of patient care a day and 1-2 hours of admin tasks every day. This also allows me to not do all my admin time outside of regular business hours.

I am now also doing annual physicals for executives that pays me about $400 an hour. This is one visit that pays more than I would have made doing two follow up visits. It also is less stress on my staff, which is a win all around.

I’m using dragon to dictate my notes and usually leave right at 5:00pm or 5:30 pm at the latest.

I also have virtual assistants. They help reduce costs while still getting all my tasks done.

Office Manager

I now have an office manager. She helps keep the day-to-day tasks running, which has been a huge help in lowering my stress level. While she is not perfect, it sure has been welcome to have their help. However, I am still struggling with this idea that I NEED an office manager. I find myself micromanaging her at times, which I am working on improving. I honestly think if I didn’t have kids, I would manage the business fully myself and save the cash. However, that gets into deeper issues like control…which like many doctors I have issues giving up control.

Another New Doctor Employee Has Started And Left

The initial physician that I hired is now a business partner. The male physician, the second doctor that I hired, that didn’t work out. He left less than a year after I hired him. We had a second location and then I divested that clinic since it was just too far from my primary office.

We are looking to start a second location in my current city. However, with inflation being as high as it is, we are dragging our feet to see what happens with the economy before agreeing to a new office and a 5-year rental term.

New Business Partner

I sold a minority percentage of my practice to the doctor who joined me 3 years ago. Working with her has been wonderful and it was a super easy decision to have her join the business side of things. She has worked for the practice for 3 years. She is just as hard working on the practice as I am. Beyond this partner, I don’t ever see myself allowing anyone else to buy into the practice going forward.

I don’t think I will add another partner anytime soon since I want to grow. If you’re wondering why I will never allow someone else to be my partner, well I’ll tell you. Growth of a business takes money. New partners must be okay with spending money and delaying a payoff. That is a hard sell to tell new partners to pay me money to be a partner, and delay seeing any of that money back for at least 5 years while we focus on fast growth.

I would rather take the risk on myself and focus on growth. I don’t want to spend my time calming down a new doctor / investor on why we are not bringing in good income and trying to explain it is because that money is being spent on growth (opening new practices). Also, if a doctor was that “okay” with delayed income…why wouldn’t they just start their practice by themselves?

Inflation

Pre pandemic we could get away with hiring unskilled employees for about $15-$20 an hour. Now we can’t even find anyone unskilled for less than $20 an hour. A medical assistant used to be around $19 an hour on average, now it’s $25 on average. Inflation has been very real. It has had a significant impact on our practice. Hopefully, this improves soon.

Insurance:

We still are a traditional practice. We take everything but Medicaid. Currently we are in talks to possibly drop Cigna. They just told us that our new contracted rates will be decreased by 8% and I’m trying to negotiate with them.

We take payment at the time of service, so our collection rate is still > 90%. This year we are on track for our first year of over 2 million in revenue to the practice. That is pretty darn exciting to make it to this point despite the pandemic.

Commercial insurance has been the biggest headache. Many refuse to negotiate with us and almost all pay less than Medicare. However, now that we have gotten larger, we have had some success negotiating with insurance companies.

Personal Life:

We now have two kids, one girl and one boy. They are 2.5 and 1.5 years old. Those of you who have kids know. Raising kids is a lot of work but is a lot of fun. I don’t spend the time I used to on the practice admin tasks like I did pre-kids. I enjoy getting back home to playing peekaboo with my kids instead of working late at the office on more admin stuff.

To say that things were stressful in my life during the past 2 years would be an understatement. From moving offices, buying a new house, selling our old house, the birth of a new kid, selling a portion of my practice, selling the second location that we had to another group, my wife’s health issues, and looking to open another location in our city….just to name a few….was a bit too much to take on.

At one point earlier this year, there were so many moving parts to my life that I was sleeping 5 hours a night from the stress. I was starting to have palpitations daily. This is when I really realized that I had to pull back. I have since reached a better balance in my life without the high stress levels. That was not sustainable or healthy. My balance is not perfect, but it is much better.

My wife continues to battle with her genetic syndrome that causes multiple skin cancers. Unfortunately, this will be a lifelong issue for us/ her. However, the good news is that these are basal cell cancers and otherwise lifespan is unaffected otherwise.

Sold Our First House

We sold our house and bought a new house within the past year. We had a house in the central part of the city and sold it for 955k. I purchased it for $440k 4 years ago. We bought a house 6 miles away for 990k that is over twice the size of the first house. (1400 vs 3100 sq ft). Our new house even has a garage! **Oh the joys of primary care**

We sold our house directly to Redfin, right at the peak. As of the time of this posting, they still have not sold our house and it is listed much lower than we bought it.

Employees:

I now have 15 employees, including 2 full-time billers.

I have an MD that works with me and 2 PAs. We are expanding to another clinic location in the south side of town but taking our time with the possible economic downturn. In the meantime, we have saved up about half a million dollars in cash in reserves for this addition.

We now on average see about 400 patient encounters a week.

We now offer full benefits, including PTO, 401k match, dental, vision, and disability to all employees.

Our office has two open positions to attempt to hire either more doctors or PAs if we cannot find a doctor to join us. Once we hire a new doctor, we will have to hire more staff to accompany that.

New Building:

My last post on SDN I talked about moving into the new building April of 2020. Due to construction delays, we didn’t fully ramp up until about November 2020. We went from 2 exam rooms to 8 exam rooms plus a dedicated lab room.

I could not be happier to be in our current office. We really lucked out on construction. I bought the property for about $1.7 million, and now I could easily sell it for $2 million in only 2 years due to the rapid property market appreciation in our area.

This will be the only building we own in the future. I plan on allocating future money to growth rather than owning commercial real estate.

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Income

The most frequent question I get asked, how much is the income as a private practice doctor.

I’m re-investing so much money back into the practice to grow that this is lower than you might think. Hiring 2 new PAs and having them ramp up costs a lot of money. I must pay them up front and wait for the billing to roll in and for them to get fully booked before I make any money. That takes time. I also must hire new staff to help with their extra workload tasks. Also taking more money upfront.

Gross Revenue

***Gross revenue for the practice my first year was almost nothing, like $40,000 since I started part time that year from August through December while I was a hospitalist. Keep in mind that I was working only every other week in the clinic. Even though I was part time open during this time, I’m going to call this year one and go by calendar years for income below to follow taxable years. Technically I hit year 4 open full time Feb 2023.

• Year 1 ~$40,000
• Year 2 ~$700.000
• Year 3 ~ 1,200,000
• Year 4 ~1,700,000
• Year 5 ~ (on track) 2,100,000

Last year I personally made about $350k. This year, it will be less since I plan on spending about a quarter of a million dollars on opening the new office location. This will bring my income down to around $300k for the year or maybe even a little less. 

Ideally, I would like to stay around $200k – $250k a year for the near future and invest the rest back into the practice to focus on growth. I want to grow faster and much larger. Luckly, I don’t have any debt besides my house and commercial loan on the building and try to live frugally. I don’t really have big personal expenses that I need to keep up with.

Growth

My last post we had about 5,000 lives that we cared for. Today we have about 15,000-16,000 lives that we care for.

My goal is to grow the practice as large as I can. I have no intention of selling out right now. The long-term exit plan is to divest…. but once we are really big if we ever make it that far.

Everyone needs an exit strategy eventually.

The future:

I’m still trying to hire more primary care docs /internal medicine docs to join me. This has been very difficult. We find three types of applicants.

1. The new grad where timing just didn’t add up right.
2. The doctor who has issues (multiple lawsuits, huge gaps in care or switching jobs every 1.5 years for the past 15 years.)
3. The doctor who got a taste of big money and does not want to take a pay cut for outpatient medicine. (Going from 350k as a hospitalist locums to 250k outpatient is a hard sell for these docs).

For this reason, we have been hiring PAs so far since we have not found a good fit just yet. However, we are in talk with 4 other doctors right now in a “franchise” like model where we set everything up, and they essentially “own” that location but pay us a management fee.

Looking Back

Owning a business is hard. I knew it was a lot of work but for the past 4 years it has been many hours poured into this business. This has led to a lot of sleepless nights, some fights with the wife about lack of vacation, and moments of maybe even depression and anxiety. Don’t get me wrong, there have been so many more ups than downs though.

The pandemic had lots of lows though. I had a doctor who I lost a lot of money on, and I was worried about the financial future of my practice during that whole episode. There were death threats from patients about the covid vaccine, to the point where I had to have a gun on me when coming in and out of my office for fear for my life. There also were times where I was questioning if waking up at 5am every day to do admin tasks to make this practice grow was really the best thing long term. I went through doubts of maybe I should just maximize profits now and stop focusing on the growth.

Is It Worth It?

I have had people tell me that my grinding at starting my own practice has not been “worth it.” Yes, I could have just went back to fellowship and made more money at this point in time by going into GI or Cards. However, for me personally I love what I do and I enjoy the business aspect of Medicine.

Life is journey. My practice is not perfect, but I work every day to do my best for my patients, my employees, and my family.

This Blog And Vlog

My blog and vlog on youtube, I attempt to show how real it can be owning your own practice. It is possible and very possible to be successful owning a practice. However, it has been a labor of love. Your practice does not have to be as admin intense as mine. I am doing this in an effort to grow, and grow my practice as big as I can make it without taking on PE money..

I’m happy to answer any questions anyone may have.

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