If you clicked on this article, you’re probably already aware of how challenging it is to open a medical practice is these days.
You have to be:
- Organized to stay on top of the regulatory and certification requirements
- Business-savvy to manage your employees and revenue cycle
- Confident enough to make executive decisions and negotiate contracts
- Realistic enough to know your own limits and make practice plans accordingly
And even if your practice meets all of these requirements, it might not be enough to keep your independent practice from becoming one of the thousands that are purchased by larger hospitals each year.
Selling certainly isn’t a bad thing for every practice owner. But you may want to maintain independence and establish your own successful healthcare business.
Related article: Be a Physician Entrepreneur and Succeed the Right Way
If so, you need to be aware of these 3 common challenges facing small medical practices. And, you need to know how to overcome them.
Three Common Challenges of Opening a New Practice
1. Overestimating costs when creating your business plan
In 2017, 20 percent of small businesses surveyed by the National Small Business Association said “lack of available capital” was one of their most significant business challenges. This can threaten the growth and even survival of their businesses.
If this is a trend for small businesses across markets, it’s even more of a threat to small practices in the healthcare community. The cost of operating a medical practice is generally higher than operating any other type of business.
So what’s the solution? Don’t wait until after you’ve opened your doors to start worrying about where you’ll find capital.
Instead, overestimate your startup costs when creating your business plan so you’ll have plenty in the bank to cover high or unexpected expenses.
–Three big things you need to do
Whether you start with a business plan or a pro forma, you’ll need to do three big things:
- Make educated projections for any and every expense you’ll have to cover
- Create pricing lists to help you anticipate how much revenue you expect to generate
- Disclose any existing debt
–You may want to hire a consultant
For many physicians, the business aspect of opening a medical practice puts them outside their comfort zones. If you fall into this category, think about hiring a consultant who specializes in opening practices within your specialty. They’ll be able to use their experience and knowledge of your location and help you create a more accurate budget for things like rent and equipment.
Likewise, a consultant will help you draft a compelling business plan, complete with market summaries and mission statements, to present to banks and other potential investors.
Speaking of presenting your business plan, be sure to submit your plan to as many banks as possible. This way, you increase your chances of obtaining funding and can compare offers so you can accept the best deal for you.
Another good tip is to look for banks with loan departments that specialize in healthcare. Any time you can work with people who know your business means you’ll spend less time explaining your market and justifying certain expenses.
2. Not planning how to outfit your practice
We live in a pretty exciting time when it comes to technological advantages in healthcare. With tools like patient portals, telemedicine, e-prescription, patient engagement, and artificial intelligence, physicians are more equipped than ever to provide accurate diagnoses and excellent care to their patients, and that’s a great thing.
The flip side of that, though, is figuring out how a small medical practice can deliver all of those outstanding benefits on a budget. In truth, you probably won’t be able to afford all of the fanciest, cutting edge tech right away, and that’s okay.
Instead, think about how you want your practice to grow, and come up with a timeline that lays out when you’ll be ready to invest more in new and different software.
–Three basic tools to get organized
In the beginning, you’ll want to focus on these basic tools to get organized:
- Electronic health records (EHR) software
- Billing software
- Scheduling software
Regardless of your budget or timeline, the very first thing you should be looking for is an EHR, especially so you can meet MACRA requirements.
An EHR is an unbelievably useful tool for managing patient records securely, and starting your practice with one is so much easier than changing from pencil and paper to an EHR later.
If you have more room in the budget from there, consider looking for a billing software or revenue cycle management system that will provide more control over how and when you get paid.
That is unless you’ve decided to outsource your billing, which can make life easier for some small practices.
Finally, a dedicated patient scheduling system can save loads of time by automating the scheduling process and helping you view and manage your whole schedule more easily.
If you have to prioritize your initial software purchases, that’s the order in which you should do it. However, if you’re able to afford all three types of software right away, or if you feel all three are important enough to your practice that you want to try and make it work, consider a practice management suite.
Many of these systems include all three of the above features in addition to other valuable tools such as patient engagement and reporting and analytics. These suites may be a little more expensive than any of the individual software types we listed. These prices may be more manageable when you consider the alternative is three separate systems.
Related Article: What Are the Best Growth Options for Your Practice?
3. Not having the right people in place to deal with the business of your practice.
It takes being a student for a long time to become a doctor. But one thing that isn’t covered in most curricula is the business aspect of opening and owning a private practice.
That means physicians who elect to start their own practice have to teach themselves a whole lot of extra information in order to keep the business going. That’s certainly possible, and many doctors have done and will do that very thing. But it’s not the only way.
Instead, focus on building a strong team of business-savvy people to support you in areas you’re unfamiliar with.
–You will need three people on your team
Over time, the size of your team will grow to match the growth of your practice. Just like with technology, you need to start small and plan to grow as you gain patients and revenue.
To begin, you’ll want three people on your team:
- A lawyer
- An office manager
- An insurance agent
Your lawyer will help you establish your practice in a way that limits your liability in order to provide more protection in case you ever face a malpractice lawsuit. Without a guiding hand to make sure everything is done right when establishing your practice as a legal entity, you could be held personally responsible for any settlements.
Your office manager will help you handle the day-to-day aspects of running the business, from managing employees to establishing office policies and workflows. An office manager role has a good bit of overlap with an HR representative, so look for someone with experience managing people and businesses.
Your insurance agent will supplement your lawyer’s work by helping you select the appropriate level of malpractice insurance coverage. This stuff can be tricky to understand but it’s absolutely crucial that you get the right level of protection. So, be sure to pick an agent you trust not to mislead you.
–And maybe a compliance officer?
If you still have some room after you establish this three-person team, you may consider adding a fourth role for a compliance officer or specialist. This can be a big help in keeping you on top of HIPAA and MACRA regulations. These regulations tend to change regularly and require a lot of attention to stay on top of.
Related Article: Why Strategic Planning is a Must for Medical Practices
And there you have it. Three of the most common challenges of opening a medical practice complete with tips on how you can overcome them.