Deciding to open a private medical practice is an exciting venture. While treating people is your number one priority as a healthcare professional, you’ll need to shift your perspective a bit and look at your private practice as a business. Just like any other business, it’s important to lay out a clear and detailed plan on how to run your private practice.
In this article, we’ve laid out a step-by-step guide on how to open a private medical practice.
Step #1: Create a Pro Forma
A pro forma is a business plan that outlines your revenue and debt projections based on reality. List your medical and clinic expenses, as well as debt and revenue forecasts. Lending companies often ask for a pro forma, and they’ll be able to see whether you have realistic projections or not, so be sure to review your numbers or consult an accountant.
Ideally, your pro forma should project income and expenses for the next three to five years. Be sure to include the following expenses, such as medical and office supplies, lease, and other costs incurred while setting up the practice. However, you need to be able to demonstrate how you came up with those numbers.
Step #2: Apply for Medical Practice Financing
Once you have your pro forma ready, the next step is to secure medical practice financing. Applying for medical business loans from banks can be complicated, mainly because many healthcare professionals have negative net worth after taking out student loans to pay for medical school. Having a comprehensive pro forma comes in handy when applying for loans since lenders will be able to see where the money will go, and you’ll be able to justify your need for a loan.
You can apply for medical practice financing through traditional lenders (banks and credit unions) or alternative online lenders for your company’s financial turnaround.
· Traditional lenders are best for established and financially healthy businesses that prioritize low rates over speed and convenience. Banks and credit unions usually have high qualification requirements, such as a few years in business (at least three to five), high personal credit scores, and annual revenue of at least $250,000.
· Alternative lenders are best for new and younger businesses. Generally, online lenders require businesses that are at least six months old, a credit score of at least 530, and annual revenue of $100,000.
Keep in mind that the terms, rates, and fees vary from lender to lender, so be sure to explore your options before zeroing in on a loan and lender.
Step #3: Hire Employees
Once you’ve secured medical practice financing, the next step is to hire employees. Every medical practice needs a reliable and responsible office manager to run daily operations. You’ll also need to hire someone with the necessary experience.
Besides an office manager, you might want to hire a professional consultant to occasionally take over your practice and report back on operations. Having trustworthy staff is a huge asset to your practice, so make sure to choose the right candidate for the job.
Here are some tips on how for hiring great employees for your medical practice:
· Use social media like LinkedIn and Facebook to connect with professionals in the industry.
· Clearly define the job description, as well as the ideal candidate.
· Offer competitive salary.
· Conduct a thorough interviewing process.
Step #4: Purchase Equipment
After hiring a team of professionals to help you run your medical practice, you’ll need to purchase medical equipment. These can be costly, so it’s important to do your research and look for the best equipment suitable to your preferences.
The type of medical equipment you’re going to buy depends on the type of practice you operate. But generally, here are some of the things you might want to consider:
· Electronic health record system. An electronic health record (EHR) digitizes your patient’s paper chart. It contains a patient’s medical records, history, lab and prescription orders, and information on the revenue cycle. You also need a well-functioning EHR system to be eligible for federal incentive payments.
· Practice management system. This system is usually integrated with your EHR, and it keeps track of all front-office information and streamlines day-to-day operations. It monitors your billing and revenue cycle since your employees can use it to bill patients and send claims.
· Credit card processor. Medical practices often receive payments from Medicare and insurance companies. However, your practice still needs a credit card processor for patients who have to pay at the point of care.
Step #5: Prepare to Open Your Practice
Once you have everything in place, you need to complete several steps before opening your doors to the public. Keep in mind that some of these steps could take some time as it depends on how other organizations operate.
· Incorporate as a legal business and secure a tax ID. Incorporation means limited liability. If someone sues you, only your company’s assets are subject to risk. Otherwise, both your business and personal assets are at risk to the threat of a lawsuit. Incorporating as an S-corp or LLC or C-corp or general partnership means you’re entitled to certain tax benefits. Be sure to research the best type of entity for your practice.
· Create clinic policies, compliance, and procedures. Establish policies and procedures on how to run your medical practice, as well as compliance with legal regulations. It should cover day-to-day operations, such as billing, patient interactions, and data entry. Remember to review and update your policies and procedures since the healthcare environment is constantly changing.
· Buy insurance. Insurance is extremely important for medical practices. You’ll want to purchase medical malpractice insurance coverage and then look into additional coverage such as worker’s compensation, business interruption insurance, business auto insurance, and property insurance.
Starting your own medical practice can feel daunting at first. With this step-by-step guide, you’ll be able to put things into perspective. Don’t feel too overwhelmed and take it one step at a time. Review each step carefully, and you’re well on your way to set your practice up for future growth.