Starting a medical practice may seem like an idea that has come and gone, but in reality, it never went away! Many new physicians coming out of residency programs may be attracted to group practice settings due to the relative security – clinical, financial, lifestyle – group practices offer. But a study by the Centers for Disease Control published in 2007 found that 35.8% of office-based physicians were in solo practice, accounting for almost 70% of all medical practices. That’s a lot of small businesses providing medical care! And after all, a solo practice or small group practice is a type of small business – providing an important, personal service to its “customers” to be sure, but a small business none the less.
The statistics on small business failures are daunting: the Small Business Administration, using census data, reports 10-12% of all small business fail each year, and only half of all new small businesses survive five years or more. So if you are starting a medical practice, how can you avoid adding to these dismal statistics?
Starting a medical practice has a few major advantages over starting other types of small businesses.
Many new business have to work hard at the basics of starting a small business.
- It is pretty obvious what kind of business you are in. You don’t have to pitch your idea about a brand new product or service to anyone – you are going to practice medicine.
- You have a built-in value proposition – all of us need physician services at one time or another, and you have the chance to communicate that value through your interactions with patients.
- And most important, there are proven revenue streams for your services – payments from patients, insurance companies and other third party payors.
So what else do you need for starting a medical practice? Plenty! Because what most physicians lack is experience in the business side of medical practice, and although learning and understanding the business requirements of starting a medical practice does not require eight years of post-graduate education and maybe a year or two of clinical fellowship, it does require a broad understanding of a wide range of issues from facilities to billing and payment to personnel management to marketing and referral development. Did they cover all that in medical school or residency?
What they didn’t cover in medical school about starting a medical practice as a small business
In this series, we are going to cover some of the basics that physicians starting a medical practice should consider.
- Market assessments, feasibility studies and business plans;
- Planning office facilities;
- Practice issues – clinical services, hospital affiliations, legal form and accounting, electronic health records and practice management information systems, insurance and payor contracting;
- Financial management – billing and accounts receivable, banking, credit cards, lines of credit, budgets and purchasing;
- Human resources – recruiting and employing staff, payroll, job descriptions, and employee handbook;
- Marketing and referral development, business development, social media and online presence, collateral material and advertising.
Please look for future installments over the next few weeks. The orientation will be to those starting a solo practice or a small group practice, but the lessons apply to larger groups and those considering expansion, too. We will try to make it enlightening and entertaining!