Launching Your Own Healthcare Practice: A Guide

Escaping the Shadows: Dr. Dana Cohen's Bold Leap

After completing her residency at Albany Medical Center, Dr. Dana Cohen found herself stepping into the spotlight of a renowned practice under the guidance of Dr. Robert Atkins, the mastermind behind the Atkins diet. Yet, as time went on, she realized that the path laid out for her was not her own. In 2002, the spirited doctor took the plunge, leaving the fame of her mentor behind to launch her own medical practice in the charming confines of a New York City brownstone.

Stepping into the Unknown

"I was just a kid back then—so green and bursting with ambition, yet completely clueless about what I was getting myself into," Cohen reflects in her candid conversation with NerdWallet. The years spent studying medicine prepare doctors for many things, but the leap into entrepreneurship is an entirely different beast. Establishing a practice alone requires a whole new set of skills, complex consultations with various professionals—healthcare attorneys, accountants, and medical consultants are just the starting line.

Financial Hurdles and the Rising Cost of Care

Launching a solo practice is not just a dream; it’s often a financial marathon. The daunting costs associated with starting up—real estate fees, construction expenses, and equipment investments—can leave many doctors hesitant. Franklin Walker from the North Carolina Medical Society Foundation highlights that fewer physicians are initiating small practices, primarily due to these financial pressures and the headaches that come with navigating insurance companies and shifting healthcare laws.

The Daily Struggles of Practice Ownership

For those like Dr. Linda Delo, an osteopathic family physician in Port St. Lucie, the battle is far from over. She battles the cash flow crisis that occurs while waiting for reimbursement from insurance providers, compounded by the difficulties of securing direct payments from patients. "When patients leave without settling their part of the bill, it becomes a near-impossible task to collect later," Delo laments, estimating her outstanding receivables to be around $100,000—an unsettling sum hanging over her head.

Innovative Solutions for Financial Stability

To enhance her cash flow and ensure timely payments, Delo's team has implemented proactive measures, meticulously collecting insurance data and confirming policy details ahead of patient visits. She also makes it a point to educate her patients about their insurance responsibilities, thereby fostering understanding and accountability.

The Blueprint for Starting a Medical Practice

No matter the industry, launching a small business requires certain foundational steps—creating a solid business plan, securing funding, and consulting legal experts while adhering to federal and state regulations. Sound familiar? Medical professionals, like all small entrepreneurs, frequently seek small-business loans to help cover start-up costs, even when student debt looms large on their financial horizon.

The Start-up Cost Puzzle

Understanding the intricacies of start-up expenses is crucial. Dr. Cohen learned this firsthand; items such as office space, medical equipment, legal fees, and essential supplies can pile up quickly. "Often, stepping into an existing practice is more economical than starting fresh," Walker advises. His insight resonates, especially for those ready to take the leap into practice ownership.

Cohen's Resilience and Evolution

After her first practice struggled to thrive under the weight of high operational costs and low patient volume, Dr. Cohen adapted. In 2009, she reestablished her practice in a more sustainable commercial location, sharing space to reduce expenses. Creativity in her business approach became her ally, as she even briefly shared her practice with a massage therapist on weekends and evenings.

Navigating the Credentialing Labyrinth

Venturing into private practice requires navigating the daunting credentialing process to accept insurance from patients, a procedure that could stretch across several months. Insurers will demand verification of medical qualifications and malpractice insurance, the latter being a safeguard for personal assets against potential legal issues. Familiarizing oneself with state requirements and maintaining proper coverage is vital.

Finding the Right Insurance Networks

For doctors, knowing which public health insurance programs to enroll in is critical. For instance, geriatric specialists must partner with Medicare, while those serving low-income communities might look to Medicaid. Margo Williams from the American College of Physicians emphasizes the importance of negotiating contracts with private insurers since reimbursement rates vary widely.

Choosing the Right Business Structure

A pivotal decision for any medical entrepreneur is selecting the correct legal structure for their practice. Most practitioners prefer forming S corporations, which allows them to pay taxes solely on personal income derived from the business. To make an informed decision, hiring a healthcare attorney for guidance and to draft essential legal documents is a smart step.

Compliance and Best Practices

Before hanging that shingle, medical professionals must adhere to a multitude of federal and state regulations that vary by specialty. This includes securing state licenses, obtaining a National Provider Identifier for use by Medicare, Medicaid, and private insurers, and registering for a DEA number to prescribe medications legally. Familiarizing oneself with these regulations is essential to ensuring successful practice management.

Resources for Navigating Practice Management

The journey toward starting a medical practice can be complex, but organizations like the Medical Group Management Association provide invaluable resources and guidelines to ease the process. Additionally, joining the American Medical Association can offer further insights into legal, ethical, and operational challenges that new practitioners may face.