Medical Economics - December 2008
Tex Med . 2008;104(12):49-53.
By Ken Ortolon
In early 2008, ophthalmologist and retina specialist Vincent R. Vann, MD, PhD, was thinking about leaving his group practice in the Lower Rio Grande Valley to start his own solo practice. Having a strong computer science background, Dr. Vann wanted to run a completely paperless office, using Macintosh computers to manage all aspects of his practice, including scheduling, billing, electronic medical records, and integrated ophthalmic imaging capabilities.
When he finally decided to strike out on his own, however, the thought of building a practice from the ground up by himself seemed a "daunting task," he says. After talking with colleagues, including one physician who had just gone through a similar experience, Dr. Vann turned to Texas Medical Association Practice Consulting for help. In August, Dr. Vann opened his new solo practice in Edinburg.
"Having someone there by your side like TMA Practice Consulting who's done this before makes it much more doable," he said. "I don't think I would ever have been able to open my doors otherwise."
TMA Practice Consulting helps 40 to 45 physicians and small physician groups set up practices each year. It offers a turnkey setup service to help guide physicians through every step of opening a new practice, from securing financing to purchasing equipment and hiring staff to dealing with credentialing, professional liability insurance, and other details.
TMA consultants say there are a number of important steps to follow to start a new medical practice successfully and a number of pitfalls to avoid.
TMA Practicing Consulting helped Austin dermatologist Edward Lain, MD, open his practice in September 2006. Dr. Lain, who holds an MBA, initially thought he could set up the practice himself. But the logistics of having to travel back and forth to Austin from out of state, where he was finishing his residency, made that too difficult. He says the TMA consultants made the transition from residency to private practice much smoother.
"It was like a boilerplate setup, which made it a lot easier," said Dr. Lain. "And it made me more confident that I wasn't missing some vital components to opening a practice that otherwise might have been missed."
Show Me the Money
TMA Practice Consulting works most often with physicians to set up solo practices. Many of its clients are physicians who have just completed their residencies and are opening a private practice for the first time. The group also works with employed physicians and physicians leaving large groups or academic settings who want to establish their own practice, as well as physicians interested in setting up a small group practice.
While the length of time needed to get a practice up and running varies depending on a number of circumstances, TMA consultants say physicians should plan on at least four months from the time they contact TMA Practice Consulting for assistance to the day they see their first patients.
TMA Practice Consulting recently helped one two-physician group open its doors in just 67 days, but most start-ups take an average of six months or more. Delays in licensing the physician, credentialing, build-out of the office space, delivery of equipment, and other obstacles can add to the start-up time, TMA consultants say.
TMA Practice Consulting offers its practice setup services in three phases.
Phase one begins with an initial meeting at which the TMA consultants ask the physicians about their vision for the practice and their plans and preferences for how to run the operation, says TMA practice management consultant Mark Steiger, CMM.
Following the initial meeting, TMA consultants develop a financial pro forma that includes all setup costs and start-up expenses, monthly operating costs, and three-year cash flow projections. The pro forma is a critical element to the physician being able to obtain a bank loan or a hospital income guarantee to assist with start-up.
"The biggest piece of the initial phase is the financial projection," Mr. Steiger said. The pro forma, he says, is essentially a detailed spreadsheet that outlines all costs the physician can expect to incur during the start-up and initial practice phase, including rent, furniture, clinical equipment, professional liability and other insurance, staff salaries and benefits, and the physician's own salary.
TMA consultants say the average start-up cost, including the physician's salary, for a primary care practice is about $150,000 for about 18 months. Specialty practices typically run higher.
Dr. Vann, the Edinburg ophthalmologist, says start-up funding for his practice was a big concern, particularly because he wanted a paperless practice.
"There's quite a bit of cost involved, particularly if you're going paperless," he said. "TMA provided banking and financial resources for that."
Dr. Lain, the dermatologist in Austin, also says the financial pro forma was a huge asset in getting started. "It was very helpful to take that to the banks to obtain start-up funding."
The Vendor Merry-Go-Round
Once the pro forma is developed, TMA consultants help the physician set up telephone and fax lines, as well as voice mail service. They provide referrals to professional advisers such as banks, health care attorneys, certified public accountants (CPAs), realtors, and credentialing companies.
Dr. Lain said the fact that TMA Practice Consulting had a list of recommended vendors in the Austin area was a big asset to him, particularly because he was setting up his practice while finishing an out-of-state residency.
"One of the biggest things I needed was a list of approved vendors - in other words, people who had been vetted and I could trust," he said. "That was one of the biggest advantages I had with the TMA consulting group. They had a list of realtors, CPAs, and attorneys they had worked with and trusted and, therefore, would refer their clients to."
Phase one also includes a review of the floor plan design for the physician's clinic. But possibly the most important step necessary in this early phase is starting the credentialing process. Physicians cannot bill Medicare, Medicaid, or any private health plan unless they have been properly credentialed. Medicare provider enrollment takes from six to 12 months because of backlogs at TrailBlazer Health Enterprises, the Medicare carrier for Texas.
TMA practice consultant Laura Palmer, CMPE, says a physician must already have a practice location, telephone and fax numbers, tax identification number, and bank account for the practice before he or she can enroll in Medicare.
When applying to Medicare and other health plans, the physician must list the practice address, which means he or she may have to put down a deposit or sign a letter of intent to occupy leased space, even if the practice is not scheduled to open for several months, she says.
"That's kind of a 'catch-22' for doctors, especially when dealing with Medicare and Medicaid," added Mr. Steiger. "Most commercial property managers don't understand that. They're not going to assign you an address or let you claim a space without starting to pay on the lease."
As a result, many physicians opt to build their own office space or lease from medical office condominiums or other buildings that specialize in leasing to health care professionals. This makes it easier to hold a space until the physician is ready to occupy it.
Dr. Vann says he decided to hire a credentialing service recommended by TMA. He says that was a big help in expediting the credentialing process because "otherwise the paperwork to get yourself credentialed is another daunting task."
In phase two, TMA consultants help the physician acquire the equipment and services he or she needs to operate the practice. TMA Practice Consulting can either provide resources or request bids for liability, disability, and health insurance; billing services; practice management software; medical equipment; office furniture; copier and fax machine; telephone systems; answering services; filing systems; and transcription services.
TMA consultants also provide information technology consultation, including an initial education session, an overview of practice management and electronic medical record software, and a preliminary information technology analysis.
The final component of phase two is helping physicians set up the various administrative aspects of their practice. TMA consultants provide resources such as medical office policy and procedure manuals; fee schedules; CPT, ICD-9, and HCPCS coding books; Clinical Laboratory Improvement Amendments (CLIA) certification applications; practice forms and templates; and required office postings.
The third phase includes staff recruitment and training and information technology implementation.
TMA consultants place employment advertisements and do an initial telephone screening of applicants. They also develop job descriptions, schedule interviews with applicants, and participate in interviews with the physicians. Following the interview, they check references and backgrounds and create offer letters and personnel files.
Once staff members are hired, the consultants train them on office policies and procedures, as well as compliance with the privacy provisions of the Health Insurance Portability and Accountability Act (HIPAA). TMA consultants also will provide Occupational Safety and Health Administration (OSHA) training.
TMA consultants say one of the big mistakes physicians often make when opening a practice is hiring more staff than they need or hiring a family member who may not be qualified to do complicated tasks, such as billing.
"There is a perception that running a medical practice is like any other business," said TMA practice management consultant Susan B. Dymond, MBA, CMPE. "But medical billing, particularly, is so unique that if you don't have experience in that particular area it can be disastrous."
TMA Practice Consulting offers a package price for its start-up services for TMA members, at below market rates.
Even after a practice is up and running, TMA Practice Consulting can provide assistance to make sure a physician is hitting his or her financial goals.
"One thing that makes us unique is that we go back and validate the financial pro forma at three, six, 12 months later," Ms. Palmer said. "Through our retained services we have the ability to work with the client for the lifetime of their TMA membership."
For example, if a physician has an income guarantee from a local hospital that is about to expire, TMA Practice Consulting can go back and audit the practice to see if it is meeting its financial projections, Ms. Palmer says.
Dr. Lain says he has maintained his relationship with TMA Practice Consulting and frequently e-mails the consultants who helped set up his practice with questions that arise. "And that's been very helpful."
Dr. Vann says he also plans to continue using TMA consultants. "I'll probably hire them again to see if they can assess what we're doing right, what we're doing wrong, just look at it with an unbiased perspective to see if we're meeting our goals."
Dr. Lain says it is difficult to "run a practice and wear all the hats." Having a trusted adviser to start you on the right track is invaluable, he says.
"My advice is to get advisers whom you trust right from the beginning, develop a marketing plan right from the beginning, and don't deviate from it," he said.
For more information about practice start-up and other consulting services TMA offers, call (800) 523-8776 or (512) 370-1418 or e-mail TMA Practice Consulting.
Ken Ortolon can be reached by telephone at (800) 880-1300, ext. 1392, or (512) 370-1392; by fax at (512) 370-1629; or by email at Ken Ortolon.
Meet the Consultants
Texas Medical Association Practice Consulting has a team of experts with extensive experience who can help you get your medical practice off on the right foot. Here are the folks who can help steer you on the path to success:
Bridget McPhillips, MBA, MAHS , is TMA vice president of membership and business development. She has more than 25 years of health care experience, with expertise in strategic planning, marketing, business development, and managed care.
Peggy Pringle, CMPE , is director of TMA Practice Consulting. Her more than 20 years of diverse health care experience includes business development, marketing, physician recruitment and relations, practice setups and operations, and hospital administration. Ms. Pringle previously developed a management service organization to support internal medicine, obstetrics-gynecology, and family practices. She is a certified medical practice executive through the Medical Group Management Association (MGMA).
Laura Palmer, CMPE , is a practice management consultant with 15 years of experience in managing multispecialty group practices in urgent care, occupational medicine, family practice, and internal medicine. Her areas of expertise include staff recruitment, business development, and managed care contracting. She also has worked in the hospital setting, diagnostic manufacturing sector, and reference laboratories. She has served as a trainer for continuous quality improvement programs. Ms. Palmer is a certified medical practice executive through MGMA.
Mark Steiger, CMM , is a practice management consultant with experience in practice technology infrastructure, marketing, client services, staff recruitment, and business office operations. Mr. Steiger specializes in new practice start-ups and has expertise in financial analysis, business office management, practice internal controls, marketing, staff recruitment, and retention. He maintains the certified medical manager credential through the Professional Association of Health Care Office Management.
Vanessa Seavall is an operations coordinator with experience in marketing, customer service, and staff recruitment. She coordinates residency seminars, manages departmental marketing and advertising, and assists senior consultants with client projects.
Heather Bettridge, CPC , is a practice management consultant with approximately 10 years of experience developing and refining private practices. Her experience includes business operations, human resource management, coding and documentation, and financial analysis. Ms. Bettridge performs medical record reviews and coordinates multifaceted projects including new practice start-ups. She is certified as a professional coder by the American Academy of Professional Coders.
Susan B. Dymond, MBA, CMPE , is a practice management consultant with more than 20 years experience in health care management. She has experience in private, academic, and hospital-based practice settings in both the for-profit and not-for-profit sectors in practice operations and as a consultant. Ms. Dymond has served on both national committees and the state board of directors of MGMA, as well as being a certified medical practice executive through the American College of Medical Practice Executives.
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