Proper Planning, TMA Help Vital to Successful New Practice

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Cover Story - January 2010  

 

Tex Med. 2010;106(1):16-24.  

By  Crystal Conde
Associate Editor  

In 2008, Rogelio Trevino, MD, left his fellowship at George Washington University to practice medicine in Central Texas. He had attended The University of Texas at Austin as an undergraduate student, and he missed the area.

Seton Family of Hospitals recruited Dr. Trevino to open an office in Georgetown. The clinic, Georgetown Family & Geriatric Medicine PLLC, opened in February. The amount of work and preparation that led to opening the doors, Dr. Trevino says, was daunting.

Not knowing where to start and unable to untangle all the paperwork and legalities involved in setting up a practice, Dr. Trevino decided he needed some serious help.

"I knew how a clinic worked, but all the administrative elements are different when you go out on your own. Seton actually recommended I work with a consultant group and gave me several options. I decided to go with  Texas Medical Association Practice Consulting because I thought the consultants would be less biased. I got genuine opinions and good vendor recommendations," he said.

TMA Practice Consulting worked with Dr. Trevino continuously for about eight months to get the clinic up and running. TMA offers practice setup services in three phases. This is part of the association's dedication to ensuring that a practice survives. (See " Selling or Closing a Practice .")

In Phase One, TMA consultants meet with physicians and ask about their vision for the practice and their plans and preferences for managing the business. After the meeting, consultants develop a pro forma, a financial document that includes all setup costs and start-up expenses, monthly operating costs, and three-year cash flow projections. The pro forma is critical to a physician's ability to obtain a bank loan.

TMA consultants then help physicians set up telephone and fax lines, as well as voice mail service. They provide referrals to professional advisers such as bankers, health care attorneys, certified public accountants (CPAs), realtors, and credentialing companies.

Phase Two involves working with physicians to select equipment and necessary services. TMA consultants can either provide resources or request bids for insurance products, billing services, practice management software, medical equipment, office furniture, copier and fax machines, telephone systems, answering services, filing systems, and transcription services. This phase also includes an information technology consultation.

In Phase Three, consultants help physicians recruit and train staff and implement information technology.

Dr. Trevino says he's glad he made the transition and credits TMA Practice Consulting with getting him started on the right foot.

 

 

A Structured Setup Process  

Christopher Brennig, MD, owner of Austin Vascular Institute, worked for two years in a group with three other cardiothoracic surgeons. He decided to open a solo practice that would allow him to concentrate on and grow his vascular surgery specialty.

It took Dr. Brennig only three months to open his practice doors in February. Most practice setups take at least six months, but he had a jump-start on the process because he'd met with TMA Practice Consulting two years earlier. Dr. Brennig considered opening a solo practice in 2007 but ended up joining a group.

His previous legwork included developing a pro forma, which had to be tweaked a little, and looking at real estate. When he did decide to open a practice, he'd already determined where his office would be.

Dr. Brennig says he borrowed $300,000 to lease his office space, cover setup expenses, and buy equipment. According to Mike Moskovitz, vice president of health care lending at SNB Bank of Austin, the average loan associated with establishing a practice is $250,000. The amount varies based on the cost of necessary equipment and the extent of the finish-out for office spaces.

Keeping start-up costs to a minimum was a priority for Dr. Trevino. He decided to lease existing space in a former pediatric clinic and took out a line of credit for about $30,000 to buy medical equipment. He says avoiding construction on an office space helps keep expenses in check.

He also encourages physicians opening a clinic to be willing to take on additional jobs at first to ensure financial success. He plans to work in directorships for some home health and hospice centers.

Dr. Brennig says TMA was especially helpful with recruiting and hiring employees. His office has three full-time staff members - a receptionist, an office manager, and a registered vascular technician.

TMA consultants placed employment advertisements and conducted initial applicant screenings via telephone. They developed job descriptions, scheduled interviews with applicants, and participated in interviews with the physician. Following the interview, they checked references and backgrounds and created offer letters and personnel files.

After physicians hire a staff, 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 provide Occupational Safety and Health Administration training.

Billing and collections are among the complicated tasks physicians hire employees to oversee. Dr. Brennig's employees are trained on the billing software program, but he outsourced the responsibility during his first six months in practice. He says outsourcing billing while setting up an in-house system is ideal because it takes time to get an in-house system up and running.

Mike Hale, president of Medorizon, a billing center specializing in electronic filing of insurance claims, workers' compensation, patient balance billing, and collection of old receivables, says physicians who choose this option don't have to invest in pricey electronic medical record (EMR) software that includes a practice management component to handle billing. A credible firm, he adds, tracks claims to make sure they're paid on time, backs up servers every day, provides access to qualified billing and collections personnel, and keeps up with industry-specific billing and collections procedures. 

TMA consultants gave Dr. Brennig's staff resources such as medical office policy and procedure manuals; fee schedules; CPT, ICD-9, and Healthcare Common Procedure Coding System coding books; Clinical Laboratory Improvement Amendments certification applications; practice forms and templates; and required office postings.

Part of the practice setup agreement between physicians and TMA Practice Consulting outlines the physician's responsibilities. They include obtaining a tax identification number, completing the credentialing process, setting up a bank account, and being involved in interviewing and selecting employees.

Dr. Brennig advises physicians opening a solo practice not to shirk their obligations as business owners and to take their role in the early phases of the practice seriously.

"TMA Practice Consulting will do a lot to help you get your practice off the ground. But you need to know how to run it efficiently once you're on your own," he said.

 

 

Connecting Doctors With Resources  

For Dr. Trevino, insuring himself, his practice, and his employees was important in the practice setup. TMA Practice Consulting helped him select medical liability, disability, and health insurance. He ended up choosing the Texas Medical Liability Trust (TMLT) for his medical liability insurance and went through his bank for a life insurance policy. (See " Insuring Your Practice .")

TMA Practice Consulting connected Dr. Trevino with legal advice. The physician says the legal group he chose assisted him in analyzing contracts, including his income guarantee agreement with Seton. Dr. Trevino is an independent physician in private practice. Seton provided him with a one-year income guarantee.

Mike Kreager, JD, a San Antonio attorney and author of The Physician's First Employment Contract , a TMA publication, says income guarantees are a popular way hospitals can attract physicians to their communities. An income guarantee is a loan, or advance, the hospital forgives over time.

Generally, a physician agrees to work in the specified geographic area for an agreed-upon number of years and in return receives a guaranteed minimum revenue in the first one to two years of practice. The idea is that the physician can build the practice to his or her liking and become self-sufficient by the end of the income guarantee. The hospital doesn't employ the physician directly but pays the physician an amount equal to the difference between the minimum guaranteed amount and the amount he or she collects each month.

According to Mr. Kreager, hospitals recruit physicians in one of four ways:

  1. To join an existing practice;
  2. To open his or her own practice;
  3. To work as a solo practitioner who shares offices and expenses with a physician already practicing in the community; or
  4. To work for a nonprofit health corporation, formerly known as a 501(a).

Texas law prohibits the corporate practice of medicine. The Texas Medical Practice Act and Texas Occupations Code prevent physicians from entering into partnerships, employee relationships, fee splitting, or other situations in which a nonphysician controls the practice of medicine.

In the income guarantee contracts he's reviewed, Mr. Kreager says, the hospital income guarantee often covers one-time, upfront expenses, such as relocation, marketing, medical liability tail coverage, and medical liability insurance for the first year.

He suggests physicians have an attorney look over contracts before signing them. An attorney, he says, can flag any disconcerting provisions, such as noncompete clauses that stipulate an unreasonably large geographic area, that are in effect for more than two years, or that set a buyout amount unreasonably high to prevent a physician from competing.

 

 

Credentialing, EMR Guidance  

Shawn Panzer, MD, owner of North Texas Gastrointestinal Associates, PA, in Denton, returned to open a solo practice in Texas after being absent from the state for years. Dr. Panzer worked in Wichita Falls in the 1990s and left to work for a medical group in Mississippi.

It took one year for Dr. Panzer to set up his private practice, which opened in June. He took out a $90,000 line of credit to cover start-up expenses. Presbyterian Hospital of Denton provided Dr. Panzer with a one-year income guarantee and recommended he work with TMA Practice Consulting to set up his practice.

Dr. Panzer says he found the volume of paperwork necessary for credentialing overwhelming. TMA Practice Consulting referred him to a reputable credentialing company that tracked his applications and kept him updated on his status with insurance carriers.

Physicians can't bill Medicare, Medicaid, or any private health plan unless they have been properly credentialed. Medicare Part A enrollment for initial applications takes 40 days, while Medicare Part B takes 27 days.

"I've filled out applications, but this was an enormous amount," Dr. Panzer said. "Thanks to TMA's help, the hospital said I was the most prepared person they've ever had. I got my first insurance payment two weeks after I started. The hospital had to front less money to support my practice."

TMA offers a managed care contract evaluation service to members through the Austin Law Office of Hubert Bell Jr. For $150, Michael Stern, JD, CPA, will review any PPO or HMO contract for legal pitfalls such as assignment clauses that allow a physician's discounted fees to be rented to other payers or language that may alter medical practice and referral patterns. Mr. Stern reads over contracts and provides physicians with a 7- to 12-page evaluation that spells out what the contract says, what it means, and includes suggested language that can be changed.

For more information about the service, contact Mr. Stern at (512) 469-9006.

Dr. Panzer recommends physicians opening a solo practice invest in an EMR system. He chose an EMR vendor that offers a monthly subscription fee that includes data storage, updates, HIPAA compliance, and storage.

John Lubrano, PhD, president of Austin-based Protis IT Solutions, specializes in office automation and EMRs for medical practices. He has been TMA Practice Consulting's technology expert since 2004. He says time commitment is the top EMR deployment challenge physicians face.

"Invariably, doctors underestimate the time required to invest up front in learning, configuring, and customizing the system to their practice. We try to emphasize that it's important to work hard to invest in the use of the system to achieve the benefits later on. If you fail to do that, you'll fail to reap the benefits the product has to offer," he said.

Costs associated with implementing an EMR system can also be a challenge. According to the second edition of TMA's Electronic Medical Record Implementation Guide , total start-up costs range from $11,600 to $31,744. Start-up costs include software licenses, vendor implementation and training, e-prescribing, practice management, technical support, other fees, and hardware. Other associated costs, such as data conversion, eligibility verification, secure messaging, reporting tools, and voice recognition software can run from $6,000 to more than $10,000.

When considering an information technology system, Dr. Lubrano says physicians should look at products that have a demonstrated record of accomplishment in their specialty. Certain products have a comparative advantage with respect to certain specialties, he says.

Physicians also should take into account a system's ease of use. He says physicians should talk to colleagues in their specialty to get an idea of a system's ease of documentation. The Health Information Technology section of the TMA Web site also includes an extensive tool that compares the EMR systems most commonly used in Texas.

"At the end of the day, the doctor has to decide which product he or she will be able to document with fastest," he said.

To inquire about practice setup services available from TMA Practice Consulting, call (800) 523-8776 or e-mail  TMA Practice Consulting . Additional information is available  online .

Crystal Conde can be reached by telephone at (800) 880-1300, ext. 1385, or (512) 370-1385; by fax at (512) 370-1629; or by e-mail at  Crystal Conde .  

 

 

SIDEBAR  

Selling or Closing a Practice

Selling or closing a medical practice due to retirement or joining a new medical practice involves complex transactions.

To guide physicians in the right direction, TMA published Transitions: Legal Considerations in Selling or Closing a Medical Practice . The publication features chapters on selling a medical practice, notifying patients and employees, medical records management, and important decisions for retiring physicians. It also includes a helpful  practice-closure checklist.

Michael Stern, JD, CPA, has experience in business formation and representation, contracts, and health law. He says physicians closing or leaving a practice have a duty to notify their patients of their decision and to offer patients the opportunity to obtain a copy of their medical records. He adds that it's a good idea for physicians to seek the advice of a lawyer and an accountant when selling or closing a medical practice.

Under Texas law, physicians must give patients adequate notice and opportunity to seek another physician or face patient abandonment charges.

Texas Medical Board (TMB) Rule Chapter 165.5 specifies procedures for retiring physicians and those leaving a medical practice. The TMB rule says notification shall be accomplished by:

  • Publishing notice in the newspaper of greatest general circulation in each county in which the physician practices and in a local newspaper serving the immediate practice area;
  • Placing written notice in the physician's office at least 30 days before the date of termination, sale, or relocation of the practice;
  • Sending letters to patients seen in the last two years, notifying them of discontinuance of practice; and
  • Submitting a copy of the notice to TMB within 30 days of the date of termination, sale, or relocation of the practice.

Transitions contains sample letters for physicians who are discontinuing or closing their practices. The publication also addresses medical records retention at length.

TMB Rule Chapters 165.1 to 165.5 outline medical records management, release and charges, patient access to diagnostic imaging studies, and appointment of a custodian of a physician's records.

The rule states physicians must maintain adequate medical records for a minimum of seven years from the anniversary date of last treatment by the physician. For patients younger than 18 years at the last treatment, the physician shall maintain the medical records until the patient reaches age 21 or for seven years from the date of last treatment, whichever is longer.

The TMA Transitions publication lists retention guidelines for medical records of deceased patients, drug records, hospital records, mammography images, managed care contracts, Medicaid and Medicare records, and more. The book also features a sample medical records release letter.

For more information on selling or closing a practice, Transitions is available to purchase for $37.89 from the  TMA Web site .

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SIDEBAR  

Insuring Your Practice

Texas Medical Association Practice Consulting offers a turnkey setup service to steer physicians through each phase of practice setup, including choosing professional liability and life and health insurance carriers. When physicians select insurance companies to cover their practices, themselves, and their employees, TMA consultants provide resources or can request bids.

Ultimately, it's up to the physician to choose the insurers and products that best fit their needs. TMA does have a special relationship with the Texas Medical Liability Trust (TMLT) and the Texas Medical Association Insurance Trust (TMAIT). TMLT is the only health care liability claim trust created and endorsed by TMA. The association created TMAIT in 1955 and endorses it as an exclusive benefit for member physicians.

TMLT, the largest medical liability provider in the state, insures more than 14,500 physicians. The company has a wide range of liability insurance products and helpful tools.

For example, TMLT created a Medical Liability Insurance 101 video designed with residents in mind. The 15-minute online video provides information on the basics of medical liability insurance and choosing an insurance provider. To view the video, click  here .

TMLT also provides Rising Star coverage for first-year physicians. Physicians establishing their first practice after completing residency may qualify for first- and second-year premium discounts.

Once well-versed in medical liability insurance options and terminology, physicians will want to begin looking at the type of coverage that best fits their needs.

Here's a brief overview of some of the types of coverage available from TMLT:

  • Claims-made policy . A claims-made policy protects physicians during the active policy period, usually one year. Failure to renew a claims-made policy when it expires means physicians no longer are covered for any claims that may arise in the future, alleged to have occurred during the time the policy was in force. Physicians who wish to continue coverage under a claims-made policy must purchase supplemental coverage, such as tail or prior acts coverage.
  • Occurrence policy . An occurrence policy provides permanent insurance coverage for incidents that occur during the policy period, even if reported after the policy expires or is canceled. Occurrence policies are generally more expensive to purchase, but it is not necessary to buy supplemental coverage like tail or prior acts coverage after an occurrence policy expires. Coverage continues into the future.
  • Tail coverage . Tail coverage, also called a reporting endorsement, is available when a claims-made policy is canceled or not renewed. Tail coverage continues insurance protection under a claims-made policy for claims arising in the future but that occurred during the time the policy was in force. TMLT offers free tail coverage to physicians who are 50 or older; have been continuously insured with TMLT for five years or more on a claims-made policy; and who cancel a policy due to complete retirement from medical practice.
  • Prior acts coverage . This supplemental coverage may be purchased from a physician's new insurance carrier. It covers incidents that occurred under a previous claims-made policy and that have not yet been reported.
  • Premises liability coverage . All TMLT policies include a Limited Professional Premises Liability Coverage Endorsement. The limits of liability for this coverage are $200,000 each occurrence/$200,000 aggregate.

TMLT also provides locum tenens coverage, moonlighting coverage for residents, and medical liability protection for health care professionals working with TMLT policyholders. For more information on TMLT insurance, click  here  or call (800) 580-8658.

TMAIT Coverage  

In addition to safeguarding themselves from medical liability, physicians must protect their personal and professional interests. TMAIT, in business more than 50 years, serves only TMA members. Because TMA sponsors TMAIT, the insurer is committed to the Texas insurance market for the long term and understands the uniqueness of physician practices.

The insurance trust doesn't offer a standard insurance package for practice start-ups. Instead, TMAIT works with each practice to design a program that meets its unique needs. TMAIT provides a wide range of insurance coverage for physician practices, such as group health, group life, group long-term disability, group short-term disability, group long-term care, group dental, group vision, key person life insurance, key person disability insurance, and business overhead coverage. TMAIT also can provide voluntary insurance plans such as dental and vision insurance. TMAIT offers retirement planning through Prudential Retirement.

James Prescott, TMAIT associate administrator, says larger medical groups typically are able to offer more insurance options to employees at lower premiums. In most groups, employers pay part of the costs.

According to Mr. Prescott, a minimum percentage of eligible employees must participate in the insurance plan. If the plan is noncontributory, the employer pays 100 percent of the costs, and all eligible employees must be covered. If the plan is contributory, the employee pays part or all of the costs, and 50 to 75 percent of employees must participate. Employers should also consider deductibles, copays, prescription drug coverage, and waiting periods, as each will affect the premium.

A waiting period is the number of days from the time a qualifying event occurs, such as a disabling injury or sickness, to the time of benefits payment. The longer a waiting period is, the lower the premium will be.

Mr. Prescott encourages physicians to consider employees' coverage needs when choosing practice and employee benefits packages. Physicians should think about whether some employees could be covered by a spouse, the number of staff members who will elect to cover their children or families on the plan, any specific health concerns affecting staff members, and the staff's ability to participate in premium payments, deductibles, and copays.

"The answers to these questions can help guide the practice to a plan that fits the practice and the budget," Mr. Prescott said. "TMAIT will work with the physician and practice administrator to determine the answers to these and other questions and will recommend only the coverage that is appropriate for the practice. We don't recommend programs the practice doesn't need."

For more information, call (800) 880-8181, e-mail  contact[at]tmait[dot]org or visit the  TMAIT Web Site .

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January 2010 Texas Medicine Contents
Texas Medicine Main Page  

Last Updated On

February 01, 2018

Originally Published On

March 24, 2010

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