How to Open a Medical Practice — Ultimate guide
Needless to say that setting up your own clinic entails many challenges. Probably the most well-known difficulties refer to the financial model for the medical practice, income and expenses management, patient handling and insurance issues, work/life balance, getting your insurance at a better price or conditions, staff hiring, setting up your practice business plan frameworks, and advertising your clinic. A portion of these will be more enduring than others and a lot of that will rely upon your organization and level of involvement.
It is highly advisable to assess your qualities and shortcomings almost immediately, so you can assign the work that is outside your domain.
These are one of the main reasons why fewer doctors are willing to start up their own practice nowadays. Specially because start up cost is exceedingly high to be cast over one professionals shoulders. As a consequence many medical practitioners are starting up one or two-person practice in order to deal with the high average cost of opening a private clinic.
Some other difficulties that medical practitioners face apart from financial planning and KPI dashboards include insurance companies guidelines and constant changes in health care legislation. One of the specific problem that many doctors with their own practice claim about working with insurance companies is the gap between the time they treat a patient and insurance companies reimburse for this treatment. It can truly be daunting to spend most of the time trying to get paid through an insurance, and it definitely affects the business model and its metrics from a financial perspective.
But insurance companies are not the only not willing to pay their debts with the clinic, many times it is the patient itself, who is refusing or avoiding being charged right away, which means that the average revenue of the clinic fluctuates enormously from what the cash flow prospective on the balance sheet shows to the real figures.
One useful tip before you even start planning your future clinic revenue and marketing plan, once you have settled and start up your clinic, always ask for insurance information before the treatment so to verify the coverage before appointments. It will reflect positively on your balance sheet metric and your average revenue at the end of the month.
Take care of your legal structure
As an entrepreneur in the field of medicine you first will need to pick a legal business structure for your financial plan template, which will define how many taxes you pay as a clinic and how much you are actually at risk for claims, obligation and neglect claims from your clients. If you are planning to start up a private medical consultancy you may only need basic metrics and finance management as you will only pay taxes on your personal income from your business.
When you are working as a corporation your business is being taxed as an entity, which means that your personal income is set apart from the company’s average revenue. This makes business partnerships between specialist of adjacent fields more appealing in from the financial point of view. Because in this case every participant is responsible for their own profit margin, as partners are being charged separately depending on their average income level in the firm. But still they pay less taxes to the government as a wholesome entity.
Besides every medical clinic should seriously consider hiring a health attorney when they are just starting up, because you will need drafting legal documents on your new medical practice constitution, terms of partnership, staff incorporation and many more. If you feel like doing it yourself there are some online legal services that offer DIY alternatives to explain how much it costs to open a clinic and what documents you have to obtain to follow all the necessary regulations on the state level.
It is important to know that almost every state or country has a medical association willing to offer legal counsel and help with the financial planning to those who are starting up a medical practice and do not have much knowledge or funds.
Sometimes there are even several associations, according to different fields of medical expertise or paramedical practice e.g. ophthalmology, dentist, physiotherapy, and so on. Their help might be decisive when you do not know how much does it cost to start a medical center or how to start your own practice.
If you are reading this article it means you have taken first steps to starting your own medical practice, but you realize you cannot start a successful business without a solid business plan. Opening up any business is already challenging enough, let alone a medical practice with all its legal and insurance exigencies, as well as financial plan difficulties.
The first step of a business plan for a medical clinic is pre-planning. It can easily be the most demanding and uncertain, because at this point you probably do not know much about balance sheet, marketing plan and partner profit margins. It is time when you have to set aside concerns about how much does it cost to set up a clinic and focus on your business goals, your business mission, and professional values.
Consequently, you will have to start planning your first financial benchmarks and monthly or annual budgets, even if there are approximate. It is necessary to have a clear understanding of your financial capabilities or limitations as a company. For that matter, you can ask for some external help from a legal advisor or a consultancy firm, or just figure it out on your own. Depends on how much you value your time and how confident you are about your knowledge about running a business from a financial perspective.
Then you will have to lay out your clinic financial model and budget plan on a feasible timeline that will allow you to forecast the progress of your business in time. More importantly, this financial timeline or model will be your guiding light during the period while you are preparing to open the doors of your clinics for the first time.
Steps during business planning include:
- Create a timeline
- Determine plans/objectives
- Create a financial plan
- Determine your budget
Marketing your Medical Practice
Many medical practices absolutely forget about one of the pillar of any private business — marketing. This part of any business plan, specially in the medical field, is frequently left for the last step, which is fundamentally wrong, as no clinic can survive without patients.
Some clinics start up with a pre-existent pool of clients, but even in this case there is no guarantee they can keep your business afloat for a sufficient period of time without an infusion of new clients. If you are asking yourself how much it will cost to attract new clients and to recover the investment into the clinic, marketing might be a good answer.
Because getting your investment back or reaching a turning point in the cash flow projection it is not only up to the pre-exiting clients, but also includes the marketing strategy in order to attract more target oriented clients, whose consumption lifecycle is long enough to get you through the year with a positive average income.
Marketing plan is a comprehensive step-by-step outline for every action an entrepreneur has to make their firm visible to the public from branding portfolio to website design, then think about networking and social media strategy plan, apart from getting extra resources from the general practice budget to maintain this wheel of fortune.
For that you need to take the next steps before considering the exact investment in equipment, staff, insurance, license, etc.
- Create a marketing plan
- Develop an attractive logo
- Create various marketing materials
- Build a distinctive website
- Join Local Business Organizations
- Network with colleagues
- Build Online Presence
- If your marketing plan is as sound and resistant as your financial budget template for the year you can easily solidify a strong marketing presence in order to deliver high profits margins for quite a long time since the official opening of your clinic.
Once you open keep your finances under control
Once you open your medical clinic and cut the inauguration ribbon in front of your first patients is where all the hard work starts, despite the sensations that you have already invested plenty of blood, sweat and tears into your investment, financial template and marketing plan.
The first surprise is that nothing or almost anything works out exactly as you have imagined or put it on paper, you will soon realize that you always need to have a plan B for any possible situation. One of the things you should have a very close and tight control of is your budget template, because it is so easy to get carried away by tax and other expenses payment, so you cannot cover your income flow.
Apart from the fact that you always have to be looking for possible investors and financial help from outside, you also have to understand that keeping up inside your budget template is an endeavor that easily surpasses any medical responsibility.
And even if you have been running a medical practice for a while and know about the bumps on the road, having a clear and well-regulated balance sheet of income flow is a huge advantage. You can always rely this task on your office manager, or externalize and contract an accountant who has experience in medical practices.
Whatever is the case having a clear and comprehensible system that you can understand at a glance is always an advantage and a relief. Keeping your finance spreadsheets in order and up to date can be one of the most important things to do after you have gained some experience in running your business.
In the end your medical practice income has to give you not only the comfort of doing your job, but also the assurance that every dime makes it to your bank account for all the effort you are putting in it. So a proper accountant system, that can easily be managed by the secretary at the reception or an administrator is essential for your financial growth and stability over the years.
How do you know every dime made it to the bank? You need to check that, so who makes sure that happens? Benchmark your practice and ensure theres oversight.