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A Complete Guide for Medical Practice Start-Ups (Part 3)

Feasibility Report and Budgeting

To make sure that your new healthcare venture does not get hindered by unpleasant surprises along the way, it is essential to carry out a financial feasibility analysis and conduct detailed budgeting, so that you know exactly how much capital you need and figure out how to acquire it. A financial feasibility study should be the direct follow up of your market study, and should include assumptions, potential income, expenses, cash flow, and balance sheet.

Elements of Financial Forecasting

To create a detailed and truly effective profit and loss statement, your financial projections must take into account several elements. Some of these are:

  • Capital investment
  • Direct costs
  • Overhead costs
  • Units of service
  • Breakeven point
  • Inflation trends
  • Potential bad debts
  • Expected collections
  • Labor rates
  • Benefit costs

Creating an Effective Budget

As surprising as it is, many independent practices never come around to creating a set budget. Others establish a budget at some point but never follow it. Is it careless practices like these that cause finances to go awry, which is when these practices end up looking for financial consultants. To avoid trouble, it is essential that you establish a budget right in the beginning, and then make sure you create a workplace ethic for yourself and your team that makes sure the budget is strictly considered at all stages.

Since budgeting for a healthcare facility is not taught in medical schools, it is somewhat understandable why even the most skilled medical practitioners have trouble when they have to take care of the finances of an entire business – and one that lives depend on. Nevertheless, budgeting is a valuable skill to develop and can become the single factor that can make or break a medical practice.

Here are a few tips to ensure that your practice budget is effective.

Track your expenses

Physicians often don’t know the exact costs of running their business. Make a detailed plan of your expenses, ideally with a practice-specific list of cost categories. A common mistake is mixing clinical and administrative expenses, which is why practices often fail to keep a track of specific expenses and run into trouble.

Do your research

If you have never run a business before, don’t worry. There are benchmark practice costs that you can use to create your own budget. For this, you can use of:

  1. Group Management Association’s (MGMA) Cost Survey
  2. National Association of Healthcare Consultants (NAHC) and Academy of Dental CPAs’ Statistics Report on Medical and Dental Income and Expense Averages.

Both provide information on different categories of medical budgeting, with average numbers you can use to create your own financial forecasts.

Important Things to Keep in Mind

While equipment, staff salaries, and procedure costs are naturally included in budgeting, there are some important things that are often forgotten:

  • Number of visits or procedures required to make a profit
  • Add-on services
  • Marketing efforts
  • Software expenses
  • Potential collection gaps

Once you know what your budget is, it is then time to dive into funding options, ranging from personal capital to bank loans to private investments. Remember that your funding process will only be successful, no matter how impressive the funding may seem, if you are certain about your expenses and projected revenue, and are ready for what may come.


About Author:

Alex Tate is a Health IT writer for various platforms. He provides perceptive, engaging and informative consultancy on industry wide topics. He knows that no single approach is the right one for every practice, and so shall advice according to the requirements. The consultancy is based around EMR Systems, Practice Management and Billing Solutions. MACRA/MIPS consultancy is also available to achieve the highest returns and revenue for your practice.

A Complete Guide for Medical Practice Start-Ups (Part 2)

Creating Your Business Plan

Before you begin your practice, it is essential that you have a business plan in place. Any successful business starts with a business plan that is based on forward-thinking, and is thorough but simple. For a medical practice, your initial plan needs to be sufficient enough to cover and evaluate all important aspects of your business, and to communicate this information to all stakeholders involved.

There are several fundamental considerations to keep in mind while creating your business plan.

  • The structure of your practice
  • SWOT analysis
  • Location and property leasing
  • Setup requirements and costs
  • Fixed and variable costs
  • Operation plan and procedures
  • Licensing and other legal policies
  • Insurances
  • IT infrastructure and data security
  • Recruitment and staffing
  • Finance and accounting
  • Target audience and demographics
  • Detailed billing structure
  • Marketing plan

Master the Basics

A successful practice stands on strong basic planning. If you get this right, chances are you will be prepared for most challenges thrown at you later. Decide whether your practice is going to be a tradition practice, a visual practice, or an associateship. It is imperative that you get business advice before settling on this, along with analyzing your own potential and aptitude. Following this is a through SWOT analysis – a detailed overview of the Strengths, Weaknesses, Opportunities, and Threats. This will help you identify the benefits as well as the gaps, while also preparing you for the competition and devising a plan on how to tackle it.

A good SWOT analysis should give you a sturdy blueprint you can build your practice on. From there on, it is a matter of making sure your plan is detailed and strategic, and that you start off with your practice fully equipped. Even if the planning stage takes time, remember that this is worth it because it is only with a well-thought and thorough plan that you will be able to achieve great outcomes and satisfied patients right from the beginning.

 Create Simple and Fast Processes

Remember that they key is not to create complex but straightforward and comprehensive processes. When this principle is applied to a medical practice, you have to make sure your processes are agile and simple. Ideally, create processes that are extremely easy to understand and learn, since this will define how smooth the training processes for your staff as well as patients are.

Understand the Market and the Selling Position

For any business to survive amidst rigorous competition, it is imperative that they find and recognize their unique selling position. Before you kick off, research and understand the marketplace that you are about to step into. Know your competitors, and decide what you are going to do differently or better than them in order to stand out to your potential clients – patients looking for quality healthcare.

Don’t Start Without Cloud Software

Gone are the days when medical clinics and hospitals could be effective with paper-based patient records. Now, with practices in the entire country switching to EHR programs, it is absurd to start a new practice without one. The efficiencies that cloud software provides your practice with are unmatched. With the right software and effective implementation, you will find yourself with streamlines operations, excellent internal and external communication, minimal time wasted, well-managed financial operations, and overall better care delivery.

Business Planning Mistakes to Avoid

In the process of creating your business plan and ensuring that you equip it with everything that it requires, keep an eye out for these common pitfalls to save your time, effort, and money.

  • A poor or incomplete business structure
  • Only short-term goals, with no long-term vision in mind
  • Not considering all stakeholders, like banks and investors
  • Underestimating the business and leadership skills required
  • Overcomplicating your business plan
  • Not planning early enough, or not spending enough time planning

At this stage, providers must remember that their primary goal is to create a business plan that is comprehensive and future-proofed, so that the practice comes into being with processes pre-streamlines and risk analysis and strategies prepared in advance.

Read on to Part 3: Feasibility Report and Budgeting

 


About Author:

Alex Tate is a Health IT writer for various platforms. He provides perceptive, engaging and informative consultancy on industry wide topics. He knows that no single approach is the right one for every practice, and so shall advice according to the requirements. The consultancy is based around EMR Systems, Practice Management and Billing Solutions. MACRA/MIPS consultancy is also available to achieve the highest returns and revenue for your practice.

A Complete Guide for Medical Practice Start-Ups (Part 1)

Are you ready to open up your own medical practice?

The decision is indeed a significant milestone in your medical career and can be the defining moment of your future in the healthcare service industry. The current healthcare landscape is rapidly changing, as are patient expectations, and more and more physicians are now going solo. While this increased competition certainly means the service quality will get better, it also poses a greater risk to practice survival, especially for new startups.

There is no denying that with the innovating healthcare ecosystem, only the most advanced, updated and streamlined practices that aim to add value to patient care will survive. It is for this reason that we have developed this guide – to help the most motivated and talented physicians understand what they need for a medical practice startup and prepare them for it.

In this guide, we will cover:

  • The basics of starting a new practice
  • Business planning and cost analysis
  • Government policies and compliances
  • Medical software for efficient running
  • Revenue generation and quality measures

1. The First Steps

While opening up a practice is a complicated process that needs detailed planning, perhaps the most important part of it is being absolutely certain and realistic about it. Medical practice startups often fail because they start off with a little too much optimism and get thrown off along the way because they realize they were in fact unprepared.

Why Start Your Own Practice?

Even though opening your own practice comes with its risks, there are several benefits to it if done right, which is why more and more providers are now drawn towards it. Since most of the healthcare business is concentrated in the hands of big-name hospitals, more private practices opening means the competition increases and the profits are more evenly distributed in the industry. Providers also enjoy greater autonomy over their practice and can create their own workflows. They are also free to choose the area they want to practice in, which means many providers target smaller areas with less access to healthcare, thus not only serving more people but also securing a market just for themselves. In addition to this are the entrepreneurial benefits, like being able to create your own schedule and be your own boss, which drives many into entering private practice. Naturally, the ownership and agency associated with a private practice is attractive compared to working in an already established system like a large hospital.

Are You Ready to Open Your Practice?

A successful practice can become a great lifelong career, but are you really ready for it? As a provider, you must ask yourself a number of questions to make sure you are not rushing into a private practice unprepared.

  1. What is your vision and motivation?
    While high profits are attractive, have you weighed them against the risks that will come with running a business alone?
  2. Do you have the necessary support?
    Even with a small business, you need the right people and systems that can help you sustain and grow. This means locating the right managers, referral systems, advisors, partners, doctors, etc.
  3. Do you have the necessary resources?
    It is almost certain that you will need more money than you think you need. It is essential to have the resources to not only start, but also to support you in case you run into difficulties.
  4. Do you understand the business aspect?
    You could be a great doctor, but still fail to run a practice on your own if you don’t understand the running of a business. Before you start, it is essential to make sure you are thinking like an entrepreneur and a businessman, and acquire the skills needed by a CEO.

It is only after you are certain about the answers that you should start your own practice with the guarantee that you will be able to handle the business.

Read on to Part 2: Creating Your Business Plan


About Author:

Alex Tate is a Health IT writer for various platforms. He provides perceptive, engaging and informative consultancy on industry wide topics. He knows that no single approach is the right one for every practice, and so shall advice according to the requirements. The consultancy is based around EMR Systems, Practice Management and Billing Solutions. MACRA/MIPS consultancy is also available to achieve the highest returns and revenue for your practice.