Managing Your Medical Practice
—Without an MBA
For all their education, most doctors lack
the business savvy to run
a medical practice. This physician explains what you need to know
to keep your practice humming.
a medical practice. This physician explains what you need to know
to keep your practice humming.
When, at about age five, I started saying
“I want to be a Doctor when I grow up,” I seriously
doubt I even had a clue as to the complexities involved with
such a career choice. Upon graduation from medical school two
decades later, I still could have had no idea what would be
involved in actually achieving that life-long goal. Even upon
completion of residency and fellowship, I could not have
realized the degree of knowledge a young physician would then
need to get to the next level.
I refer not to the
next academic level here—rather, to the next business
level—running a practice/business! Indeed, having
completed by that time no less than “twenty-eighth
grade” as I tell my two daughters, I found it both
humbling and a bit daunting to ponder taking on yet more new
areas of study.
Other than a two-year
foray into “MBA land,” I saw no way to gain the
business knowledge I needed apart from learning it on my own.
What follows then, is a primer on starting up, developing, and
managing your own medical practice, with an emphasis on the
latter.
A good start
Initially, a doctor who has seriously
pondered opening a solo medical practice or managing a small
partnership or group of two to four physicians must have
already determined that she has the instinctual business sense
to actually run a small business. If this is not the case, then
the doctor should consider another of the many options
available today (e.g., joining a single- or multi-specialty
medical group, working in a hospital practice, or joining the
faculty of a medical education program). One has to have a
degree of self-analytical honesty here, but once you have
determined that you want to manage your practice, then
it’s time to go about putting together your team of
professionals—CPA, attorney, and business consultant (the
last is optional).
First, you need to
know your market so that you can appropriately and judiciously
calculate your expected level of success. This is easier if you
are returning to your home to practice or staying in the market
you’ve trained in. If not, you may get the information
you need from the county medical society and the Chamber of
Commerce, as well as non-competing physicians and groups. Be
careful to avoid specific discussions of fees, however. This
may be an anti-trust violation.
The next task is to
meet with your CPA and estimate how you feel things will go.
During this meeting, you must deal honestly with yourself. Know
your abilities insofar as speed and efficiency vs. spending
enough time to deal with more complex problems. This, combined
with at least a working knowledge in your chosen field and
general fee structures that this market will accept, will help
guide your estimates.
Your CPA should be
able to perform basic accounting of expected gross billing vs.
actual net receipts (the latter a far more important figure),
and cost accounting to help you estimate all-important practice
overhead. He should feel comfortable with you as a professional
and let you help with these estimates as well as bring to light
any possible variables with respect to how you will relate to
patients, staff, and other health-care professionals in your
market.
Once you have an idea
of these basics, it is time to seek legal advice with respect
to the best structure for your practice/business (e.g.,
subchapter “S” corporation, “C”
corporation, “LLC,” or the “PC” or
“PA” designation). The attorney should help you
incorporate if you choose that route, as well as file all
necessary papers to the appropriate state offices/departments,
etc. Many times, this may be done with a global fee as opposed
to the typical hourly rate that would cost far more—so be
sure to ask about this before you even set up the initial
meeting.
Other needs for
start-up include choosing the practice site and deciding
whether to lease or own your real estate. Leasing is far wiser
initially unless you are adept at medical real estate
transactions or have an inside source of knowledge.
You will need to
select your initial staff (receptionist, medical assistant,
LPN/RN, and medical biller are basics), and make a host of
other purchases, such as: telephone/computer systems for
appointments, billing, etc., medical supplies, office supplies,
business license, and the many insurance
needs—malpractice, disability, life, property liability,
worker’s compensation, medical, dental, and office
overhead.
Management techniques
Staffing issues are a huge factor in
managing your practice as you will ALL find out! From the
outset, you must understand one thing vis-à-vis
staff—they all have one thing in common that they do not
share with you—that is, THEY are all employees and YOU
are the boss/owner/employer! Sounds simple, and it is, in fact,
but no less vital to incorporate into your mindset. You can try
to be friendly, courteous, and a modern-day boss concerned with
staff morale, benefits, and the like in addition to more
traditional parameters such as performance, how fast a learner
they might be, and how they deal with your patients/clients. In
the end, keep in mind that you are their boss, NOT their
friend, and it is best if never the twain shall meet.
After you’ve
been up and running for a quarter or two, a review with your
CPA is in order to discuss the
“quarterlies”—the complete
numerical/statistic review of every dollar you’ve taken
in or spent on your business. This will never cease until you
sell or close your practice, so get used to these quarterly
financial reviews. Familiarize yourself with statements of
assets and liabilities, income statements, and other financial
statements. Know how to read them! It will always serve you
well. Your CPA can help you understand these financial
statements.
This is the time to
compare actual results with estimates made earlier, as well as
take a good look at areas where you may be over- or
under-performing in comparison with those same estimates. A key
area to examine is overhead. Also hone in on areas where you
are spending much more than you figured. This will be a good
place for you to begin cost-cutting.
Inevitably, you will
realize that there is only so much income you can possibly take
in to your practice/business. You can only work so many days,
so many hours, and do so many procedures while retaining an
excellent reputation as a doctor and not a mill where you churn
out services for dollars. You NEVER want to get that
rep—it’s rare that you can change it once
it’s stuck to you! Therefore, you will rapidly realize
that it’s in the area of overhead that you can make the
biggest impact on your net profitability. You should focus on
this area every quarter of every year. Never become complacent
and figure that you can ride on “autopilot.” Big
mistake!
Don’t forget to
pay attention to the little things, like controlling the
thermostat (it’s always a balance of cost vs. comfort so
pay attention to your patient/clients’
preferences—to a point), controlling postage, and
teaching staff about the cost of more than one ounce (hint:
it’s not the same stamp as the first
ounce—it’s currently 38 percent cheaper and it
definitely adds up), offering your staff pre-tax benefits
through payroll deduction as well as a profit-sharing plan (a
big boost to staff morale and loyalty), negotiating a long-term
lease with minimal increases in rent, shopping all your
insurance needs to many different brokers/companies,
aggressively shopping all your office and medical supplies with
multiple vendors, and trying for volume discounts, preferred
doctor status, etc. ALL of these can add to your bottom line
and all should be reviewed regularly...by YOU.
Even if you decide to
hire an office manager or utilize the services of a medical
business consultant, no one cares more about your
practice/business than you—and no one ought to. You are
the owner/president/CEO/CFO/treasurer and may even be the
secretary and the one who sometimes even prepares the daily
deposit (not a bad idea to keep your hand on the pulse of
day-to-day operations). Therefore, YOU are the sole
determinant, in the end, of your practice’s success.
Always stay
“hungry” and remember how you feel in the six
months leading up to opening the practice and your first year
or two. Then you will be likely retain the biggest chance at
long-term success n
Jeffrey
W. Glassheim, DO, FAAAAI,
FACAAI is a specialist in adult and pediatric asthma, allergic
disease medicine, and clinical immunology with a private solo
practice in Fresno, California. He consults and speaks about
medical and practice management topics.
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