Setting up a new practice can be challenging, and that is no different with a dermatology practice. Regardless of where you are in your career, whether it be straight out of residency or several years later it can still be a challenge. Our goal at Practice Advisors 360 is to offer you tips to help you understand the various activities involved and the most critical steps in the process as well the costs. Setting up your own practice involves many steps and decisions, but it’s best to group them into several broad categories: 1) organization; 2) finances; 3) staff and resources; 4) quality of care and outcomes; 5) compliance.
One of the biggest setbacks to starting your own dermatologic practice is obviously the start-up costs. The actual costs can vary greatly. Some of these differences are in relation to local economic factors like the leasing office space and wage rates that vary by location, while others can be more influenced by the “style” or type of practice you want to lead. For example, a medical dermatology practice will have less start-up costs than a cosmetic, procedural or surgically based derm practice simply because it needs less equipment and tools. Community competition, income goals, work hours and marketing expenses can also affect your costs. So as you can see there is a lot of different factors to consider,
There are some expenses that many tend to overlook. This includes the cost of capital – how the practice is going to be paid for. Another issue that comes with starting a practice is the lack of initial revenue. This is a huge contrast to joining an existing practice where they already have an established client base and insurance contracts in place that provide an immediate stream of revenue. By starting a new practice this means that you will have to develop an ongoing patient flow and prepare for delayed reimbursement issues from third-party payers. Although these issues can become a significant obstacle to initial success, they can be overcome eventually.
Some of these factors may produce a drain in your finances, and eventually lead your to borrow from a bank in order to meet ongoing overhead expenses such as office rent, employee salaries and benefits, and medical supplies. The reality of starting a new practice is that nothing is for certain, particularly when it comes to cash flow. What complicates the issue even more in comparison to other new businesses, is the existence and fluctuation of third-party payers, particularly issues such as a delay or denial in payment combined with varying discount rates, which can significantly lower the amount you expect to get paid. Paying salaries and overhead costs can quickly deplete your cash reserve, which might turn into a negative balance and nothing to cover expenses with.
Predicting cash flow when starting out a practice is typically an estimated guess, but it can still help you budget your financial goals. Then, if you’re not meeting your financial goals, you can make adjustments.
Building a new practice takes time and consideration of the finances and expenses involved. While undergoing a new business venture such as starting a new practice, stressors are high, but it has been done many times. Now this endeavor is usually done best alone. You might consider going into this with another partner (or several) to help with the initial start up costs. While this might seem like a good idea up front, it can be a challenge to have enough revenue to support both of you especially if it is a start-up practice.
If you are someone who prefers to work in a group practice, then it may be better to join an existing practice – this can also alleviate several of the above concerns regarding cash flow. The biggest benefit of joining an existing practice is the steady patient flow and guaranteed salary. There is also decreased financial risk.
Regardless of what path you choose to take after residency, you will want to make sure that it is the right one for you and not a rash decision. This shouldn’t be based on the need to pay off your large medical school debt, meeting financial obligations, or for a security blanket. When thinking of the “right path,” consider not only financial factors, but also other valuable aspects of life such as personal time, family and location. You will also want to consider the environment and ambiance of the practice as well as the mentality and mindset of the other doctors, particularly if you are considering a buy-in option. Determine the strengths and weaknesses of the practice, learn its history and gauge if you share similar priorities with the other physicians in the group.
Regardless of what decision you make, there are endless options – make sure you’ve done your research and determine what best fits you! Trying out both options to see what works is an increasingly popular choice many graduating dermatologists are looking into.
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Now that you have read some basic tips and things to consider you are ready to purchase a practice. After you have found a place that meets your needs you will still need to make on offer, secure financing, sign the practice sale agreement and lease, and complete the purchase. As you can see a lot of important factors go into this decision. Make sure you are being properly advised. Practice Advisors 360 is the nation’s leading dental advisory company. Contact us today at (844) 360-8360 or visit us online at practiceadvisors360.com