Physiatry Practice Management Resources

Question I have worked as an employee in a hospital-based practice for several years and have established myself as an internist with a significant patient base. However, I have the desire and ability to start my own practice. How should I go about making this transition?

Answer We see many physicians leaving the employment of hospitals to start private practice.

There are several critical areas that need to be addressed when making a transition to private practice.

First is the separation from your current employer. Whether the hospital will cooperate with your move will have a definite impact on your patient base and subsequent cash flow.

Many hospitals are finding that they are unable to run medical practices profitably. Therefore, they are willing to cooperate with the leaving physician to maintain the referral relationship with him or her.

In some situations the hospital is willing to financially support the physician through the practice startup phase. The hospital also may allow the physician to take patient records and may even assist in notifying patients of the physician's change in office location. Maintaining a good hospital-physician relationship will almost always benefit both parties.

You should consult with an attorney who is experienced in health care and has handled similar separations. This will ensure that all aspects of your separation are addressed, and you may benefit from the experience of others who have already gone through the process.

The second area to be addressed is the change in billing for your work through the hospital/employer relationship to billing as an independent physician. Even if, in your independent practice, you continue to be on the panel of every insurance carrier you associated with as an employee of the hospital, you will be required to be recredentialed.

This process always take longer than you anticipate, and parts cannot be completed until you have established your new entity (corporation, limited liability company, proprietorship) and obtained a federal identification number.

Usually the patient billings outstanding for your work as an employee will remain with the hospital. You will be required to start from zero with the insurance companies.

For unknown reasons, it takes weeks for the insurance companies to get your claims processed as a "new" physician. In our experience, you can never have too much cash reserved to get you through this phase of your practice.

At a minimum, you should plan to have at least enough startup cash to see your practice through six to eight weeks of operations. We recommend you have three to four months of reserves available. Running out of reserved cash is the top crisis of all new practices.

Your accountant can help with cash flow projections to determine the amount necessary to start the practice. Having an accountant or consultant experienced in health care will be especially helpful in projecting revenues and practice overhead.

An accountant or consultant also can assist you in setting up the relationship with a lender to establish a line of credit for startup capital and for the purchase of furnishings and equipment.

The third area that needs to be addressed is the actual setup of the physical office space, including the hiring of staff. You will need help with this process -- unless you can go without sleep for weeks at a time.

Many times the physician has identified an office manager or other key employee for the new practice. This person will need to be placed on the payroll prior to the startup, at least on a part-time basis, to get the practice set up. Or you can hire a consultant to manage this process.

This process will include lease negotiation, construction, lease or purchase of office furnishings and equipment, supplies purchases, insurance coverage, staff hiring, credentialing, and other necessities. It may take three to 12 months. We strongly recommend you not take on this responsibility by yourself.

The fourth critical area is the marketing of your new practice. As mentioned before, the hospital may be willing to assist with the marketing of your new practice. Even so, you also will need to market on your own.

A personal letter to all former patients -- if allowed by your separation agreement -- informing them of locations, hours, insurance plans and how to transfer their patient records, will help in maintaining your patient base.

In addition, newspaper advertisements, feature articles in local media and special speaking engagements will help get your name out to the general public. You will also want to cement your relationships with current referring physicians and make the referral process in your office as easy as possible.

The most successful transitions are accomplished through careful planning, allowing time to do all that needs to be done -- with time allowed for setbacks -- and attention to detail. Knowing there will be obstacles and last-minute catastrophes, and planning for such contingencies, will allow you to keep this project on course.

Most physicians find private practice to be hard work, but very fulfilling, once they have successfully launched their practice.

By Rita M. Schwager