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Breaking Free/Beginning Anew: Tips for Re-Establishing a Medical Practice
By Deborah H. Wells, CPA, MBA, Shareholder, Director of the Medical Services Group, Alpern Rosenthal
If you're trying to find your place after being employed by a hospital
or an insurer, or perhaps you've become disenchanted with your current
group and desire a chance to practice on your own, it may be time to
re-establish yourself in your own medical practice.
You are not alone. Recent statistics indicate physicians are buying
medical practices at record rates. In 1997, hospitals bought 46
percent of the medical practices sold. In 2000, physicians were the
buyers, with solo physicians buying 74 percent of the practices sold
and group practices buying 16 percent.
Whatever the reason, this market turnover presents a number of
challenges and opportunities. To take advantage of this environment,
physicians should keep a number of factors in mind when
re-establishing their medical practices.
Strong Financial Foundation
Your first concern is to build a strong financial foundation for your
new practice. For starters, review the finances of your existing
practice, determine the impact of any change on your patient base,
analyze existing managed care contracts to determine which can and
should be renegotiated and brought over to the new practice and review
your coding habits to develop accurate financial projections.
You must also determine ownership of your accounts receivable and
calculate their value in the new practice. Decide on a method for
valuing fixed assets to negotiate a purchase price with the current
owner of your practice. For new equipment needed, you should be
looking at lease and buy options.
Operational Issues
Your practice operations will be influenced by some key decisions. For
instance —
- Which doctors and staff from your current practice will make the
move with you? You should consider if some physicians are ready to
retire and if you need to recruit new physicians. Buyout agreements
enter the picture here, as do any contracts that may penalize you for
moving staff from one practice to another.
- Certain needed office functions will be better performed
internally, while others may be better suited to contract with service
providers outside your practice. These decisions will need to be made
in areas such as billing and collection, practice management, record
keeping and payroll service. Use the opportunity of starting the
business over again to rethink all of these decisions in light of the
current healthcare and economic environments.
- How much time should you plan for the transition to your new
practice? Plenty. More specifically, once you have physician,
clinical and business staff in place, you should allow 4 to 6 months
for payers to credential your new practice. Medicare is notorious for
taking considerable time to process the paperwork required for their
credentialing. Private payers may not be much better. Health plans
also won't automatically renew your credentialing under your old
practice and may not be accepting new physician groups.
If you can't get credentialed, work with your bank to establish a line
of credit.
There are multiple other issues to keep in mind as you re-establish a
medical practice. The ultimate goal is to have enough patients and
capital to hit the ground running on Day One of your new
practice.
To assist you through this transition period, Alpern Rosenthal has
created specialized services for the development of efficient
processes and procedures essential to get you up and running, as well
as improving your profitability.
Deborah H. Wells, CPA, MBA, Shareholder, is Director of the Medical
Services Group for Alpern Rosenthal. She has more than 20 years of
experience providing the services of accounting, auditing, tax and
consulting to healthcare entities and providers. She can be reached at
412.281.7692, ext. 351 or at dhw@alpern.com.
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