Here is a detailed list of the steps you must take to start a successful practice
Part one of a two-part series
Medical school and residency do an outstanding job of preparing young physicians to practice medicine. But they usually are not as good at preparing a physician to start his or her own medical practice.
Starting a practice from scratch can be a very daunting prospect for a young plastic surgery resident with loads of debt. There are books that focus on starting a general medical practice, but none focus specifically on starting a plastic surgery practice. Because of this, when I set up my own plastic surgery practice, I took notes about everything that I did so that I could help others who find themselves in the same situation.
These two articles (read part 2 in the December issue) are a compilation of my notes—a chronological guide to setting up a private practice. It is organized into suggested actions to be taken each month or two before you open your practice.
Whereas this is by no means the only way to start a plastic surgery practice, I hope it is a valuable resource for those who are going out on their own for the first time, either immediately out of residency or as a transition from an academic position to private practice. If I have neglected any aspects about starting a practice, I apologize in advance.
12 Months Before Opening
Determine your practice’s location. This is the first and most important decision you will make. Obviously, several factors come into play. I heard one report that noted that the No. 1 determinant of where a male physician practices is the location of his in-laws. The No. 2 determinant is the location where he trained. This may or may not be true, but a good piece of advice is to go where you want to live, and the rest will fall into place.
Another way to look at practice location is to consider that “animals go to the oasis to drink.” In other words, go where other surgeons—and patients—go. Richard Ellenbogen, MD, FACS, FICS, of Los Angeles told me that when he started his practice 30 years ago, he went to where the other plastic surgeons were. His belief was that if there was enough work for 20 plastic surgeons, surely there would be enough for 21.
A final way to consider location is to go where there is a need. Although this works very well with the primary care specialties, in plastic surgery one must take several other factors into account.
First, some hospitals look for young plastic surgeons only to help cover their call schedule or their lower-paying cases. In addition, many hospitals that need plastic surgeons are in relatively low-income areas, and therefore the insurance reimbursement—and the potential for building an aesthetic surgery base, if desired—is likely to be lower. If you are interested in predominantly aesthetic plastic surgery, there are certain areas of the country that probably cannot support it.
Wherever you choose to open your practice, be sure to do a few things first. The American Society of Plastic Surgeons (ASPS) has a publication that details the number of plastic surgeons in the different areas of the country.1 It analyzes the data per capita, and it will give you an idea of which parts of the country are more in need of plastic surgeons than others. In addition, many Internet companies will do a demographic analysis for you so you can determine home prices, average incomes, and details about schools in the area.
Decide what your niche will be. As a new plastic surgeon, you must rely on something to get your practice going. If you join a group, you may be able to negotiate a contract with a guaranteed minimum salary.
This is beneficial, because you will have the security to know that you will be able to put food on the table and pay your bills. However, be aware of possible restricted covenants should things not work out and you decide not to stay in that practice.
If you are not joining a group but are starting a new practice, your situation is a bit more stressful. It is easier for those who are entering a community in dire need of a plastic surgeon, because presumably you will be referred patients right away. They will likely be reconstruction and hand surgery patients, but you can make a good living from reconstruction alone.
If you will not have patients handed to you on a silver platter, deciding on a proper niche is important. I encourage you to determine what sets you apart from others in your community and use this uniqueness to your advantage.
Don’t forget to study for your in-service exam. Remember, you must graduate residency before you can start a private practice.
Look into the hospitals in the area. Determine which hospitals are amenable to the practice you plan to cultivate. Do you plan to do major hand and trauma surgery? If your forte is microvascular reconstruction, then a larger, better-equipped hospital may be a better choice in which to practice than a small community hospital.
Find out the details of emergency department (ED) call at each hospital. Some hospitals pay plastic surgeons generously to take call, and this can constitute a “guaranteed” salary. Be sure to speak with the administration of the hospital, because some hospitals in needy areas may help a new plastic surgeon financially with a guaranteed salary or by purchasing instruments such as lasers.
Finally, if you are going to rely on the hospital ED to support your new practice, make sure that you will be able to take enough call to do that.
Determine whether you can afford to be a solo practitioner or if you must join a group for initial financial stability. Does your spouse work? Do you have children to support? How much medical-school debt do you have? Are you a self-starter, or would you rather walk into a practice that is already set up for you? You must answer all of these questions to make the right decision.
Apply for your permanent state medical license and Drug Enforcement Administration (DEA) number. These are necessary before applying for third-party payors, hospital privileges, malpractice insurance, and so forth. Also, consider applying for a license in another state, just in case the license in your current state is revoked for some reason. Should this happen, getting a brand-new license may be difficult.
Apply for membership in your state medical society. Often, these groups can provide significant assistance for a beginning medical practitioner. Expect that this will cost several hundred dollars.
Consider hiring a special management consultant company to help you get started. These groups are usually headed by accountants who specialize in helping physicians start and run their practices. They can usually be contacted through the American Medical Association (AMA), the ASPS, or your state medical society. They often charge by the hour and can be very expensive, so get an accurate quote before signing with a group. Even if you do not hire a special medical consulting company, you will need to hire a good accountant.
Update your curriculum vitae (CV), and review it periodically.
Ask several of your residency attending physicians to be your references before you leave residency. Professional references are needed for more applications than you may expect, including applying for hospital privileges, insurance plans, and ASPS membership. It is much easier to ask before you leave than to reach people 1 year after you’ve been gone.
Consider buying and reading Starting a Medical Practice.2 This book can be obtained from the ASPS and was very helpful for me when I was starting my practice. Many of the suggestions in this article originate from this book.
10 Months Before Opening
Work with an accountant to draw up a pro forma for the first 3 years of practice. A pro forma is an estimate of your income and expenditures that can give banks a better idea of whether they should offer you a loan to start your practice. The pro forma includes everything from how much you will spend on furniture and medical supplies to how much you will pay your employees and yourself.
Talk with office-supply reps and medical-supply reps, and ask around to determine how much you need to pay your employees. A practice-management consultant or accountant can be very helpful here. Whereas your pro forma will likely be completely inaccurate, most banks do require it to determine whether they will offer you a loan and how much the loan will be.
Look into various buildings to lease office space. Consider buying versus leasing. Occasionally, some office buildings will allow their tenants to buy their space in a condo-type arrangement. Ask the hospital medical administrators if they can help you find a good medical or business realtor. It will cost you nothing to use them because their fees are paid by the landlords.
If you think you will likely build an operating room (OR) in the future, then consider this when choosing your building.
Find an attorney to help you get your business started. An attorney is necessary to help you go over your lease and to set up your corporation.
Decide on a practice structure, and begin the paperwork to get it started. There are many ways to structure your practice, including sole proprietorship, limited liability corporation (LLC), and professional corporation (PC). Talk with your attorney and accountant to determine which will be right for you.
Determine a name for the practice, and reserve the name with the state licensing agency. Often, plastic surgeons will name the practice after themselves (John Doe, MD, PC) or after their geographic vicinity (Detroit Plastic Surgery Center).
Find out when the local phone books are printed and the deadlines for placing advertisements in them.
9 Months Before Opening
Make your final decision on the building and suite you are interested in, and obtain a lease. Be sure to have your attorney go over the lease. Pay special attention to the buildout allowance and cost (the amount the landlord gives you toward finishing the suite versus how much it will actually cost to finish it).
The difference between the buildout allowance and the buildout cost is yours to pay and must be placed into your budget. I caution you against signing a lease that lasts longer than 5 years, because your practice will likely grow faster than you expect!
Check with the state and city zoning boards and with the landlord to be sure that no special permit or license is needed to open the practice in the space you are interested in.
Make an initial floor plan of the space you are planning to lease to be sure there is sufficient space for your needs. If you are planning on building an OR, consult with the American Association for Accreditation of Ambulatory Surgery Facilities Inc (AAAASF) or other accreditation organization to be sure that you have the space correctly laid out to avoid any fines.
Contact the hospital(s) where you intend to practice and speak with the medical staff office. Get details about ED call schedules (such as when they are made and how to get on staff), and determine if there is any difficulty in booking surgeries.
Work with your accountant or practice-management consultant to obtain a line of credit from a bank. I recommend a line of credit as opposed to a loan. With a line of credit, you pay interest only on the money you use, whereas with a loan you pay interest on the entire amount whether you use it or not.
Use a regular bank to obtain the lowest interest rate. If you do not qualify, then consider a boutique lender recommended by the AMA or ASPS. Get approved for a line of credit before signing the lease. Usually, a bank will require a pro forma, personal tax returns from the last 3 years, a business plan in which you promote yourself, and your updated CV.
8 Months Before Opening
After the corporation, LLC, or sole proprietorship is set up, apply for a Federal tax identification number (employer identification number, EIN) from the Internal Revenue Service (IRS). Use form SS-4, which can be found on the IRS Web site. You can even apply by phone.
You will also likely need a state tax identification number. Be sure to contact your city treasurer or clerk to register for city income tax, if appropriate. These numbers are needed before you apply to third-party payors (insurance companies). Also, contact the county or city clerk’s office to register for the business’ personal property taxes. If you have questions about applying for these numbers, ask your accountant or attorney.
After receiving your EIN, open business savings and checking accounts. Also, obtain a business credit card.
6 Months Before Opening
Develop a logo for your practice. The easiest way to do this is to use a logo-development company; you can find one on the Internet. It is helpful to do this before placing your yellow pages ad so that you can place the logo in it and begin to create your brand identity. Be aware, however, that the more colors you use in the logo, the more expensive it will be to print your stationery, so try to stick to one to two colors.
You will most likely have to pay a security deposit and the first month’s rent after you sign the lease before the landlord will begin the buildout or leasehold improvements. After this amount is paid, the management will go over the floor plan with you again. Be sure to review your floor plan very carefully. It will be very expensive to change this after your space is built out.
Be sure to include the following areas in your floor plan if you haven’t already thought of them: your office, the office manager’s office, at least one examining room (preferably two), an imaging room if desired, a waiting room, a reception area for your secretary, a consultation room (some physicians use exam rooms for this purpose), a small procedure room, a bathroom, an employee break room, and an extra office if you intend to take on a partner eventually. If an OR is in your plans (now or in the future), review your floor plan with the AAAASF (or other accrediting organization) before you finalize the plan.
After deciding on the floor plan, consider your office décor. Some landlords will pay for an interior designer, so consider your budget and get some ideas from other offices you’ve been in. Before signing any paperwork for the buildout and office décor, make sure that you get a written schedule of costs so you know exactly how much you will need to pay for the buildout. This should be done before the buildout starts.
After you have signed your lease, obtain a telephone number. It may be worth the extra expense to choose a number that is easy to remember. The number must be set up after you sign the lease (because the geographic area your office is in will determine the numbers you can use) and before you look into yellow pages or other advertising. Also, it’s good to have it early so that you can put it on your stationery and hospital and third-party payor applications.
Apply for hospital privileges after you get your new office address. Be aware that it can take several months before these come through for you. Hospitals will not likely allow you to apply for privileges if you do not already have an office address in the area.
4 Months Before Opening
Apply to be a Medicare provider. The majority of third-party payors require you to have hospital staff privileges before they will allow you to apply to be a participating provider. The exception to this rule is Medicare, which will allow you to apply for a Medicare identification number and receive a unique physician identification number (UPIN) after you have determined your practice location.
You will need to fill out one or more of the following forms:
If you are planning to be an individual practitioner, fill out and submit form CMS-855I (Medicare Enrollment Application—Physicians and Non-physician Practitioners).
If you have set up a corporation, an LLC, or another entity that you will use for tax purposes, you will need to “reassign” your benefits to this “supplier” so that the checks go to it, and not to you. The forms to fill out for this are CMS-855R (Medicare Enrollment Application—Reassignment of Medicare Benefits) and CMS-855B (Medicare Enrollment Application—Clinics/Group Practices and Certain Other Suppliers).
You will need to determine which company is the Medicare carrier for your region (certain carriers will cover several states) and send the application to it. Look this up on the Internet or check with your state or local medical society for help with this, because the details may change.
Apply for malpractice insurance. Look into national and regional carriers—ask your hospital’s medical staff office or the state medical society. If you are an ASPS member or candidate, you may qualify for a discount.
Know the differences between occurrence and claims-made insurance. Basically, occurrence insurance covers you for any claim that can arise during a specific insured time period, no matter when the suit or claim comes up. Claims-made insurance covers you only while you are paying for it, and not after your payments have stopped. A “tail” can be purchased from a claims-made insurer to cover you for past work if you decide to discontinue your insurance with them.
A “nose” policy can be purchased from a new insurance company to cover you for the time you were practicing before you bought the new insurance. Residency programs often supply a tail for your time as a resident, but this isn’t always the case for fellowships, especially private ones. Be sure to look into this before deciding on a particular fellowship.
Next month, I will review the steps to follow in the 3 months before you open your new practice.
Anthony Youn, MD, is a board-certified plastic surgeon and founder of The Hills Plastic Surgery and Laser Centre in Rochester Hills, Mich. He can be reached at (248) 650-1900 or via his Web site, www.beverlyhillsbeauty.com.
I would like to thank Richard Ellenbogen, MD, FACS, FICS, the surgeons of the Grand Rapids Plastic Surgery Residency Program, the presenters at the 2003 Senior Residents’ Conference, Don McAnelly of the Rehmann Group, and the authors of Starting A Medical Practice, all of whom have been invaluable to my start-up process.
1. American Society of Plastic Surgeons. Demographic update October 2006. Available at: [removed]www.plasticsurgery.org/psf/psfhome/myprac/demographics/index.php[/removed] (membership required).
2. Daigreport JP, Mink L, American Medical Association. Starting a Medical Practice. 2nd ed. Chicago, Ill: American Medical Association; 2003.