Initial costs to start up a new practice

[cool_vkb]

Attendings can you please give me your valuable opinion on how much capital one needs to start a practice to start from scratch.

Ofcourse this depends from area to area but lets say this is located in a small town in midwest.

Iam not including offcie rent (as this is dependent on geography) and sustaincance money till practice starts but the other basic costs for example

1.what are the most common equipment a podiatrist must have in his office when he starts and their costs
2. For a new practice what employee positions one needs to have. for ex: nurse or assistant, etc.
3. The fees/ dues to state or malpractice insurance
4. How does one bill insurance.i heard that you have to claim from insurance. so it might take few weeks to months sometimes before you actually get money in hand. ;-).

I know its too early but i just want to keep an idea regarding that budget. who knows if i start saving today i might have money by time i graduate and then wont need to take loans 🙂.

---

Members don't see this ad.

 

[sorham]

Saving up now, is that a joke? In school you are losing money through student loans, then residency you barely make enough to get by... How would you save up hundreds of thousands of dollars during school and residency?

 

[cool_vkb]

Saving up now, is that a joke? In school you are losing money through student loans, then residency you barely make enough to get by... How would you save up hundreds of thousands of dollars during school and residency?

This post is addressed to attendings and posted in residency forums. Please dont divert the orignal subject of the post.

Everyone situation is unique. Iam asking a question based on my situation. May be i dont have loans or May be i work part time or May be i inherited somemoney or won a lottery.

 

[sorham]

This post is addressed to attendings and posted in residency forums. Please dont divert the orignal subject of the post.

Everyone situation is unique. Iam asking a question based on my situation. May be i dont have loans or May be i work part time or May be i inherited somemoney or won a lottery.

Wouldn't that be nice not to have to worry about those things, sorry for the diversion. I would be interested to know the round about costs as well...

 

[PADPM]

That's a difficult question to answer, since there are a lot of different views/theories regarding this issue.

Some believe you can open your office with just one treatment chair until you get busy enough to purchase/lease a second, and some believe it's mandatory to start off with two from the start.

Some believe you should rent space large enough from the start to accommodate your anticipated growth, and other's believe that means you're spending too much money in the beginning that you can't afford. They believe you should sign a relatively short term lease and move to a bigger space as you grow.

Most new docs purchase their big items on a lease/purchase arrangement, which means you pay X amount of dollars for X amount of years, similar to a car payment. At the end of the last year, the equipment is yours for a nominal final payment. If that is too costly, bank loans accomplish the same thing.

As far as staff goes, I believe in being a "minimalist" in the beginning and not trying to overspend. Don't try to impress everyone with too many staff that you can't afford.

Additionally, since it's YOUR office, it's also my opinion that YOU should know EVERYTHING about your office, and not simply delegate chores. YOU should know how to bill. YOU should know the ins and outs of insurance issues. YOU should know how to take and develop an x-ray. YOU should know how to order supplies. YOU should know how to pay all the bills. YOU should know the numbers of the insurance companies. YOU should know the numbers of the utility companies if your phones don't work, your heat doesn't work, your electricity doesn't work, etc. YOU should know how to call the hospital to schedule a surgery.

I think you get my point. The reason for this is because someday you will come to the office on a busy day and a key member of your staff will not show up due to illness, irresponsibility or some goofy reason.

And the show still must go on, and YOU are the captain of the ship. When I opened my office and it started getting extremely busy, my office manager who THOUGHT she was the only one who knew how to do the billing, etc., became extemely ill and was out for 4 months. I was too busy to realize that NO ONE else in the office was ever taught how to do the billing.

Fortunately, I knew how to do it, so at nights and on weekends for 4 months (I didn't have time to teach my other staff) I did the billing myself.

APMA dues presently are about $1600-$1700 a year which includes state dues. (I'm not sure about first year rates). The American College of Foot & Ankle Surgeon dues are presently $550 a year and I believe that dues for the American Board of Podiatric Surgery are about "$500.

You must also add in state licensing fees which vary from state to state, but can be costly, because some have 3 year renewals. Additionally, there are DEA registration fees which also can be costly for a 2-3 year renewal (several hundred dollars). Some states such as NJ also require an additional CDS license, which is relatively inexpensive. Most hospitals also require an application fee of several hundred dollars just to APPLY for privileges and most hospitals also require "staff dues" of several hundred dollars every year or two.

One of the most difficult parts, which is free, but frustrating and time consuming, is contacting all the insurance companies and getting on the insurance "panels". That can take months and a lot of red tape. And naturally, it's difficult to treat patients without the ability to bill insurance.

Another consideration will be a computer/software system for your office, which can be one of your biggest expenses.

Purchasing an x-ray unit may be your single largest expense. Some young doctors are opting not to invest in this equipment initially, if they are close to a free standing x-ray facility or hospital. With capitated insurance plans, we can often NOT get paid for taking x-rays, and those plans are getting more popular in some areas. Additionally, in some areas some insurance companies are "contracted" with specific radiology sites for x-rays, therefore you can't take them in your office.

I just read that in NJ, one of the largest insurers in that state is proposing that they will no longer pay DPM's or other specialists to take x-rays in the office. All x-rays must be performed at approved facilities.

So you must weigh whether your expense is worth the investment. Especially when considering that most docs are no longer purchasing simple x-ray machines and processors, but are now going digital, which is a VERY large expense.

I can recommend a few sources that will probably be able to give you actually "numbers" and speak with you about actually setting up an office.

I would contact a rep at one of the podiatry suppliers such as Surgical Supply Service (if you need the number, let me know) or Gill Podiatry Supply. And I would DEFINITELY contact the American Academy of Podiatric Practice Management. This is right up their alley.

 

[cool_vkb]

That's a difficult question to answer, since there are a lot of different views/theories regarding this issue.

Some believe you can open your office with just one treatment chair until you get busy enough to purchase/lease a second, and some believe it's mandatory to start off with two from the start.

Some believe you should rent space large enough from the start to accommodate your anticipated growth, and other's believe that means you're spending too much money in the beginning that you can't afford. They believe you should sign a relatively short term lease and move to a bigger space as you grow.

Most new docs purchase their big items on a lease/purchase arrangement, which means you pay X amount of dollars for X amount of years, similar to a car payment. At the end of the last year, the equipment is yours for a nominal final payment. If that is too costly, bank loans accomplish the same thing.

As far as staff goes, I believe in being a "minimalist" in the beginning and not trying to overspend. Don't try to impress everyone with too many staff that you can't afford.

Additionally, since it's YOUR office, it's also my opinion that YOU should know EVERYTHING about your office, and not simply delegate chores. YOU should know how to bill. YOU should know the ins and outs of insurance issues. YOU should know how to take and develop an x-ray. YOU should know how to order supplies. YOU should know how to pay all the bills. YOU should know the numbers of the insurance companies. YOU should know the numbers of the utility companies if your phones don't work, your heat doesn't work, your electricity doesn't work, etc. YOU should know how to call the hospital to schedule a surgery.

I think you get my point. The reason for this is because someday you will come to the office on a busy day and a key member of your staff will not show up due to illness, irresponsibility or some goofy reason.

And the show still must go on, and YOU are the captain of the ship. When I opened my office and it started getting extremely busy, my office manager who THOUGHT she was the only one who knew how to do the billing, etc., became extemely ill and was out for 4 months. I was too busy to realize that NO ONE else in the office was ever taught how to do the billing.

Fortunately, I knew how to do it, so at nights and on weekends for 4 months (I didn't have time to teach my other staff) I did the billing myself.

APMA dues presently are about $1600-$1700 a year which includes state dues. (I'm not sure about first year rates). The American College of Foot & Ankle Surgeon dues are presently $550 a year and I believe that dues for the American Board of Podiatric Surgery are about "$500.

You must also add in state licensing fees which vary from state to state, but can be costly, because some have 3 year renewals. Additionally, there are DEA registration fees which also can be costly for a 2-3 year renewal (several hundred dollars). Some states such as NJ also require an additional CDS license, which is relatively inexpensive. Most hospitals also require an application fee of several hundred dollars just to APPLY for privileges and most hospitals also require "staff dues" of several hundred dollars every year or two.

One of the most difficult parts, which is free, but frustrating and time consuming, is contacting all the insurance companies and getting on the insurance "panels". That can take months and a lot of red tape. And naturally, it's difficult to treat patients without the ability to bill insurance.

Another consideration will be a computer/software system for your office, which can be one of your biggest expenses.

Purchasing an x-ray unit may be your single largest expense. Some young doctors are opting not to invest in this equipment initially, if they are close to a free standing x-ray facility or hospital. With capitated insurance plans, we can often NOT get paid for taking x-rays, and those plans are getting more popular in some areas. Additionally, in some areas some insurance companies are "contracted" with specific radiology sites for x-rays, therefore you can't take them in your office.

I just read that in NJ, one of the largest insurers in that state is proposing that they will no longer pay DPM's or other specialists to take x-rays in the office. All x-rays must be performed at approved facilities.

So you must weigh whether your expense is worth the investment. Especially when considering that most docs are no longer purchasing simple x-ray machines and processors, but are now going digital, which is a VERY large expense.

I can recommend a few sources that will probably be able to give you actually "numbers" and speak with you about actually setting up an office.

I would contact a rep at one of the podiatry suppliers such as Surgical Supply Service (if you need the number, let me know) or Gill Podiatry Supply. And I would DEFINITELY contact the American Academy of Podiatric Practice Management. This is right up their alley.

Thank you very much sir.

 

[sorham]

If you have someone you trust is it worth it to go in with another DPM and open a practice together. I realize you have to find a way to generate twice the amount of patients, but you cut the costs in half when it comes to renting space and buying an x-ray machine etc. do many do this to cut down on costs?

 

[PADPM]

This is something I do NOT recommend. In this case, you will have too many "chief's" and not enough Indians. (No disrespect to any native Americans...it's simply a cliche)

This type of set up is wrought with complications and has the potential for disaster. I've seen a lot of great friendships end because of these types of arrangements.

I'll list some of my reasons;

1) You have TWO inexperienced docs starting at the same time. Both have to start from square one.

2) In my opinion, it is rare for a strong practice to have two doctors of identical age from day one. There is usually one "boss" and a younger associate who eventually comes on as a partner and others follow.

3) A practice NEEDS a leader, and with two equal "partners" from the start, who is going to take that role without causing a problem?

4) It is INEVITABLE that one doctor is going to produce more income than the other or put in more hours than the other, no matter how the contract is written. That will ALWAYS cause a problem and jealously or animosity.

5) You have no choice other than to "accept" the other doctor's skills and habits. When you hire an associate, you've observed those skills prior to hiring. When you both go on board together, you've married this doctor and his habits/skills for better or worse.

6) Wives/husbands break up these relationships. I'll say that again. Spouses break up these relationships. Dr. Smith decides to buy a new BMW and just took a vacation to Greece, yet Dr. Jones is having trouble paying his bills. Dr. Jones wife doesn't understand why HER husband seems to spend more hours at the office, (and she KNOWS he's a better surgeon) and always seems to get more emergency calls, yet Dr. Smith is driving a nicer car and taking a better vacation and his wife is a real BITCH. Then problems start cascading.

7) Dr. Jones starts thinking "yeah, I DO work more hours and take more emergencies......"

8) Dr. Jones realizes that the receptionist seems to be giving Dr. Smith all the "good" new patients, and he's getting all the HMO patients and "routine" patients. Dr. Smith already has enough cases for his ABPS boards, and Dr. Jones isn't even half way there. That doesn't seem fair???

9) Dr. Jones pays the bills. The cell phone bills are paid by the office and he notices that Dr. Smith's cell phone bill is $150 more a month than his, with a lot of "data" minutes for sports scores, internet access, game downloads, ringtone downloads, song downloads, etc.

These are just a few scenarios that I have actually witnessed and the list goes on and on. Yes, there are times when these situations work out.

But my accountant, who specializes in medical practices once told me that he advised doctors to not partner up with doctors in the same age bracket due to "ego" problems. He said that the majority of successful practices he was involved with have a "senior" doctor and younger doctors. There DOES need to be a "boss".

And putting TWO inexperienced doctors, with no patients and big loans into an office together in my opinion and experience is more often than not a recipe for failure and possible disaster.

 

[Feli]

Why buy everything and start from scratch? You'd have zero initial patients and high startup cost.

Makes more sense to me to buy out someone looking to retire and get some instruments/supplies and maybe a lease or option on the office. That way, you have pts right off the bat and can upgrade as you go. That would spread out the cost and also not spook the patients by changing everything overnight... digi XR soon after you move in, existing doc leaves a couple months later, EMR a month later, new wallpaper the next month, etc.

If there's a prime practice area where nobody's selling/retiring, then yeah, you may have to start cold. However, asking price means pretty much nothing IMO... an existing practice is only worth that if the seller finds a buyer who will/can pay that amount for it based on what % of the goodwill offered, stuff they find usable, and the potential they see in the practice. Part time practices with some instruments/etc get fire saled or even "donated" to pod schools if they fail to sell or if a deceased DPM's family inherits an office full of stuff that has basically no value to them. Chances are you could get office and equipment for much less than you could buy it all new for... and the pts are a good bonus too (provided they are at least some of the kind of pts/ins you will want).

 

[Feli]

If you have someone you trust is it worth it to go in with another DPM and open a practice together. I realize you have to find a way to generate twice the amount of patients, but you cut the costs in half when it comes to renting space and buying an x-ray machine etc. do many do this to cut down on costs?

I'm not too sold about the concept of getting a co-resident, classmate, etc as a partner right off the bat. Regardless of how good a pair you'd make, how well you get along, etc... where are you going to get that many patients? It's said that it takes 5yrs to start a loyal customer/referral/reputation base for a business (restaurant, dealership, practice, etc). How can you quickly feed two full time DPM mouthes - and sizable student loan payments - when you start from scratch or buy out a part time practice with relatively few pts? I don't see any reason to bring in another doc unless the practice founder is overbooked and/or looking to cut back on hours, and that takes quite awhile in most markets.

I would tend to agree on what PADPM said about being careful with 2+ young lions going into things together (unless it's gonna maybe be a trauma focused practice or somewhere you need many ppl willing to work bad hours). Some of the most successful offices I've seen started that way, but it is usually better where there's an older guy and a younger... or more importantly, just different subspecialties, different interests, varied training, and different hours/income expectations among the partners or associates. Think along the lines of a wounds guy, bigshot surgery/science gunner guy, routine care + minimal responsibility guy, business/coding minded guy, etc. They obviously all need reasonably well rounded skills to cover weekend call, etc, but you can turf things around within the group and keep everyone happy while stopping the $ from leaving your office. That tends to be what I see the most successful groups in my area doing: Everybody has their strengths, but there's a pretty clear "top dog" (who usually takes a mgmt fee even from the other partners since they're the founder or major owner who had the stones to take the initial risk and buy/start the whole group).

 

[sorham]

thanks PADPM and Feli, you both make good points, I'm a long way from having to face this situation, but buying into a practice or joining an ortho group seems to be the best bet right now...We'll see down the road.

 

[NatCh]

Dr. Smith decides to buy a new BMW and just took a vacation to Greece, yet Dr. Jones is having trouble paying his bills. Dr. Jones wife doesn't understand why HER husband seems to spend more hours at the office, (and she KNOWS he's a better surgeon) and always seems to get more emergency calls, yet Dr. Smith is driving a nicer car and taking a better vacation and his wife is a real BITCH.

Something about this breakdown just made me laugh, especially the final clause.

 

[PADPM]

NatCh,

You probably laughed 'cause you know of a couple of wives that would fit this scenario!

You've been in practice for a while, and you know that the scenario I created really isn't far from the truth and has happened in various forms many times.

 

[NatCh]

NatCh,

You probably laughed 'cause you know of a couple of wives that would fit this scenario!

You've been in practice for a while, and you know that the scenario I created really isn't far from the truth and has happened in various forms many times.

Shhh! Can't comment. People might be lurking.

 

[tracheatoedoc]

You can open cld in the right location, i.e. not the suburbs of chicago. Mississsipi, alabama, arkansas, etc.
You can lease space and lease equip, but you will nedd working capital.
I recmmend getting ahold of Medical Mavin and talking to them about purchasing an existng practice.

 

[PADPM]

With all due respect to tracheatoedoc, I would deal with Medical Maven with extreme caution.

I personally know of several of my former residents that had horrible experiences with this company, which left them in serious financial debt, and I know of a friend that attempted to sell his practice through this company and it was not a pleasant experience.

If you deal with this company, PLEASE do not sign ANYTHING without first consulting with a VERY experienced health care attorney AND an accountant. Buyer beware.

 

[cg2a93]

Yes, I have dealt with Medical Mavin in the past and I would never make that mistake again. If you do decide to deal with that outfit I would have a lawyer look over any and all documents twice.