Should I pose this opportunity to my boss

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DanielleS

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So I recently left my associate position in Massachusetts to join a practice in Northeast Ohio. I am very happy in this gorgeous practice. The owner has an 8 room practice to which we are only using 3-4 rooms. So he has 4 fully functioning exam rooms going unused. I am thinking of suggesting to him that we offer to rent those rooms to residents coming out of residency for them to start their practice. And was hoping you could help me with my pitch and numbers as I am not familiar with some things.

1. We could build a multispecialty practice through this rental which would create a great synergy.
2. We could offer for first and last month rent up to four rooms to some doctors of varying specialties that can create a great network.

My goal was to suggest to him that we offer residents the option to rent 2 rooms for as 3k a month or 1 for 2k. This would get them use of our EMR, onsite x-ray machine, Biller, and front desk staff. As well as no CAM charge, utilities cost or building taxes. We have onsite maintenance and cleaning so that would be covered too. So basically all they would need is an MA if they want one and malpractice insurance. After the lease term they can choose to move on with their patients to their own place or stay with us.

Note: my plan is to have a tiered cost structure based on rooms needed, length of lease, and split of collections (this is where I may be way off). It is my understanding that doctors coming out of residency get 40-60% of collected so I was thinking of 20% sounding right that gives them an extra 20% over private practice. Then they can build their practice for 5 years and walk off with their patients if it makes financial sense else sign another lease.

Here is the numbers behind my thought as to why it makes sense (please correct any assumed numbers so my presentation goes well):

Cost for doctors coming out who want to start a practice

Rent for Place : ??? (we will assume free)
Utilities I am going easy and round : 100 / month
front desk, billing and staff (assuming 2 people at 10$): (2 people * 10$ an hour * 40 hrs a week * 52 weeks = 41600 / 12 months = 3466.67 a month on average)

so already without equipping the rooms and such you have less of an outlay per month just taking staffing into consideration.

Do you think my offer is too much, too little, or just right for rent for 5 years? if not right, what would you change? Do you think anyone coming out of residency would be interested in such an opportunity? Do you think I should propose this to my boss and at what cut should I ask for to coordinate this (i.e. 50% of the collections piece)? How would you pose it to him? Where would you go to look for people who are interested in this?

Thanks for the advice I have trolled these forums a lot and there is a ton of good advice and I appreciate any more that you can provide.

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There are some potential legal complications so it would be best if you separate each of the services the practice would offer: 1) rent/use of rooms (which could include utilities); 2) billing and CREDENTIALING services- it sounds like the graduating resident would have his own legally separate practice and would be billing through his own insurance #'s. The graduated resident would presumably keep these #'s if he left your location, and 3) use of front office personnel and 4) charts.

make sure to include in the contract that the resident owns his own practice and is responsible for all calls from his patients and providing appropriate notification to his patients if he leaves the location.

The location would need to post prominent signage that the residents are a completely separate practice (to reduce liability for each other's actions).
 
Also need to ensure that if the resident were to leave the office but want to keep their practice, how they would move medical records. Getting records out of an EMR can be a nightmare.
 
I think you are way in over your head regarding the business complexity and legal issues involved. This is not like renting out an extra chair at a Salon.

Let's assume your "boss" is not an idiot if he built a brand new medical space. Sure go ahead and ask if he/she has any future plans for those rooms, but I would avoid going into your detailed "business" plan.
 
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All,

I appreciate your replies and have taken them all into consideration when speaking with my boss. It was great advice. He was very open to my ideas of renting the space and we bounced ideas back and forth as to terms as I didn't want him to know I was planning this whole thing out. Here is what we came up with:

1. They would sign up for their own EMR / PM system (we use a cloud based system that we are trying to work out a reduced rate for the incoming doctor). That way when they leave they take their patients very easily by just logging in from their new office.
2. we are discussing a low down and 0-1k rent until they start collecting that way all they have to pay for is Malpractice, any equipment we don't use in podiatry (otoscope and such)and credentialing at hospitals to start (maybe an MA if they want one). We have a company that we contract with special rates that help you get on insurances and credentialed. the down payment will go to that service and can be reduced if they didn't want that service.
3. Rent after that will be split to two components rent and use of staff (all of which will be reduced for first 6 months)
4. They will need to form their own company and we can give them the name of our lawyer to setup that documentation. All of our documented agreements will have subrogation and indemnification protection between us.
5. Rent will include building, maintenance, signage, staff, all utilities, and an ear of a doctor that has ran his own practice for about 30 years for guidance.

For those graduating residents that want to be on their own I think this is a great option to build their practice and then move to their own place or stay here forever. Let me know if you think graduating residents would like this opportunity?
 
All,

I appreciate your replies and have taken them all into consideration when speaking with my boss. It was great advice. He was very open to my ideas of renting the space and we bounced ideas back and forth as to terms as I didn't want him to know I was planning this whole thing out. Here is what we came up with:

1. They would sign up for their own EMR / PM system (we use a cloud based system that we are trying to work out a reduced rate for the incoming doctor). That way when they leave they take their patients very easily by just logging in from their new office.
2. we are discussing a low down and 0-1k rent until they start collecting that way all they have to pay for is Malpractice, any equipment we don't use in podiatry (otoscope and such)and credentialing at hospitals to start (maybe an MA if they want one). We have a company that we contract with special rates that help you get on insurances and credentialed. the down payment will go to that service and can be reduced if they didn't want that service.
3. Rent after that will be split to two components rent and use of staff (all of which will be reduced for first 6 months)
4. They will need to form their own company and we can give them the name of our lawyer to setup that documentation. All of our documented agreements will have subrogation and indemnification protection between us.
5. Rent will include building, maintenance, signage, staff, all utilities, and an ear of a doctor that has ran his own practice for about 30 years for guidance.

For those graduating residents that want to be on their own I think this is a great option to build their practice and then move to their own place or stay here forever. Let me know if you think graduating residents would like this opportunity?

I think this business model is antiquated, and the days of the solo practioner are dying.

Why dont you want to just hire this person as a partner in your group?
 
I think this business model is antiquated, and the days of the solo practioner are dying.

Why dont you want to just hire this person as a partner in your group?

I agree and will discuss this I just assumed people were like me and wanted to keep a larger percentage of what they collect? I think a lot of graduating residents are too myopic in their views and don't see that by mitigating some of their risks they give up a lot more. When you own your own practice yes you have overhead but that overhead is far less than the percentage you give up to have that safety. Ultimately there are a lot more graduating residents than there are people looking to sell or having large patient bases that they have to give to them and your starting from very little no mater where you go so your productivity will be low either way you slice it. If I have to work to build productivity I'd rather get more of that pie. Maybe I am a dying breed...
 
Let me know if you think graduating residents would like this opportunity

The best way to find out would be to ask them, send out a blurb in the residency to see if you get any bites. I wouldn't be thrilled about a new, almost start-up venture as there is some degree of risk and loans need repaying. But I don't practice outpatient medicine so take that with a grain of salt.
 
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I agree and will discuss this I just assumed people were like me and wanted to keep a larger percentage of what they collect? I think a lot of graduating residents are too myopic in their views and don't see that by mitigating some of their risks they give up a lot more. When you own your own practice yes you have overhead but that overhead is far less than the percentage you give up to have that safety. Ultimately there are a lot more graduating residents than there are people looking to sell or having large patient bases that they have to give to them and your starting from very little no mater where you go so your productivity will be low either way you slice it. If I have to work to build productivity I'd rather get more of that pie. Maybe I am a dying breed...

I just noticed you are a podiatry practice. The reason large groups exist it to share risk/call/fixed costs. Adding another person to your group does not necessarily decrease the percentage you collect, as long as that person is generating enough revenue. Typically the more people you add you actually make more money assuming the fixed costs stay relatively the same. This assumes that whoever you add has enough volume to support the group. There are many, many different private models of how to share revenue.

For physicians, MIPS/MAPS and quality programs are going to become a huge pain in the ass with a lot of fixed costs. The solo/small groups are going to get crushed.

Again you seem to be naive to the business of medicine and the complexities involved. It is far more sophisticated than just generating RVUs and having a place to hang your shingle. Those days are long gone.

If you really want to be savvy, the way to go would be to start a primary care/endocrine/podiatry group. Those seem like logical specialties that would work well together. You would likely need to make those physicians partners in the group with also shared real estate options. You also need to look out for the Stark law, and regulations against self-referrals. These things require lawyers, practice management MBAs, etc.

I dont think a brand new resident wants to go start a solo practice with a few podiatrists with no advertising and no starting patient population. Huge risk with very limited upside.
 
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I think a lot of graduating residents are too myopic in their views and don't see that by mitigating some of their risks they give up a lot more.
Graduating residents often have a lot of debt, so asking them to put a significant amount of money down for a new practice that won't be profitable right away will be difficult. Some can do it, but not many.
 
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