Jeffrey Wade
Starting a medical practice is a challenging process that requires careful planning and consideration. One of the most important steps is to ensure that you will get paid for your services, which usually means registering with and contracting third-party payors like private insurance, Tricare, Medicare, or Medicaid. This will entail being assigned an NPI number and complying with coding guidelines and requirements. It is also important to obtain malpractice insurance and to comply with all legal regulations, including state and local regulations. Other considerations include defining your vision and mission, developing a business plan, securing financing, finding a location, hiring staff, and marketing your services.
| Characteristics | Values |
|---|---|
| Entity choice | Corporation, LLC, partnership, etc. |
| Legal regulations | Stark Self-Referral Laws, federal and state anti-kickback laws, Florida laws such as the Patient Self-Referral Act, the Anti-Kickback Statute, Fee Splitting laws, the Medical Practice Act, the Osteopathic Medical Practice Act, Florida's Patient Brokering Act, etc. |
| Insurance | Malpractice insurance, general liability insurance, property insurance, workers' compensation insurance, etc. |
| Business account | A business checking account is important for a practice's financial strategy. |
| Business plan | A solid, realistic pro forma is important for obtaining financing. |
| Location | Define your vision and mission, and find the right location. |
| Staff | Hire qualified staff members, including nurses, medical assistants, and administrative personnel. |
| Technology | Implement business-critical technology, such as electronic health records (EHR) systems. |
| Licenses and permits | Medical license, state business license, Drug Enforcement Administration (DEA) registration, Clinical Laboratory Improvement Amendments (CLIA) certification/waiver, professional and occupancy permits, etc. |
| Marketing | Develop and execute a marketing plan to attract new patients and establish your practice's reputation. |
| Services | Describe the patients you'll provide services to, including relevant demographic information. |
| Pricing structure | Data such as age, household income, and consumer preferences may inform your pricing structure. |
| Logistics | Resources, partnerships, licenses, certifications, insurance, equipment, supplies, and supply chain are all important considerations. |
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What You'll Learn
Understand legal entity types and their consequences
Understanding the various types of legal entities and their consequences is critical when starting a medical practice. The choice of entity will impact the liability and tax implications of the practice, and it is important to consider factors such as capitalization, future growth plans, and the size of the entity when making this decision.
One option is to structure the medical practice as a corporation. This type of entity offers limited liability protection, with the corporation itself being taxed separately from its owners. This structure may be suitable for practices seeking outside investment and those wishing to offer ownership stakes to employees. However, corporations can be more complex and expensive to set up and operate, with additional regulatory requirements.
Limited Liability Companies (LLCs) are another popular choice for medical practices. LLCs provide limited liability protection while offering more flexibility in management structure and tax treatment. LLCs can be taxed as pass-through entities, which may be advantageous for smaller practices. Additionally, LLCs typically have simpler governance requirements and offer protection for the personal assets of the owners.
Partnerships are also a viable option, particularly for practices with multiple physicians. In a partnership, the owners share responsibility for management, profits, and liabilities. This structure can foster collaboration and shared decision-making, but it is important to carefully outline the terms of the partnership in a legal agreement. Partnerships may be taxed at the individual level, similar to pass-through entities.
The choice of legal entity has significant implications for the operation of the medical practice. It is important to consider the impact on liability, taxation, governance, and future growth potential. Additionally, the chosen structure may influence the level of regulatory oversight and compliance requirements. Seeking legal and financial advice can help ensure that the selected entity type aligns with the goals and needs of the medical practice.
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Get a business checking account
Setting up a business checking account is an important, yet often overlooked, part of a medical practice's financial strategy. It is recommended to set up your business checking account as soon as possible, as you will be paying a lot of expenses from this account and you want to keep track of your transactions easily. You will also need a routing and account number for insurance providers to send payments to your account.
It is not essential, but you may want to meet with a personal financial advisor to reassess your personal banking needs. Becoming an entrepreneur may impact your personal financial plans, so it is a good idea to take this opportunity to ensure you have the right financial tools in place for the future. For example, you may want to re-evaluate your disability, critical illness, and life insurance coverage to ensure it still meets your needs.
You will also need to think about the various types of insurance you will need for your medical practice. Malpractice insurance is crucial, and you should consult a specialist insurance provider to determine the appropriate level of coverage for your business. The bank issuing your loan is also likely to require you to take out additional coverage, such as workers' compensation. Other types of insurance to consider include general liability, property, and workers' compensation insurance.
In addition to insurance, there are several other financial considerations to keep in mind when starting a medical practice. Firstly, obtaining financing through a traditional bank loan can be challenging, especially given that many healthcare providers have a negative net worth after taking on debt to attend medical school. This is where a solid business plan and pro forma come in—you will need to demonstrate cash flow needs and debt projections to secure a loan. It is also important to remember that, in the healthcare industry, there is often a significant lag between performing services and getting paid, as you are at the mercy of insurance companies and the government.
Finally, it is worth noting that starting a medical practice requires a significant financial investment upfront, including costs for equipment, office space, and staff salaries.
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Register with insurance companies
Registering with insurance companies is a critical step in establishing a medical practice. Here are some detailed instructions to guide you through the process:
Identify the Insurance Providers:
Firstly, research and identify the prominent insurance providers in your area. Understand the different types of insurance plans they offer and decide which plans you want to accept at your medical practice. Consider the patient demographic you aim to serve and choose insurance providers that align with their needs.
Understand the Requirements:
Each insurance company will have its own set of requirements for medical practices to register as providers. Familiarize yourself with these prerequisites. They may include specific licenses, certifications, or accreditation standards that your practice must meet. Ensure you understand the credentialing process and begin working towards fulfilling their criteria.
Apply for Registration:
Once you have identified the insurance companies you wish to work with, initiate the registration process by submitting applications to each company. This process may vary depending on the insurance provider, so follow their specific instructions. Make sure to provide all the necessary documentation and information accurately and completely.
Negotiate Contracts:
After your application is accepted, you will typically enter into a contractual agreement with the insurance company. Carefully review the terms and conditions of these contracts, seeking legal advice if needed, to ensure you understand your rights and obligations. Negotiate reimbursement rates and other terms to ensure they are fair and favourable for your practice.
Stay Compliant:
Maintaining compliance with the insurance companies' requirements is essential. Stay up to date with their policies and any changes they make. Ensure that your practice continues to meet the credentialing standards and follows the agreed-upon procedures for billing, coding, and claims processing. Regularly review and update your policies and procedures to remain compliant.
Handle Denials and Appeals:
Working with insurance companies may involve dealing with denials of coverage for certain treatments or services. Understand the process for handling these situations, including any requirements for additional information or appeals. Stay informed about the specific rules and regulations of each insurance company you are registered with to effectively navigate these processes.
Registering with insurance companies is a complex process that requires a good understanding of the industry and attention to detail. It is advisable to seek guidance from experts or consultants familiar with the healthcare and insurance sectors to ensure a smooth and compliant registration process.
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Get malpractice insurance
Getting malpractice insurance is a crucial step in starting a medical practice. While not all jurisdictions require lawyers to carry professional liability coverage to practice law, it is essential for the financial health of your medical practice. A malpractice claim could deplete your business's financial resources, even if you successfully defend against it. Therefore, it is prudent to have insurance before accepting your first client.
When purchasing malpractice insurance, it is essential to consider the specific requirements of your jurisdiction. In the United States, each state has a minimum premium requirement per attorney set by insurers, and rates vary by practice area and county. Some states, like Oregon, mandate legal malpractice coverage, while others, like New York, do not. Canadian provinces each have a designated legal malpractice insurer. Attorneys in the US have more options when choosing an attorney malpractice insurance provider. The American Bar Association provides a directory of insurers handling malpractice claims by state. State, local, and practice area bar associations may also provide recommendations or lists of approved providers.
When starting a medical practice, it is important to understand the different types of insurance coverage available. Occurrence coverage provides lifetime protection for incidents that occurred during the policy period, regardless of when the claim is filed. In contrast, claims-made policies are cheaper initially but become more expensive over time as the potential for claims increases. If you cancel a claims-made policy, you will need to purchase "tail coverage" to be covered for any suits filed after the policy ends. This extended reporting endorsement can be costly, often three times the annual premium. Alternatively, "nose coverage," or prior acts coverage, can be purchased from a new carrier if you switch insurance providers.
To find malpractice insurance providers, you can ask your state medical association for recommendations or sponsored carriers. If you are joining a physician group, your insurance will likely be provided by the group, and it is still important to understand the coverage details and what happens if you leave the group. Additionally, ensure compliance with Medicare and Medicaid guidelines, including obtaining a group number and NPI number, to be a participating provider.
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Comply with Medicare and Medicaid guidelines
Complying with Medicare and Medicaid guidelines is a critical aspect of starting a medical practice. To ensure compliance, there are several important steps to follow:
Firstly, it is necessary to apply for a National Provider Identifier (NPI). The NPI is essential for billing Medicare, Medicaid, and most private insurance companies. You can obtain your NPI by applying on the National Plan and Provider Enumeration System (NPPES) website. This will also involve being assigned a group number, which is part of complying with Medicare and Medicaid requirements.
Secondly, familiarise yourself with the coding guidelines and requirements. Accurate and compliant coding is essential to avoid audits, which can be detrimental to your practice. Ensure that your staff is adequately trained in coding and that your documentation is meticulous. This includes keeping detailed records of patient encounters, diagnoses, procedures, and any other relevant information that may be required for billing or audit purposes.
Additionally, it is important to understand the reimbursement process for Medicare and Medicaid. This includes registering and contracting with these entities and negotiating fair reimbursement rates with them. It is advisable to seek legal advice when reviewing contracts to ensure you fully understand the terms and conditions.
Moreover, stay up to date with any changes or updates to Medicare and Medicaid policies and guidelines. These programs can change over time, and it is your responsibility to ensure your practice remains compliant. This may include periodic reviews of your policies and procedures to ensure they align with any new guidelines.
Lastly, be mindful of any state-specific regulations that may impact your participation in Medicare and Medicaid. Some states have unique requirements that you must meet to maintain compliance. Regularly check with your state and local government to ensure you are aware of any additional regulations or changes that may affect your practice.
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Frequently asked questions
The first steps involve meticulous planning, including defining your vision and mission, developing a business plan, and securing financing. You should also consider the type of legal entity you want to form (e.g., Corporation, LLC, partnership) and the associated liability and tax consequences.
It is crucial to obtain malpractice insurance to protect your practice and providers. Additionally, consider other policies such as general liability, property insurance, and workers' compensation. You should also research insurance providers and determine the plans you want to contract with, including private and public medical insurance options.
You will need to find a suitable location, obtain necessary licenses and permits, and set up your office space with essential equipment, furniture, and technology. It is also important to hire qualified staff, including medical professionals and administrative personnel, and develop a marketing plan to attract patients.
Register with and/or contract with third-party payors like private insurance, Tricare, Medicare, or Medicaid. Carefully review and negotiate contracts with insurance companies to ensure fair reimbursement rates. Comply with coding guidelines and requirements, and maintain accurate documentation to minimize the risk of an audit. Additionally, set up a business checking account to easily receive payments from insurance providers.
