Mind the details when opening a practice

A column answering your questions about the business side of your practice

By Karen S. Schechter amednews correspondent— Posted Oct. 15, 2007.

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Question: In starting a new practice, what are the potential pitfalls to watch out for?

Answer: In last month's column we discussed the timeline and general things to think about in starting a new practice. This is a follow-up -- a look at some of the nitty-gritty work that needs to be done to avoid pitfalls.

Whether you use a consultant or do it on your own, here are some tips that may make the startup process less painful and more productive in the long run.

First, make sure your advisers (attorney, accountant, consultant, banker) have health care experience, and in particular experience with medical practices. Ask for references to substantiate their understanding of your business. Use these advisers to evaluate lease agreements and managed care contracts, along with your buy-out agreement from the practice you are leaving.

Next, be aware of credentialing stumbling blocks.

Many physicians think that because they are participating in insurance plans in one practice their status will automatically transfer to the new practice. Whenever there is a change in status, such as a new tax identification number, change of address, etc., the plans must be notified.

This notification may result in one of three actions. One, the plan will update its database with the information and attach the provider ID number to the new tax identification number. Or the plan will send you a new contract to sign before updating their database. Lastly, the plan could require you to go through the credentialing process as if you were requesting participation for the first time.

It is important to maintain ongoing communication with the plans during this time to minimize the risk of not having network status at the time of startup.

Also, do not make any automatic assumptions regarding how you bill.

Many physicians starting new practices automatically assume that either they have to have in-house billing from the start, or that once they outsource billing they can never bring it back. Many physicians starting a new practice are outsourcing billing for several reasons, including, but not limited to, the lack of in-house billing and accounts receivable management expertise, and concern over startup costs associated with billing software, hardware and staff.

Regardless of the size of your practice, the billing and accounts receivable management functions will require at least the equivalent of one part-time employee if handled in-house. Some physicians think that the office manager can handle these responsibilities. Generally speaking, this is not the case. During the first six to 12 months of startup, there are so many operational, administrative and management tasks that need to be addressed that it is virtually impossible for one person to handle that and be an effective biller.

Unless you hire an experienced biller, we recommend outsourcing part or all of this function.

If you plan to bring this function in-house in the future, make sure the agreement with the billing service includes appropriate termination provisions, including release of billing information in a useable format.

Next, make sure you invest in good equipment -- telephone systems, computers, printers, copiers, scanners and the like.

Purchasing lower-end items may satisfy your current budget limitations, but in the long run will end up costing more in replacement and lost productivity costs.

The same holds true for practice management systems. Even if you decide to outsource billing, you will still want a flexible appointment scheduling system and the ability to maintain a patient database. It is important that the system be integrated (or have the capability to integrate) with an electronic medical record system.

Take advantage of this opportunity to think outside of the box. Very often, physicians just want to repeat what was done in the practices they are leaving. Operating a certain way does not mean that it is the most efficient, effective or productive way to do things. Look at everything: processes, policies and procedures, supply vendors. You may not have the time to address all of these at the beginning, but it should remain on your list of things to do.

Make a list of all of the procedures you are considering mimicking in your new practice and ask yourself (or others in the know) why it is done that way. These procedures may be appropriate for your new practice. However, in many instances you may also find better ways to accomplish the same results.

Finally, it's important to know what's going on in your practice from the start. If you have a strong staff, you may be able to delegate responsibilities early on.

But it will be helpful in the long run to establish accountability and make it part of your weekly schedule to review key financial indicators and processes. Continue to ask questions and challenge responses to ensure you have a clear understanding of where your practice is heading.

Karen S. Schechter amednews correspondent—

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