How To Save Money Starting Your Own Private Practice

Starting a healthcare private practice through the traditional route is an expensive proposition especially in cities like Washington, DC.

With estimates in the low six figures just to get started, it’s no wonder many doctors end up just not bothering.

But that doesn’t mean these costs are set in stone.

In today’s article, we’ll take a look at some of the major costs in opening your own private healthcare practice, and how a medical coworking space can help you reduce them.

Vendors

The electronic health record (EHR) system is your most critical vendor expenses.

Watch an EHR demonstration before purchasing.

Anticipate paying between 6% and 8% of your monthly revenue for an integrated EHR.

Your other vendor expenses will include medical waste, internet, phone, healthcare supplies and credit card and payroll processing.

The average initial setup ranges from approximately $10,000 – $25,000.

Medical Insurance

Both general liability and medical malpractice insurance are required.

General liability costs roughly $1,000 – $2,500 annually, and it covers you for accidents.

For example, if a patient slips and breaks a hip at your office, this insurance will cover the cost.

Medical malpractice insurance is much more expensive, averaging between $5,000 and $25,000 yearly, and the cost varies by specialty, location and your claims history.

It’s a good idea to get at least three quotes before purchasing, and negotiate with the carrier to ensure you receive all possible discounts.

Establish a quarterly payment schedule to pay for the policy in smaller chunks.

Medical Office Space

DC has one of the most expensive real estate markets in the country.

A lot of other blog articles will suggest that you rent a space only big enough for what you need but with room for expansion.

This may be true in smaller cities or less urbanized areas, however in DC and the DMV finding a space with room to grow is going to be much more challenging.

An out-patient therapy practice needs roughly 2,000 – 2,500 square feet, and the average commercial rent per square foot in Washington DC is $50 – $56.

This price jumps up to $65 if you are looking for a Grade A buildings with all the bells and whistles.

That means you’re looking at over $8,300 a month in rent.

Most commercial leases require a security deposit as well.

In the case of DC, there is no law placing a cap on the maximum amount a landlord could charge for a security deposit.

Landlords see the security deposit as a means to cover lost rent for a noncompliant tenant.

This means when the market is more volatile as it is now, landlords may charge up to 4 to 6 months of rent as a security deposit.

What does all that mean?

It means that just to sign a lease, you’ll need at least $33,200.

In many other cities, that’s a mortgage down payment.

Capital expenses

No matter your specialty, opening your own practice means you’ll need to decide what equipment to acquire and how to do so.

There is also the matter of renovating your practice space to meet your needs.

Generally landlords will provide a tenant improvement allowance in your lease.

However depending on the age of the building and your needs the cost of renovation may far exceed it.

For your equipment, depending on your specialty, estimate at least $15,000 for a budget.

For the buildout estimate at least $30,000 – $100,000 depending on your specialty.

For example, if you’re starting your own massage therapy practice you’ll likely need less specialized equipment than if you’re starting your own medi spa.

Legal & Accounting Expenses

Whether you are forming an LLC or PLLC the legal formation of your private practice requires a lot of paperwork and a lot of time researching the tax benefits.

Traditionally you would have to have both an accountant and an attorney, whose rates may vary.

In general set aside at least $2,000 to $3,000 to cover attorney and accountant fees.

Marketing Your Private Practice

Marketing – especially digital marketing – is a must have before your practice even opens its doors.

Without marketing you won’t get any patients.

I know that this might go against everything your med school taught you, but a private practice is a business and if you aren’t marketing your business then your practice is doomed to fail.

A conservative marketing budget should be 7% – 12% of your total revenue.

A decent website – one that actually inspires confidence in your prospective patients – can cost upwards of $10,000 or more, and setting up an effective social media campaign can be just as expensive.

Ways to Save When Starting a New Private Practice

No matter how you cut it, starting a private practice DOES take a financial investment.

Fortunately there are some creative solutions to cut down on the amount of money that you will need to start your own private medical practice.

Some of this requires being open-minded and thinking out of the box.

1. Leverage The Shared Economy

The idea of sharing equipment and office space may seem a bit odd, even uncomfortable.

However, this is one of the most effective ways to cut back on the cost of opening a practice.

In terms of space, look for co-working spaces or subleases that can meet your practices needs.

Medical and healthcare co-working spaces are becoming more common.

2. You Don’t Need To Buy Shiny New Equipment

In terms of equipment consider leasing the equipment or getting lightly used equipment, you’d be surprised the amount of fairly new equipment and open-box equipment is available.

Sometimes this equipment comes from liquidation sales.

Sometimes it’s from healthcare providers that have retired.

There are a number of different places where you might be able to find gently used medical equipment for cheaper.

Take a look at these sites, and you may be surprised at what you find:

• DOTmed
• Goodwill Home Medical Equipment
• The Refurbished Equipment Marketplace
• Good old fashioned Ebay

Get Revenue Cycle Management Software

Just getting revenue cycle management software won’t save you money in starting your private practice.

However, having a revenue cycle management system in place will definitely help you get to your private practice to a financial viability faster and more effectively than not having one.

Make sure that your revenue cycle management works with your electronic medical record software.

There are many options out there and some electronic medical record services have a revenue cycle management component.

The two key questions to deciding on a revenue cycle management software are:

• How easy is it to work?
• Does it show your bottom line?

All revenue cycle management systems spew out data.

But if it’s just garbage data, there’s no point.

It has to reflect your actual bottom line.

Start At A Practice Incubator Or Practice Accelerator

A business incubator provides support and infrastructure for a startup company.

There are various configurations and a range of ways in which incubators facilitate startup teams.

Generally speaking, they offer expert advising and mentoring, capital funds, office space, administrative and IT support, and networking opportunities.

A business accelerator is a similar ecosystem with subtle differences.

Incubators tend to focus on innovation and disruptive ideas, while accelerator programs aim to accelerate the growth of an existing company.

So, depending on where you are in getting an idea off the ground, this distinction could be important.

While more common in business, there have been a number of healthcare focused incubators and practice accelerators.

Questions? Ask Symbiosis

If you’re considering starting your own private practice, we can help you:

• Save money on startup costs
• Get to a point of profitability sooner

Contact us today to find out how