All successful firms must design a compelling offering and manage the workforce to deliver it at an attractive price. But service firms must do even more: deal with the frustrating fact that their customers can wreak havoc on service quality and costs.
For example, a customer dithering at a fast-food counter slows things down for everyone else waiting in line. An architect’s client struggling to clarify how a new facility will be used drags out the design process.
To tackle this challenge, Frei advises aligning four key elements of your business:
Get these elements pulling together, and none of them can pull your business apart—as service stars like Wal-Mart, Commerce Bank, and Cleveland Clinic have discovered firsthand.
The Idea in Practice
To consistently deliver service excellence, ensure that each of these four elements reinforces the others:
Determine how customers define “excellence” when it comes to your offering: Convenience? Friendliness? Flexible choices? Price? Identify what you’ll do to deliver that excellence—and what you won’t do. Example:
Commerce Bank decided to serve customers who prized pleasant, face-to-face service and convenience. It offers evening and weekend hours, buildings with high ceilings and natural light, and a fun contraption for redeeming loose change. Despite its relatively unattractive interest rates and narrow product range, its retail customer base has expanded dramatically.
Think about how you’ll pay for the increased cost of the excellence you’re seeking to provide through your service offering. Possibilities include:
Ensure that your workforce management activities (recruiting, selection, training, job design) empower employees to deliver the excellence embodied in your service offerings. Example:
Commerce Bank competes on extended hours and friendly service, not on low price or product variety. It knows it doesn’t need straight-A students to master its limited product set, so it hires for attitude and trains for service. For instance, it uses simple recruiting criteria, such as “Does this person smile in a resting state?” And it encourages employees to recruit people they see providing great customer service in other industries.
Articulate which behaviors customers must demonstrate to get the most value from your service. Then design your service specifically to foster those behaviors. Example:
To get customers using the new self-check-in kiosks, airlines ensured that travelers could complete the transactions with far fewer keystrokes than check-in personnel used to need. By contrast, retail stores that offer self-service checkout machines haven’t made using those machines easy for shoppers. Moreover, the stores expect shoppers to shoulder responsibility for fraud prevention by weighing bags during checkout. Result? Anxious customers avoid the machines.
Starting your own medical practice is an exciting way to take the practice of medicine into your own hands. However, it’s also complicated and challenging. For your medical business to be successful, you need a clear and detailed plan at the outset to keep things moving on schedule. This step-by-step guide can help you start a private medical practice, from obtaining funding to welcoming the first patients.
There is no universal formula for starting a medical practice. It might be worth your while to hire a professional consultant who has started medical practices before, is aware of the pitfalls and challenges, and can advise you on medical malpractice insurance and workers’ compensation. After all, the specific details of starting up vary by specialty, and some laws and regulations differ by state.
A professional consultant will understand the variables and help you plan accordingly. Some new practices might need to hire contractors to outfit their new offices, while others might find a turnkey location. Overall, however, many common items must be on your checklist when building a practice from the ground up. Here’s how to start a private medical practice, step by step.
With so much to do, you might be asking yourself where to begin. In a word – financing.
The actual dollar amount needed depends on your unique situation, but in general, you should aim to secure at least $100,000 to cover equipment and startup costs, said David J. Zetter, founder and president of Zetter Healthcare and a member of the National Society of Certified Healthcare Business Consultants. In addition, Zetter said, you should try to obtain a $100,000 line of credit to cover payroll and bills until your revenue stream is established and stable, which will take some time. [See our recommendations for the best payroll providers.]
“If you’re not independently wealthy, or you just have enough money to set out the cost to open but also need to have operating capital until revenue comes in, then you need a loan,” he said.
So, how can you convince a bank to front you the money you’ll need?
To figure out your financing, make a pro forma. A pro forma is the lighter version of a full-blown business plan, with revenue and debt projections grounded in reality. In your pro forma, account for all your medical clinic expenses, debt and anticipated revenues. Bankers can tell which projections are realistic and which aren’t; it’s their job to make wise investments, so you’ll want to back up any numbers you use if you’re going to pursue a bank loan. A strong pro forma will project at least three years into the future and sometimes as far as five years out.
“The first thing you need to do is build a pro forma, which basically tells the story of what your revenue will be from the first until at least the third year, because you need to go out and get financing,” said Zetter. “You need to include the costs to set up the practice, your lease’s cost per square foot, your [electronic health record system] expense, medical supplies and office supplies. You’re building a crystal ball of what the practice looks like, and you have to be able to tell how all of those numbers came into being.”
Obtaining financing through a traditional bank loan can be tricky, especially considering that many healthcare providers have a negative net worth after taking on debt to attend medical school. That’s where a solid, realistic pro forma comes in. Max Reiboldt, president and CEO of the Coker Group consulting firm and author of Starting, Buying, and Owning a Medical Practice, explained the importance of a rational business plan and the absolute need for startup financing.
“You’re not going to get capital to start your business without a solid business plan,” Reiboldt said. “We show cash flow needs and debt projections by month, or at least by quarter. Furthermore, in healthcare, you don’t get paid very much when you perform the services. You’re really at the mercy of the insurance companies and the government. So, there is a tremendous lag … on cash flow on top of this tremendous capital investment you’re making.”
Here are some financing tips.
Key Takeaway
Key takeawayThe best business loans can help finance your medical practice.
Once you’ve obtained a loan and opened a line of credit, you’re ready to start hiring your team and purchasing the office and medical equipment you’ll need. This task is easier said than done, and ample research is necessary for each decision. But again, with a little planning and the right information, setting yourself up for success is just a matter of effort. Here are some of the aspects you’ll want to consider.
Electronic health record (EHR) systems, also known as electronic medical records (EMR) systems, are essential tools of the trade for medical providers. Digitizing records and streamlining communication is a high priority for the modern healthcare provider. An all-inclusive EHR serves as a one-stop shop for your patients’ records and histories, communications with other providers, lab and prescription orders, and information on your revenue cycle.
Editor’s note: Looking for the right electronic medical record system for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.
Moreover, you’ll need a well-functioning EHR system to qualify for federal incentive payments. Learn how to choose an EHR/EMR system and see our recommendations for the best EHR/EMR medical software.
Your practice management system (PMS) is the lifeblood of your practice. Integrated with your EHR system, practice management software keeps track of all your front-office information and facilitates operations. Chief among its uses is conducting and monitoring billing and collecting.
Not only will your staff use the practice management system to bill patients and send claims to payers, but any relevant information will be shared between the EHR system and the practice management software, eliminating the need to duplicate records.
You can always outsource your billing to a third-party company. You’d still need a practice management system, but at least your staff wouldn’t have to deal with overseeing the billing process. Not only is submitting claims time-consuming and complex, but your team would also be responsible for responding to rejected or denied claims to get the money due to your practice. When you opt for a third-party billing service, that burden shifts to the company you’ve contracted with. Still, there are potential downsides with a third-party biller to consider as well. For information on choosing a vendor that meets your needs, visit our guide to the best medical billing services.
Think about how medical transcription fits into your practice. There are typically three ways a medical business performs transcription: in-house with a staff member, via voice recognition software or outsourced to a medical transcription service. The key aspects are timeliness and accuracy; you want your dictations returned in print quickly, but only if they’re accurate, especially if they’re going to another healthcare provider or will be uploaded into your EHR system.
Medical practices are founded on trust. Not only do they handle a lot of sensitive patient information every day, but people are literally trusting the practice with their lives. That extends beyond exams, diagnoses and treatments. You’ll want to know and be able to trust your staff, which means employing a background check system.
You’ll be interested in candidates’ criminal and employment histories, but healthcare providers have more to consider beyond what the average background check provides. There are also required certifications and licenses to consider. Failure to ensure your staff is properly credentialed could result in big problems for your practice. Visit our guide to choosing a background check service to find the right provider for your practice.
Although you’ll be making most of your money through payers like insurance companies and Medicare, your practice will need a credit card processor for when patients need to pay at the point of care. Not only has the world of credit card processing changed lately, with the addition of EMV chips and other security measures, but some systems are more suited to the medical field than others. You’ll want to select a credit card processing company that offers additional security and participates in the American Medical Association’s Member Value Program, which partners with vendors to provide discounts and perks to medical practitioners. Discover the best credit card processors that can aid your practice.
As you assemble your front-office team, you’ll need a reliable office manager to run the day-to-day operations of your practice. This person must be responsible and dedicated, but those qualities aren’t enough. You’ll need someone who also has the necessary experience.
“You need to decide how you’re going to staff your practice. Who’s going to help you run your practice? A friend? A nurse? Your spouse?” said Zetter. “The office manager needs vision and to take strategic actions to build the practice properly.”
You might also consider hiring a professional consultant to occasionally take stock of your practice once it opens and report back on its operations. A trustworthy office manager is a huge asset, but not a guarantee of a successfully run office. A professional firm contracting with your practice, however, has a financial stake in delivering an honest appraisal of how your practice is running.
Tip
TipEnsure your office is set up with one of the top business phone systems for medical offices to help manage daily operations.
Consider any ancillary services you may want to offer your patients based on your specialty and their needs. These services could be a great way to make some extra money, as well as to differentiate yourself from the competition and keep your patients happy.
For example, Reiboldt said offering a service such as bone density tests on-site might be in your best interest, even though the necessary medical equipment and training for staff represent an additional expense. Additionally, certain EMR and PMS providers such as CareCloud can give you tools to build an e-commerce arm into your medical practice. Read our full CareCloud medical software review to learn more.
“Many specialists and some primary care providers will want those ancillary services,” Reiboldt said. “Why? It’s a convenience thing for the patient, No. 1, and secondarily, it adds income to the practice, but it also adds expense.”
You must complete several logistical steps before you can open your doors, and they should be carried out in conjunction with the preceding actions. Give yourself plenty of time to get incorporated as a legal entity, obtain insurance and establish policies and procedures before you launch. Credentialing, for example, can take quite a while and depends on the pace at which other organizations operate.
This one is self-explanatory, but extraordinarily important. The main reason for incorporation is limited liability, which means if you’re sued, only the assets held by the company are subject to any risk. If you don’t incorporate, you’ll open up your personal assets to the threat of a lawsuit.
Moreover, certain tax benefits are associated with each type of entity. Whether you incorporate as an S-corp or LLC, a C corp, or a general partnership, do your research on each type of entity and the potential advantages it offers your practice. To figure out which business entity is right for you, read our articles on choosing the best legal structure for your business and the process of becoming a corporation.
You will also need to get your practice’s healthcare providers credentialed to submit claims to the payers you’ll be working with. The credentialing process can take up to three months, but you may want to give yourself up to five months in case something goes awry.
You’ll need to navigate the process for each payer you plan on submitting claims to, which includes offering up information on each physician’s work history, proof of malpractice insurance, hospital privileges and attestations. It’s a time-consuming process, but certain medical billing services such as CareCloud can handle it for you. Read our full CareCloud medical billing review to learn more.
A set of responsible, current and verifiable policies and procedures, in addition to compliance with all legal regulations, is vital to your practice’s success. These standards should cover all your daily operations, including data entry, billing and interactions with patients. Since the healthcare environment is always changing, you’ll want to periodically update your policies and procedures as well to make sure they don’t become antiquated and ineffective.
Every business owner understands the importance of insurance, but for medical professionals, it’s even more crucial. First, you’ll want medical malpractice insurance coverage. Beyond that, the bank issuing your loan will likely require you to adopt additional coverage such as workers’ compensation. “You have to start thinking about insurance,” Zetter said. “[You’ll need] malpractice and general liability. You will probably at least need life and liability insurance, just because bankers will require it.”
Congratulations! If you’ve reached this point, you’ve put in plenty of blood, sweat and tears and haven’t yet seen a dime in compensation for it. But your labor will all be worth it when you get the chance to cut that ribbon and welcome your first patients to your very own medical practice. It’s an accomplishment plenty of healthcare providers don’t get to enjoy in the modern medical industry, so pat yourself on the back.
Once your practice is established and running smoothly, you’ll want to put a mechanism for accountability into place. Sure, you’ve hired an office manager you trust, but how can you hold them to task, especially if you’re busy seeing patients day in and day out? Hire a consultant or an accountant who has experience monitoring medical practices to occasionally review operations and report back to you.
“After you set up a practice, there needs to be oversight of the practice beyond the office manager,” Zetter said. “How do you know every dime made it to the bank? You need to check that, so who makes sure that happens? Benchmark your practice and ensure there’s oversight.”