Let’s paint the scene. You’re an ambitious physician looking into buying a medical practice or starting one from the ground up. You envision the rewards of providing high-quality treatments that affect patients’ lives. You see yourself influencing the standards of care industry-wide.
But then you start digging into the details of actually starting that dream practice, and slowly your vision starts to feel a little out of reach. Or at least a little less glamorous.
There are many steps that go into starting a practice, as well as many costs. It’s not a journey without obstacles, and about 50% of practices will close their doors within five years.
But the good news is that yes, owning a medical practice can be very profitable and very rewarding!
What is most important as you start considering opening a practice is understanding the costs associated with your new practice and building a strategy around exactly how you can begin making profits.
When you’re prepared for the journey ahead of you, you’ll be better set up to make profits as soon as possible.
Plan for Start-Up and Operational Costs
Don’t go into starting a practice blindly. You must consider exactly what your start-up and operational, or continuing, costs will be. That will give you the insight you need to build a strategy that garners profits over those expenses.
If you are purchasing a practice, you will of course have all the costs associated with buying a medical practice. If you start a practice from the ground up, you’ll have different costs, such as expenses to register your new business. Regardless, you will have fees to pay to consultants and advisors such as attorneys, accountants, and professional brokers.
You’ll also need to consider your office space and equipment. Are there renovations needed before you could open your business’ doors? Is there office equipment, furnishings, or diagnostic equipment you must purchase? What about a computer management system for medical records and patient scheduling?
When you’re starting your medical practice, you’ll also want to invest in sales and marketing. These investments, when done well, can pay big dividends in driving patients to your practice.
After calculating those start-up costs, then consider what your monthly and annual continuing expenses will be. What is your rent? What will utilities cost? What about the office and medical supplies?
Consider insurance, business taxes, and payroll that you’ll need to pay for on a regular basis. If you obtained financing to cover any start-up expenses, you’ll also need to factor in continuing payments on that loan.
One significant continuing cost is malpractice insurance. Depending on your practice location and your medical specialty, malpractice insurance can get expensive. On average, a physician owner will pay around $7,500 a year, but surgeons and OB/GYNs could be looking at $50,000 or more every year.
Strategies to Increase Profit
While those start-up and operational costs can be significant, the great news is that as the owner of this new medical practice, you have the freedom and flexibility to strategize the specific ways you want to increase the profit of your business! Here are some strategies our expert team of medical practice brokers has seen work well.
- Scale your practice so that patients are not dependent on a solo physician. If your primary physician is sick or out of town, you still want to keep the business open and operational. Consider hiring nurse practitioners and physician assistants so you can increase revenue by accepting more clients.
- Offer extra hours for evening and weekend appointments.
- Offer ancillary services at your practice. The less you have to refer patients to other providers, the more profit you will generate.
- If you or any of your physicians are surgeons, consider providing procedures at private surgery centers.
- Join an Independent Physicians’ Association, which will help you receive better insurance contracts and group purchasing discounts.
- Join an Accountable Care Organization (ACO). Insurance companies pay regular bonuses to ACOs, which are then shared with physician members who manage chronically ill patients and keep healthcare costs low.
- Consider a concierge membership model or direct primary care. You could do a full concierge model or a hybrid approach. With patients paying a monthly retainer to access any services, you can turn an even greater profit and create reliable revenue.
- Provide care to smaller hospitals and skilled nursing facilities.
- Share office space with complementary referring providers. This brings more specialty care to patients and provides a cost-effective way to open satellite offices.
- Invest in marketing, including a website and solid search engine optimization (SEO) to drive visitors to your website. Monitor referral sources and provide incentives and thank yous to your top referrers.
- Consider the new patient journey. Reduce any friction possible for a patient to get an appointment. Make the patient registration process as easy as possible, and make sure you’re able to see new patients more quickly than your competitors.
Your New Role
One final thing to consider as you work to make a new medical practice profitable is your new role. As the owner, you are not just focused on the clinical side of things, but on the operations of running a business. You are the CEO, CFO, HR director, IT consultant, and more.
That might sound overwhelming, but also consider the benefits. You have the power to determine the strategies you want to take to become profitable. You are your own boss, which lets you be more creative, set your own hours and vacation time, and create your own goals.
You get to run this practice how you want to. You get to hire the people you think are best for your patients and provide the care that you believe will truly best help them.
So, Should You Start a New Practice?
The short answer is, it depends — on your personality, your goals, and your desires. But we see people experience the rewards of owning medical practices every day! Most of our team here at Strategic Medical Brokers has experienced those benefits. It can be highly rewarding, both financially and in other manners.
If you decide to move forward, consider giving a professional healthcare business broker like Strategic Medical Brokers a call. We can act as an intermediary and advisor to help you avoid potentially expensive missteps when you are buying a medical practice.
You can also search our medical businesses for sale and see if there is one right for you! We also offer Buyer Representation for practices not listed with us. We are trusted advocates for our clients, and we are experienced at medical practice acquisition and how to set you and your new practice up for the most success!