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How to Start a
1. Business Plan
It all starts here. You must be prepared to
articulate your long-term goals and quantify your anticipated start-up
costs, expenses and revenue. How will you support yourself and
family before the revenue stream begins? Will you finance with
investors or banks? Who will send you patients? How
many? How much will an office visit and procedure generate?
How much surgery will you perform? The little green book can
serve as a good basic reference for starting a practice.
Link – spreadsheet.
2. Accountant – Incorporate
Even if you’re a sole proprietor, your tax liability
must be ascribed to your business and not to your personal
wealth. Your accountant can help set-up the business and tax
identification numbers. As a medical practice, the subchapter S
designation for a PC, personal corporation is appropriate. Keep a
log-book of your major corporate activity.
3. Insurance Agent/Disability
Nothing happens without disability insurance.
When asking for a bank loan, the financiers will demand proof that loan
can be paid, even if you become disabled. Group disability can be
had through the American Academy of Ophthalmology (Marsh Insurance Co.)
and private vendors. For an individual, more than one disability
policy may be needed to carry the business overhead, personal and
household expenses. Expect the application and approval period to
take several months. So get the process moving early.
Ask around for an experienced insurance agent.
You’ll soon need - Life/Key Man Insurance – insurance for the site
& equipment and to protect yourself and premises against
construction related miss-haps and other catastrophes.
4. National Provider Numbers
The application is made on-line and takes a few
days. You need two numbers: one is your personal number; the
second is for your business. All submitted insurance claims will
require these numbers.
5. Malpractice Insurance –
Can be had quickly but must be in place before you
apply for inclusion in health plans such as Medicare. Ophthalmic
surgeons pay about $25,000/year – in quarterly payments.
6. Medicare provider number
Use form 855i to apply. You’ll
need two applications – one for your personal Medicare number and a
second form for your new business. The personal Medicare number
is tied to your personal NPI. The Business NPI is tied to the
corporate Medicare provider number. Your billing will reflect
care as a personal rendering physician but with pay-through to your
7. Financing Banks & Small Business Administration (SBA)
Don’t feel obligated to try only one vendor. A
reduction of one percentage point of interest will reduce your costs by
$1,000/month on a 1 million dollar loan. The SBA loan can
be used for construction and equipment. Some banks may offer
partial financing through the SBA and a line of working capital through
the banking establishment. Consider the terms: you don’t want to
place your home as collateral; SBA might demand it. SBA loans
require little or no payment in the first year – and competitive rates
over the next seven. Loans rates are set with a benchmark of the
prime rate plus some extra percentage above. Try to get a rate as
close to the prime rate as possible.
8. Electronic Medical Records & Practice management program
The giants NextGen and Compu-link charge about $50K
for software, installation, training and licenses and expect to pay
another 10-15K for hardware (computers and servers. On top of
that, the monthly fee is $350-400/month. They offer robust
packages but getting the programs tailored to your practice may take
lots of time and effort.
MDOffice offers a good product at 2/3rds the price.
Most EMR systems provide up-links from office -
imaging equipment and analyzers. Look for lensometers,
auto-refractors, perimeters, cameras and OCT with digital download
features. 3-D OCT machines generate too much data for
conventional EMR systems. Consider a second date server storage
system if your future needs require state-of-the-art OCT imagery.
Topcon’s EyeRoute system can store digitized images from OCT, cameras
and visual field analyzers.
All useful systems require an in-house server to
maintain the files. You’ll also need to contract an IT guy to
help install and maintain the system. The servers produce a lot
of heat and are a little noisy. Consider placing a separate
12,000 BTU air-conditioner for local temperature
9. Leasing space
Learn about the prevailing rates. Leases can
be had for 5, 10 or 15 years. Most leases will include a clause
for escalated payment over time. Ask for free rent for six months
– time to get your office renovated and working before the bills come
10. CAQH & Enrolling in health plans
CAQH (www.caqh.org) provides a public listing of
your license, provider numbers, malpractice insurance, locations and
all necessary data required by HMOs to register you as a
provider. You have control over the record. Consider
enrolling in many of the local plans at your start-up to help build a
patient base. Patients will be able to find you as a local
“provider.” Enrollment in individual HMOs may take months.
11. Hiring an architect
Expect to pay about $50-$100/square foot of
the space that needs renovation. The architect’s proposal will
include: scope of work (measuring the space, complete
architectural plans and specifications - with millwork and selection of
furnishings, preparation of documents for building approvals and
permits and certification that construction has been completed to the
building code. Get references – and oversee the whole process so
that the design works for you. Key items: sufficient waiting room
space, handicap access, heating and air-conditioning and
finishes. Today’s office is wired for computer networks, phones
and electronic medical records.
12. Hiring a contractor –
Complete renovations cost about $1000/square
foot. I had 5 contractors price renovation of a 2000 sq. ft.
medical space – the bids varied from $150,000 to $409,000 with no major
distinction in the overall project. Good finish work (plastering,
painting and detail) and millwork are expensive – so is union
labor. Ask to see the contractor’s work; get references.
Good cabinets (suitable for a medical office) and countertops can be
ordered through Home Depot. Write a contract so that the
contractor gets paid after completing the work in stages – with 10%
held back until the job is completed and all building department
approvals are obtained. For example, the five stages may include:
demolition, rough walls and carpentry, electrical and plumbing,
painting, flooring and finishes, and punch list and sign-offs. And put
in a penalty clause, e.g., $1000/day, to keep the project “on-time.”
Make sure to address heating and cooling issues so
you can maintain a comfortable working environment in all
seasons. In-house servers generate substantial heat (and a
constant low drone.) Consider placing them in a well-ventilated
closet with a separate cooling system
13. Information technology (IT) man
Your architect or contractor may provide a
reference. Today’s modern office requires lots of networks, for
diagnostic equipment, practice management computers and phones.
You’ll want to put in the networks early in the construction/renovation
process – well before the walls and ceilings are finished. If you
install an electronic medical record/practice management system, you’ll
probably need a large cabinet for a computer server.
A fully equipped ophthalmic lane costs $30,000, and
can leased at about $500/month expense with purchase over five
years. Equipment for a fully equipped office with four lanes,
perimeter, laser, OCT and camera and laser can cost almost
$400,000. Consider what you need to get started and what you’ll
need for the future. Big-ticket items can often be had below the
“retail” price. Don’t be afraid to haggle.
John Pinto’s Little Green Book of Ophthalmology (2005)
Published by the American Society of Ophthalmic Administrators
4000 Legato Road, Suite 700, Fairfax, Virginia 22033-4003