By Stephen C. Fitzer
Bexar County Medical Society
Executive Director
Starting a medical practice is in many ways like starting up any business, but because of the regulatory agencies, it can be like start-ing a foot race carrying an extra 20 pounds of ankle weights.
To start a normal business, one must do quite a number of things to ensure survival. A business plan is needed. New physicians frequently comment that they are expected to be not only good practitioners of medicine, but great business people as well. Medical schools do a fine job of teaching the art of medicine, but the art of practicing business requires on-the-job training and experience.
The extra 20 pounds physicians carry when opening a new business is a result of the number of agencies that control what physicians can and can’t do, above and beyond the agencies that control normal businesses.
Physicians must file with a number of state and federal agencies, register with many others and certify with even more. Hospitals and insurance companies add to the list of interfaces for a physician/ businessman. How does a physician even know what to do? To figure it out, follow the same process you’d follow if you were contemplating anything of great magnitude. Read, study, ask questions, find a mentor who has been there and figure out where the pitfalls are.
Along with this article, I have provided many sidebars (courtesy of the Gen-eral Counsel at TMA) that provide information or indicate where to go to get more information. It is always important to find out what you don’t know so you can start the ramping-up process.
There are many very helpful articles and publications which help direct physicians who are starting new practices. In reality, once a new physician is ready from a medical training perspective, it will take several months to get ready business-wise to start practicing medicine.
Ideally, a physician should start preparing a business plan while yet in residency (see “Business Plan” cutout). Otherwise, there is an unnecessary delay once the residency is completed. Going through this process while in residency also helps ensure the physician is sure he/she actually wants to start a new business. This also will be a time to consider other alternatives, such as becoming a partner with an existing firm, buying an existing practice or working as an employee for another physician or medical agency.
If a new physician wants to purchase an existing practice, BCMS has listings on its website of physician practices for sale. Applying the principles of “Practice Valuation” as outlined in my article in the February edition of San Antonio Medicine magazine, a physician can decide if it is better to take over an existing practice or start a new one.
Buying an existing practice makes it easier to evaluate market position, cash flow issues, mentoring issues, etc. The ultimate comparison is whether or not buying an existing practice will make a physician better off than pursuing one of the other alternatives mentioned.
Some of the hospitals in San Antonio also assist physicians in setting up new practices. This assistance comes in the form of revenue advances or guarantees, mentoring from other physicians in the community, system setups, help locating staff and finding office space, etc. These agreements often have time limitations and requirements to which the physician must agree.
Hospitals do this to encourage physicians to practice in San Antonio, and to do so close to their locations.
Talk about how to set up a practice with those in the know. Get advice from professionals. TMA also has a practice consulting service which, for a fee, can help set up a practice or provide ad hoc advice along the way.
The Bexar County Medical Society has a staffing service that can help find key employees and check their backgrounds. There also are many professional services that can provide great advice (see my article on “Business Advisors and Consultants” in the April 2007 issue of San Antonio Medicine magazine).
Prepare, prepare, prepare. Your intended life’s work is in the balance. Don’t ASSUME anything. Research EVERYTHING. Don’t cut corners that will limit your ability to be successful.
Investigate, evaluate, choose, plan —then pay attention to details. The business of medicine changes everyday. Anticipate your future. Remember that while you may love the art of medicine, if you fail to run a good business, it will negatively affect you financially and adversely affect the care of patients who depend on you.
1. Address Notifications
Organizations to notify of the address of a new practice:
Texas Medical Board
P.O. Box 2018
Austin, TX 78768-2018
(512) 305-7010
Bexar County Medical Society
Attn: Membership
6243 W IH-10, Suite 600
San Antonio, TX 78201
(210) 301-4391
Texas Medical Association
Attn: Membership
401 W. 15th Street
Austin, TX 78701
(512) 370-1441
2. Drug Registrations
If you plan to administer, prescribe or supply controlled substances in Texas, you must obtain an application for a Texas controlled substances registration number.
Texas Department of Public Safety
Controlled Substances Registration
P.O. Box 4087
Austin, TX 78773-001
6100 Guadalupe, Bldg. E
Austin, TX 78752
(512) 424-2188
Once you have obtained a Texas controlled substances registration, you can apply for a Drug Enforcement Administration (DEA) number.
Drug Enforcement Administration
Attn: Registration
10127 Morocco, Ste. 200
San Antonio, TX 78216
If you plan to prescribe Schedule II controlled substances, you must obtain a supply of official prescription stickers designated for your use.
Texas Department of Public Safety
Official Prescription Program
P.O. Box 4087
Austin, TX 78773
(512) 424-2189
To send payments to the Official Prescription Program:
Texas Department of Public Safety
Official Prescription Program
P.O. Box 15999
Austin, TX 78767-5999
3. Government Payors
If you plan to treat Medicare patients in Texas, you will need to apply for a Medicare provider number from Blue Cross/Blue Shield of Texas, who handles it for Medicare. BCBS will supply the application, but it takes six to eight weeks to get the provider number.
Blue Cross/Blue Shield of Texas, Inc.
Provider Services
P.O. Box 655924
Dallas, TX 75265-5924
(214) 766-6076
Medicaid provider numbers for Texas are obtained from the National Heritage Insurance Company. However, you will need to get the Medicare number first. NHIC’s number is (512) 794-2325, or (800) 873-6768. It will take about
a month.
Champus is handled by Wisconsin Physician Service. You can call and ask for an application for a provider number. Ask for the Central Provider Coding Unit.
Wisconsin Physician Service
Coordinator, Professional Relations
CHAMPUS
P.O. Box 701061
San Antonio, TX 78270-1061
(210) 545-9076
Texas Workers’ Compensation Com-mission (TWCC) is for workers who are injured on the job. For a guide as to rules, forms and fee guidelines, contact:
TWCC Publications
(512) 440-3618
Or call TMA and ask for a copy of:
The Complete Workers’ Compensation
Guide for Texas Physicians
(800) 880-1300 Ext. 1423
4. Medical Malpractice Insurance
There are a number of carriers that provide medical malpractice insurance, and the number of providers has steadily increased since tort reform was implemented in Texas in 2003. The Texas Medical Association (TMA) created the Texas Medical Liability Trust in 1979 to serve members of the state and county medical societies. Contact:
Texas Medical Liability Trust
P.O. Box 14746
Austin, TX 78761
(800) 580-8658
5. Internal Revenue Service
Call (800) 829-3676, or go online to www.irs.gov/businesses/index.html
Ask for forms:
• SS-4 Application for Employer
Identification Number
• Employers Tax Guide
• Tax Guide for Small Businesses
• Tax Withholding and Estimated Tax
• Tax Information on Partnerships
• Record-keeping for Individuals
Unemployment insurance taxes are typically paid quarterly. Contact:
Texas Workforce Commission
Tax Department
Status Section
101 E. 15th St.
Austin, TX 78778-0001
Workers compensation insurance is required if you have one or more full-time employees. You need to buy the insurance from an insurance broker.
The Occupational Safety and Health Administration (OSHA) sets safety standards for workplace. OSHA will require that you post a permanent notice to employees, maintain records of workplace injuries and illnesses and report annually on job-related injuries and illnesses. The reports go to the Texas Workers Compensation Commission.
6. National Provider Identifier (NPI)
The U.S. Department of Health and Human Resources has established a system for all providers of healthcare and healthcare services. It requires that all physicians (or any entity that would bill Medicare or any other government program) obtain an NPI number. If a physician practice bills as a practice (instead of by physician), then it needs an NPI number as well. To apply, access the National Plan/Provider Enumeration System (NPPES) website at https://nppes.cma.hhs.gov
7. Administration of office employees
If you are going to be an employer (of receptionists, nurses, etc.), you must apply for a federal employer identification num-ber from the Internal Revenue Service. The IRS will tell you how to handle the withholding federal taxes, Social Security and unemployment insurance taxes.
8. Medical Waste Disposal
The Texas Department of Health defines the categories of waste subject to regulation and establishes the standards for waste treatment prior to disposal. The “Texas Board of Health Rules for Definition, Treatment and Disposition of Special Waste from Health-Care Related Facilities” can be found at Title 25, Texas Administrative Code, Chapter 1, sections 1.131-1.137. The authority to regulate medical waste removal and disposal remains with the Municipal Solid Waste Division of the Texas Water Commission. Current medical waste regulations are available from the Special Waste Evaluation Team, Municipal Solid Waste Division, Texas Water Commis-sion, P.O. Box 13087, Austin, Texas 78711-3087. Refer to “The physician’s guide to medical waste regulations, parts 1-4”, in Texas Medicine for a more in-depth review of these regulations. For copies of these articles, contact TMA’s office of General Counsel at Texas Medical Association, (800) 880-1300.
9. Business Plan
Every business needs a business plan. A business plan should be able to answer the following questions:
• Business Purpose – What services will you provide?
• Market – Who needs and will buy your services? What is the size of the market? Is it a growing or shrinking market?
• Location – Should you lease or buy a location? What renovations will be needed? Are there any deed or zoning restrictions? What other businesses operate in the area? Does the location help advertise the business? Is the office close to a needed hospital or surgery center?
• Competition – Who will compete with you for patients (identify them specifically)? Which competitors are successful and why? What share of the market do your competitors have? What will be the difference between you and your competitors?
• Management - What do you know about management of a business? Can you manage relationships with payors? Can you manage staff? Do you have job descriptions for your staff? How many employees do you need? What skills should employees have? How will staff get trained?
• Objectives – What do you plan to accomplish in the first five years of your business? You should have measurable goals and timeframes.
• Financial – How much money will it take to equip a practice? What capital equipment will you need? How long will you have to pay employees, rent and utilities and the like before the cash from payors begins to come in? How much money will it take before the business is self-sustaining from a cash perspective? Who will you borrow the money from to start the practice, and under what terms? Can you afford to pay back student loans and pay practice start-up loans? Prepare a three-year cash forecast for the best and worst of conditions. Does it get you where you want to go? Is it viable?
• Payors – Which payors do you plan to do business with? How long does it take to get credentialed by these companies? What rates will they pay you? How negotiable are the payors? How long does it take from the time a service is performed until money is received from payors?
• Electronic Medical Records – You will need to begin with an electronic system for clinical, financial and administrative purposes. What type of system best suits your practice? How much will it cost? What are the electronic filing requirements of Medicare, Medicaid and the payors?
• Legal Structure – What type of corporation will you set up? The common types of corporations used by physicians are sole proprietorship, general partnership, limited liability partnership, limited liability company, professional association and non-profit health corporation. To read about the advantages and disadvantages of each, consult the table listed at the end of this article.
