Here are some questions discussed at a roundtable discussion I participated in at the last AAO in San Francisco, November 2019:
Is it risky to start a solo practice in 2020?
Of course there’s always risk into venturing into the unknown. When I started my practice I was afraid it would fail because I had no business experience. In my opinion, there are actually more risks to joining a group than going I to solo practice.
The rewards of being able to control your schedule, who you work with, and how you practice, which is what happens when you go solo vastly outweigh the risks. At the end it’s a personal decision.
If you want administrators who don’t understand clinical medicine to control your life, or to have someone dangle the promises of becoming a partner but not giving you a reasonable buy in, that’s your choice.
One fact that many young ophthalmologists ignore is that there are many risks to joining a group, academics, or even large organization. If you join a group, there’s the risk they may be purchased by private equity and change things around. A large organization may be purchased by a health care conglomerate and decide to shut down the ophthalmology department. This is precisely what happened at the HMO mill I worked for. One friend in a private group had his practice owner sell it and the new owner told him they didn’t need him and he’d be without a job in 90 days.
Even in academics, Drexel shut down and the ophthalmologists were left looking for work. New York Eye and Ear was acquired by Mount Sinai and many changes were made, and as a result I hear many folks left. Running your own practice, the only person that can fire you or sell to another organization is you!
Has anyone started a solo practice and then shut it down?
Believe it or not, there is someone in our email thread that started a solo practice, got tired of the HR and admin work, and then joined a group. He quickly realized this was a huge mistake and left to start another solo practice.
I have also heard of someone wanting to relocate and sold their solo practice, only to start another one in a different city. A temporary setback for sure, but it is not a lifetime commitment when you open doors in one city.
I do know of two folks who didn’t enjoy running their show and left to join a big organization, as well as someone who purchased a floundering practice and then left for academics a few years later.
But the percent of ophthalmologists leaving, or wanting to leave, solo practice is MUCH less than the percent of ophthalmologists leaving their first or second job. Surely this says something.
How important is location?
Believe it or not, you can open up anywhere you want and be successful. Many of my colleagues are in the most competitive, highly saturated areas, such as NYC, San Francisco, and southern California, simply because no one was willing to give them a fair deal.
Ho Sun had another ophthalmologist in his first building. I opened up in Goodyear AZ right across the parking lot from a highly respected and high volume excellent cataract surgeon. Two years after I opened, the biggest private equity group in town opened a satellite office right next to me. I can see their building out of my window. Every time I go to the hospital cafeteria, I see their ads for cataract surgery in the front page of the paper. Yet, I’m doing just fine and very pleased with my practice growth. In a few years I’ll be dong just as many cataract cases as when I worked in my big group and had primary care docs in house feeding cases to me.
Having said all this, it is certainly easier to open up in a less saturated area. Read Ho Sun’s posts about Location. If you open up in a more saturated area, it will definitely take you longer to get busier and the path will be more difficult, but you will get there eventually.
I do know of two people in my city who opened in more difficult locations and had trouble. One was averaging two patients per day for a year, then opened a satellite after the restrictive covenant expired and became really busy. Now he doesn’t know what to do with two offices and needs to hire someone to work in one of the offices. The second person opened up a office on the other side of town and became so busy they had to hire two other MDs.
So if you’re in a saturated part of town, you could consider a satellite office, but you will become busy one way or the other. Perhaps you might even regret it three years later when you’re busy in both offices.
But what about getting onto closed panels or insurance plans? I’ve heard it’s difficult to get onto medicare advantage plans.
Depending on your area, if you join multiple hospital systems and then their accountable care organizations (ACOs) or independent physician organizations (IPAs) the medicare advantage plan networks are frequently aligned with ACOs or IPAs.
Medicare advantage plans are private plans when a patient assigns their benefits to a private insurance company such as BCBS or Aetna or Humana. Approximately 1/3 of medicare patients are in these plans, although it varies by state. Generally speaking they are more prevalent in urban areas. Approximately 2/3 of patients enrolled in MA plans are in HMOs which are often narrow network and restrict the doctor the patients can go and see- in contrast to traditional medicare where a patient can go see anyone.
It’s interesting that one consultant on the panel suggested you take a look at what percent of the population is in medicare advantage plans and which plans the patients are in. I agree it’s important to know what to expect, but I replied that even if I were excluded from ALL medicare advantage plans, my practice would be just fine. It would simply take me longer to grow.
It didn’t happen immediately, but with joining the ACOs and some persistence I was able to get onto most of the medicare advantage plans in my area. Of course these plans pay less than medicare, so now I’m actually thinking of dropping or going out of network for these plans.
Do you need a business plan and where did you get one?
I raised some eyebrows when I answered “no” to this question. Guess what, I don’t have a personal finance plan nor budget but I seem to be doing just fine. In fact, I presented a course about personal finance at AAO where I mentioned having a written financial plan… if you aren’t reaching your goals.
In fact, I know other colleagues who got bank loans but didn’t have a business plan. The sole purpose of the business plan is to get a loan from a bank. I self funded my startup, so this wasn’t required.
I do think you should gather your thoughts and project what your income will be per patient, have an estimate of how quickly you’ll grow, and have a rough idea of how much you’ll have to spend on overhead every month. But you can simply borrow someone else’s business plan, creating one yourself isn’t something to stress out over.
In fact, if you write a plan you’ll probably notice that you’ll go off it pretty quickly. You may grow faster or slower than you expect, add a satellite office which adds rent, or hire another employee which incurs additional cost. The good news is that most folks severely under project their profit and success.
Just like with personal finances, analytically looking at numbers before you make important practice decisions such as purchasing a piece of equipment or hiring a employee or even MD is a critical task, but as long as you’ve thought through everything carefully and have a backup plan if things don’t go as expected, you don’t necessarily need a written business plan.
How long does it take to break even? How much did you make your first year?
I broke even my third month. I only saw 22 patients my first month and didn’t even send out any claims until the beginning of my second month. But part of this was because my lease was structured to be front loaded with five months of free rent (amortized over the course of the lease). For the average person on our thread, this varies anywhere from three months to a year.
I actually made over six figures my first year. Many of us take a loss (negative income) on paper our first full year, but that depends on if you section 179 a lot of your equipment. I opened doors in December, so that year I saw 22 patients and took a $80,000 loss against my employment income.
Ho Sun has a great post here that discusses what your career earnings might be. Note that the first year of solo practice has minimal correlation to what you will be earning five or six years down the road. Of course everyone wants to make as much as early as possible, but solo practice involves some upfront sacrifices for big rewards down the road.
There’s nothing wrong with working for a group to get clinical and surgical experience, living like a resident to save money, and then starting a practice.
How do I learn about billing and coding?
We spent a ton of time talking about this at the round table discussion I participated in. My opinion is that taking courses is of minimal use; I took the Saturday AAO coding course before I opened and for me it was of minimal help. Taking courses certainly provides a good background, but the best way is to get your hands dirty and learn how to do it yourself. “The physician is the captain of the ship” is certainly a mantra I follow. A few initial denials at the beginning isn’t the end of the world.
Learning how to code and bill when you first open will make your practice a well oiled machine when you’re busy. Same thing goes for working insurance denials. You could outsource it, but no one is going to care as much as you do. Your $20/ hour employee who took a night course in coding at the community college isn’t going to care as much as you whether you’re paid $500 for the eyelid procedure.
Believe it or not, some of the best sources about learning about codes and modifiers are google and your colleagues. We frequently have discussions about proper coding and billing in our solo eye docs email group.
One thing that wasn’t discussed at the roundtable is to collect patient responsibilities at the time of service. If you’re joining a group practice, please do yourself a favor and make sure the practice is doing so, otherwise it’s money out of your pocket. The industry standard is collecting about 96-97% of insurance allowed amounts; mine is over 99.5% (we aren’t including cash pay elective procedures).
Should I outsource my billing, credentialing and bookkeeping/ accounting?
Unfortunately, many docs in solo practice I know outsource a lot because they want to focus on practicing medicine. The truth is it’s your ass on the line, and no one is going to care as much as you.
I know of someone who hired a credentialing and contract negotiating company. Unbelievably, this company signed off on a contract without the doctor reviewing it and she was stuck with unfavorable reimbursement rates which she couldn’t negotiate higher.
I still post my own EOBs and payments. No one can ever embezzle from me, and I know my practice income and profits month and year to date off the top of my head. Since I get my employee to phone insurance companies and do the dirtywork, I’ve calculated that unless I’m earning over $500,000 per year, it doesn’t make sense to outsource my billing to a company that will charge 6% and possibly lose another 1-2%. Given overhead is about 50%, this is 12-14% of profits.
Bookkeeping takes about a half hour of my time to contemporaneously enter my 25-35 expenses into the Expensify app. Is it worth paying someone $200 per month for a half hour of my time and take the risk they might miss an expense which I can tax deduct? Even considering I take an hour at the end of the month to reconcile with my bank statements (which you should be doing anyway even if you have someone else doing bookkkeping) and four or five hours at the end of the year to reconcile and categorize expenses, this is $150 per hour or $300,000 per year. We may earn more dollar per hour clinically but it’s still worth my time to do it myself.
Ironically, someone else on the panel made the comment “you should do a few more surgeries instead of your taxes.” I suggest they read this article:
If there was anything I could stress to solo practice owners, it’s that while there’s no way you can do everything yourself because time is a finite resource, no one is going to care as much as you do, and sometimes the “experts” you hire may not worth the money the charge or may not get the job done. Personally, I’d rather hire another scribe or tech to free up my time to do these critical yet mundane tasks.