Download a PDF of the Current Issue 2015 Volume 12 Number 3 July- September

Starting a Medical Practice

Gregory A. Chaires, Esq.
Chaires, Brooderson and Guerrero, P.L

Starting a new business is not for the faint of heart, but starting a new medical practice can certainly be a daunting task.  The physician starting a practice needs to earn a living, many times pay off student and other loans, run a medical practice and provide quality care to his or her patients.  It is essential that both new and more experienced physicians have a comprehensive understanding of the operational elements of a medical practice.  Many consider obvious elements such as selecting the right location to avoid over saturation in the market, getting phones set up and the anticipated cost of staff.  However, there are many other elements necessary to establishing a medical practice.

In addition to the challenges of just running a new business, the health care industry is one of the most regulated industries in the United States.  There are federal laws, state laws, rules issued by oversight entities like the Florida Board of Medicine and Center for Medicare & Medicaid Services, there are billing reimbursement guidelines and contracts that must be followed.  There are a variety of federal and state privacy and security laws such as HIPAA, the HITECH Act, and the recently enacted Florida Information Protection Act of 2014.

It would take several articles to cover all the issues and considerations for the formation and successful operation of a medical practice.  This article will discuss some broad areas of consideration but it is recommended that you interact with professionals to assist you in the formation of the practice.  In this age of the internet there are a host of resources available that provide basic background information on the various issues involved in starting up a medical practice, some of which we will discuss below.  We have found the Medical Group Management Association Checklist for a new practice start-up (http://www.mgma.com/Libraries/Assets/Practice%20Resources/Tools/Checklist-for-Starting-a-New-Medical-Practice.pdf)  a good resource for practitioners looking to start their own medical practice.

The important people to consider part of your advisory team are an accountant, health care attorney and management consultant.  It is important that you not lull yourself into thinking that since you are highly intelligent and skilled at medicine, you can just “figure” out the formation and operation of a medical practice by reading an article or as you go along.  While the various internet materials are available, all the decisions that you make have ramifications and must not be considered lightly.  Thus, it is important to seek out those that can help you the most.  When you have a heart problem, you generally do not take care of it yourself or go see a podiatrist.  Your advisory team will be very helpful in your success and an experienced health care attorney is critically important.

Below are some broad areas of consideration in starting a medical practice or joining an existing medical practice.

I. Forming the practice and Entity Choice

It is critical to have an understanding of the various types of legal entities available (Corporation, LLC, partnership, etc.), and the liability and tax consequences associated with each entity choice.  Depending upon your interest in capitalization, plans for future growth and the size of the entity, some entities may be more appropriate for your needs than others.  It is also helpful to understand anti-trust and security law ramifications, as well as more general issues, such as registering and maintaining compliance with state regulations.  Your governance documents are very important to ensure that your practice has a road map to operate. Questions regarding partnership, admission of new owners, termination of owners and employees, buy outs of owners are examples of issues that need to be considered and addressed in the governance documents of the practice.  It is always important to have documents in place in advance.   Consultation with an accountant as well as legal counsel who understands business, corporate law as well as health law, is very important from the outset.

II. Employees/ Employment Contracts

After forming the practice, one of the early issues is the hiring of employees and how that will be structured (and remember you, the physician owner, will be an employee as well).  A physician owner must consider salaries, bonuses, annual increases, various fringe benefits and restrictive covenants, such as covenants not to compete (which are enforceable in Florida if properly drafted).  Consideration needs to be given to the type of personnel necessary to operate your practice, contracting with other physicians and the compensation requirements and regulatory considerations for the use of physician extenders such as physician assistants and nurse practitioners.

III. Operation of the Practice

This broad category encompasses everything from staffing issues, billing services, adverse incident reports, subpoenas, compliance programs and lease arrangements to designating a HIPAA privacy and security officer, maintaining HIPAA and HITECH Act compliance policies and procedures, email policies, managed care contracting and credentialing with commercial and governmental payors, and call coverage.  Many practitioners opt to have office policies and procedures for employees to assist in maintaining compliance and in effectuating termination policies, if necessary.   Some providers outsource their billing to companies that specialize in these services.  Some providers choose to participate with certain managed care networks.  Risk management is always important as well and there are part-time risk managers that can assist in a practice.

IV. Additional considerations

You cannot forget the elemental issues like malpractice insurance coverage and asset protection.  A physician is advised to weigh the costs and benefits of having coverage versus going “bare.”  Additionally, it is urged that physicians become educated about regulations on compensation, investment and financial relationships, such as the Stark Self-Referral Laws, federal and state anti-kickback laws, and Florida laws such as the Patient Self-Referral Act, the Anti-Kickback Statute and Fee Splitting laws, the Medical Practice Act, (Chapter 458), the Osteopathic Medical Practice Act, (Chapter 459), Florida Statutes, , as well as Florida’s Patient Brokering Act, and the rules published by the Boards of Medicine or Osteopathic Medicine thereunder.  There are three simple rules to keep in mind (1) if it sounds too good to be true it generally is, (2) there is rarely, if ever, anything for free in the business of medicine, and (3) if things of value flow in the direction of a referral source, there could be potentially significant concerns.

  Finally, physicians must be sure to properly apply for and comply with Medicare and Medicaid guidelines, if they wish to be a participating provider.  This will entail being assigned a group number and a NPI number and complying with coding guidelines and requirements.  Becoming familiar with the requirements for coding and ensuring excellent documentation will put you on the right track to minimizing an audit, which can be devastating to a practice (think compliance programs which every practice, no matter what size, should have).  There is no substitute for adequate and accurate documentation whether it be a third party payer audit, a Department of Health investigation or a medical malpractice lawsuit.

We started off by discussing how starting a medical practice can be daunting, but it can also be very personally rewarding.  There are resources out there that can help you make the decision if owning and operating your own medical practice is right for you.  You need to know your market and have a marketing plan.  You need to have a business plan and a pro forma so that you have a plan and strategic guidelines in which to operate your new practice.  Most importantly, you must be patient as it can easily take nine months or so to get things fully operational.