- 2007 Volume 4 Number 2 April- June
- Starting a Medical Practice
Starting a Medical Practice
Gregory A. Chaires, Esq. Board Certified in Health Law
Starting a new business is certainly 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, pay off 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 necessary 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 establishment. However, the elements necessary to establishing a medical practice are significant and far-reaching.
In addition to running a new business, the health care industry is one of the most regulated industries in the United States.
It would take several articles to cover the issues and considerations for the formation of 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 in the formation of the practice.
The important people to consider part of your advisory team are an accountant, 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. All the decisions that you make have ramifications and must not be considered lightly.
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 essential 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 also is 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. Consultation with an accountant as well as legal counsel who understands business and corporate law as well as health law is very important from the outset.
II. Employees/ Employment Contracts
After forming the practice, the issue then shifts to how employees will be structured. A physician must consider salaries, bonuses, annual increases, benefits and restrictive covenants, such as covenants not to compete. 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. 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.
III. Operation of the Practice
This broad category encompasses everything from staff issues, billing services, adverse incident reports, subpoenas, compliance programs and lease arrangements to designating a HIPAA privacy officer, maintaining HIPAA compliance policies and procedures, email policies, managed care contracts, credentialing, 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.
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, and the rules published by the Boards of Medicine thereunder, as well as Florida’s Patient Brokering Act.
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. There is no substitute for proper documentation whether it be a third party payer audit, a Department of Health investigation or a medical malpractice lawsuit.