Physicians Practice - April 2008 - (Page 66)

START IT UP: FINANCE consultant who can evaluate the business and marketing aspects of it,” says Borglum, citing the example of a dermatologist client whose practice is restricted to contact dermatitis. You might not think that such a narrow focus would be a viable business, but in this case it works because she started with a sound foundation of ﬁnancial planning and is one of only a handful of such subspecialists in the region. Your accountant is another source for help making sure your numbers are meaningful. In terms of the data behind those numbers, “Generic national ﬁgures are almost irrelevant,” says CPA Jerry L. Love, who’s been working with physician clients for nearly 30 years. He notes that instead of turning to an accountant, people sometimes unwisely obtain data through common-size financial statements, which express ﬁgures as a percentage of a common base term. This is a mistake, he says. You may ﬁnd, for example, that salaries represent 20 percent of gross revenues, really major items like rent and labor and malpractice insurance and things like that, but they won’t necessarily remember or understand that there are a lot of other things you might have, like ofﬁce supplies.” Drilling down into these seemingly trivial areas, which you might understandably overlook if you’ve always been a salaried employee, is crucial. It’s relatively easy to estimate the expense side of the ﬁnancial statements. Revenues can be tougher to build in, but it’s simple to ﬁnd the IN SUMMARY The construction of sound ﬁnancial assumptions may be the most crucial aspect of planning for a new medical practice. As a key part of your business plan, you’ll need statements that cover at least two years and include startup expenses, revenue and charge analyses, a fee schedule, and a break-even analysis. Also: ACCEPTABLE GAMBLE “Once you [conduct the break-even analysis], you go from uncertainty to risk, and risk is measurable.” “But the doctor doesn’t know what his gross is going to be,” says Love. “At the end of the day, if the doctor is going to have a nurse, an ofﬁce manager, and a receptionist, he needs to know how much those salaries are going to cost.” Love, a former chair of the Texas Society of CPAs, maintains that the best way to get this sort of comprehensive data is through a CPA in your area, who “will either know the answers to those questions or know where to ﬁnd those answers rather than guessing.” Just like in construction, there’s a real danger of underestimating the expenses for which you’ll need to plan — everyone knows someone who’s blown their kitchen remodeling budget by a triple-digit percentage. “We always tell doctors when we’re working with them on a feasibility analysis that we like to be conservative in terms of adding in more costs than we think we’re going to need,” says Migliore. Physicians becoming practice owners for the ﬁrst time, says Love, “will have a tendency to get the Medicare rates of payment in your geographic area for the CPT codes you use most often — just search online for “Medicare reimbursement CPT” or a similar term, or ask your practice management consultant to supply them. Check out our annual Fee Schedule Survey at PhysiciansPractice.com for further guidance on average commercial rates. But be careful about your assumptions. “Making up your own fee schedule: Now there’s a mistake!” says Borglum. He recommends using an RVU-based system, noting that this will be a simple proposition if you enlist expert help or purchase the pertinent data yourself (again, a quick Internet query should produce the results you need). For all of these documents, start with a basic spreadsheet, which offers the ﬂexibility to make additions and changes, and look at ﬁgures from a source such as the Medical Group Management Association’s Physician Compensation and Production Survey. In any case, “You need to make sure it’s a WWW.PHYSICIANSPRACTICE.COM Eduardo Peña Dolhun, MD • Enlist professional help when you need it. You’re new at this, so “the best thing to do is to hire an expert who can help with the details, and with forecasting and research,” says CPA Jerry Love. assumptions for your initial ﬁnancial projections, regional numbers that reﬂect your specialty and patient mix are far more valuable than national figures. Look to compensation and productivity surveys like those from Physicians Practice and the Medical Group Management Association for reliable estimates. as comprehensive as possible. Don’t forget costs such as your own salary, interest, and quarterly estimated tax payments. A CPA who specializes in medical practices can help you navigate these commonly overlooked areas. minimum. Think through the future ramiﬁcations of even the smallest decisions, like choosing multicolored stationery, and factor your household budget into all projections. • When seeking data to build revenue • Make your list of startup expenses • Keep initial costs and overhead to a 66 | PHYSICIANS PRACTICE | APRIL 2008 http://PhysiciansPractice.com http://WWW.PHYSICIANSPRACTICE.COM

Table of Contents Feed for the Digital Edition of Physicians Practice - April 2008

Physicians Practice - April 2008 Contents The Bigger Picture: Medicare Decision Time Letters Physicians Practice Pearls: Outsource Your Pain Noteworthy Cover Story: Trial Lawyers Tell All Management: When It’s Time to Change Ask the Experts Technology: Do You Know Where Your Data Is? The Tech Doctor: Are Your Discarded PCs Really Clean? Billing & Collections: Playing Hardball The Administrator's Desk: Recruiting for Patient Satisfaction Start It Up: Finance - Mastering the Numbers Game Coding The Great Practice Makeover: Taking Care of Business Associates Classifieds Advertiser Index

Physicians Practice - April 2008

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.