Starting A Solo Practice: It Takes Entrepreneurial Spirit and a Desire for Control
Author: Laurence Geller, Medical Management Associates, Inc.
It’s enough of a challenge in normal economic times to start a solo ophthalmology practice. There’s the financial debt; the reimbursement dance; the regulatory compliance issues — and the list goes on. In this economy, it can be positively daunting to start a solo practice. Daunting, but not unrealistic. A successful solo practitioner is still a viable option in some markets. However it requires the personality, skills, and passion of an entrepreneur. And most importantly, willingness to devote significant time to build the practice.
The Solo Practitioner Personality
Ophthalmologists best suited for solo practice tend to be extroverts with an entrepreneurial mindset. Like other entrepreneurs, these ophthalmologists want to be in charge and are willing to defer financial gratification until they can turn a profit.
They are energized by the idea of building their own business. These ophthalmologists are willing to shoulder the burden of running the practice; in some small practices, the ophthalmologist is the office manager.
Starting a solo practice demands an outgoing personality — someone who is willing to get involved in the community, who enjoys developing a patient base and meeting with referring physicians.
The present generation of young ophthalmologists is more likely to join a group or even become a hospital employee than their predecessors. In addition to the financial risk, there is the work-life balance issue to consider. Getting any business off the ground requires a time commitment.
However, there’s another far more common middle ground option that some ophthalmologists are choosing. I refer to this as a “hybrid” approach. Older, established doctors planning an exit strategy for their retirement will recruit younger counterparts as potential successors. Instead of joining a big group or starting a practice, young ophthalmologists join an established solo practice for two or three years, building up their patient base and reputation during that time. Knowing that after that given time the practice will be their own.
Filling a Specialty Niche
A glut of physicians makes it challenging to start a solo ophthalmology practice in big urban markets like Chicago, Boston, New York or Atlanta. But doctors can go to exurban and rural areas to fill a need for ophthalmic services in those communities. Carving out a niche in this way is an advantage of going solo. Solo practice is more profitable and feasible in secondary markets.
While the extraordinary credit crunch today makes it generally harder to get start-up financing for a business, ophthalmologists who locate in under-served markets may look more creditworthy to banks. Lenders accept that doctors have a lot of debt coming out of medical school, so they consider the following when making credit decisions. The first is personal financial history. Does the candidate have a good credit rating or is the candidate overleveraged and saddled with a bunch of credit card debt? The second thing they look at is the practice opportunity. Starting up in an area that has a shortage of ophthalmologists is far more appealing to the lender. Finally, do not overlook the importance of a detailed, well researched business plan. That can make all the difference as to whether a loan application is granted or denied.
Managed care contracts could be easier to come by in outlying areas too. In some metropolitan markets, some managed care plans may feel they have an adequate number of physicians in specialties such as ophthalmology. They don’t want to contract with any additional physicians. This practice isn’t as common as it was in the 1990’s, but it does still hold true today.
The Business of Practicing Medicine
More than anything else, the business details of the practice; the sheer administrative and financial scope that comes along with business ownership is what dissuades some ophthalmologists from going solo. However the business entrepreneur types who take the plunge oftentimes really enjoy these aspects.
Solo practitioners can get some relief from these tasks by hiring an experienced practice manager — someone who is on site, running the business on a day-to-day basis. A practice management consulting firm can also provide the kind of oversight and expertise that a solo practice needs.
Even with the help of an external business advisor, solo practitioners will have precious few hours to indulge in a private life during the first years of operations since days will be occupied with seeing patients and performing surgery. As a result, many of the business aspects of the practice will need to be conducted after normal working hours.
It’s also important to keep in mind other risky commitments, like a multi-year office lease in addition to medical school loans. Depending upon factors like salary expectations and the cost of building out an office space, an ophthalmologist may need to have access to between $150,000 and $250,000 to get started.
With a line of credit, however, the debt can be structured so that it is manageable. Typically, it is set up so interest only is paid during the first year of operation. Then principal and interest is paid off — normally over a 48 month period. The doctor can draw on the line of credit as needed, even before opening the office. With this ready reserve of cash, ophthalmologists can build out, furnish and equip their offices; cover expenses until collections can cover those costs, and pay themselves a reasonable salary.
It now takes longer to get a cash flow going in a new practice, (18 to 24 months, vs. one year in the past). The delayed financial reward may discourage some people from going solo. On the other hand, the autonomy and control may have a strong appeal for an entrepreneurial ophthalmologist.
Sometimes, an ophthalmologist can supplement the bank financing with an income guarantee from a hospital. This is an incentive to start a practice in a market where there is a service gap. It is not intended to cover all of a doctor’s expenses; it just subsidizes them. A hospital can offer an ophthalmologist an income guarantee if the hospital can demonstrate that the community needs an ophthalmologist.
With operating margins shrinking, patient volume is a crucial factor. Ultimately, the ophthalmologist who wants to set up a solid, successful practice has to manage a balancing act between efficiency and personalized patient care.
It is demanding to start a solo ophthalmic practice — yet it can be extremely rewarding. For this reason, it’s extremely important that a doctor who is interested in going solo spend adequate time on preparing a business plan. This topic will be discussed in the next article.