You’ve finished your training, passed the boards and gotten your license. And after surveying your practice options, you’ve decided to try your hand at being your own boss. But how do you survive as a solo practitioner? Last month, YO Info looked at some of the first steps to entering solo practice. This month we’ll look at how you collect a paycheck.
Live Within Your Means
Payment models differ based on individual circumstances and the maturity of the practice. At first, many solo practitioners will simply pay themselves whatever income is left after expenses. Only after business stabilizes, can you expect a reasonable — and regular — salary.
To determine what type of income you can expect to draw from your solo practice, you’ll want to meet with your accountant or financial advisor. Once they take a look at your financial numbers, they’ll be able to provide a profit-and-loss statement and help you determine what a fair paycheck looks like (depending on how much debt you want to service) and whether you’ll receive pay every week or every month.
Prepare for Obstacles
Be prepared for rough going initially. As with any small business, monthly collections and expenses can vary widely in the first year. It’s important to have adequate savings and/or an alternative means of income to help get you through that volatile period. You might even think about an emergency fund that can assist you during the few months before your new enterprise breaks even.
Ajit Nemi, MD, MBA, and Ravi R. Patel, MD, are both ophthalmologists in solo practice. They tell a similar tale of caution. “My initial pay was very variable,” said Dr. Patel, a corneal specialist in Jacksonville, Fla. “I handled this variation by taking out a line of credit and a business loan and saving as much as possible until I was able to sustain a steady income.”
Dr. Nemi, a comprehensive ophthalmologist in Alpharetta, Ga., did the same: “My first year, I rented a room in my friend’s house and lived off of frozen pizzas. It really helped me appreciate the value of money and put me in the best position to grow the practice.”
Dealing with the ebb and flow of cash is another one of the more nerve-wracking aspects of solo practice for Edwin S. Chen, MD, a cornea and comprehensive ophthalmologist based in San Diego. After he submits claims, for example, it can take 30, 45 or even 60 days to get remittance from the insurance company. And if the professional fees fall under the patient’s deductible and you bill your patients rather than collect at the time of service, you’ll end up waiting an additional 30, 45 or 60 days for your patients to send in payments. Dr. Chen suggests having a healthy operating reserve to cover these unexpected fluctuations.
Fortunately, as your practice grows, your monthly expenses will become more predictable and won’t create as much fluctuation to the bottom line. Until then, keep your costs manageable.
Stephanie Marioneaux, MD, a solo practice corneal specialist in Chesapeake, Va., suggests connecting with a mentor or someone with a similar practice. She says a sounding board like that can tell you how they go about paying themselves and running their own practice.
Do they work on weekends? Do they make it a point of having a Saturday office open? If the demand is there, you’ll more than likely be working five days a week and a few weekends to generate the necessary amount of revenue.
Maintain a Dynamic Practice
As your practice gets up and running, your focus will shift from everyday money issues to thinking more about long-term sustainability and managing growth. Here are some of the challenges you can expect as your practice matures.
Government regulations and reimbursement issues are becoming a bigger challenge for all of ophthalmology. “Every year there’s something new in the political arena that you’ll be confronted with,” said Dr. Marioneaux, “and so you really have to be active and realize that, as a solo practitioner, you can’t simply bury your head in the sand, see patients and go home.” She suggests contributing to the OPHTHPAC® and Surgical Scope funds as well as reaching out to your state ophthalmology society to stay current on local issues.
As a solo practitioner, there is much more at stake than patient care — there’s the day-to-day finances, HIPAA issues, electronic health record updates and Occupational Safety and Health Administration regulations, to name just a few.
“This sounds cliché,” Dr. Chen said, “but it’s remarkable how little we, as physicians, learn about these things in our training.” To stay ahead of the game, you’ll most likely have to spend considerable time learning about these topics or paying someone else a hefty sum to help you. “It’s been a very steep learning curve,” he added, “and it’s definitely not for the faint of heart.”
Keep Investing in Yourself
Notwithstanding these challenges, starting your own practice and investing in yourself can be one of the most satisfying professional choices of your career.
“Of course, you’ll work harder than you ever thought possible,” said Dr. Chen, “doing things that you had no idea how to accomplish, but you’ll also be rewarded in ways you never imagined by delivering the type of care that you want in a house that you built.”
Editor’s note: For a more in-depth look at starting a solo practice, including how to create a business plan, project revenue and choose a legal entity, be sure to check out Lawrence Geller’s four-part series from the American Academy of Ophthalmic Executives. The YO Program at AAO 2014 will also include a practice discussion on practice types. YO Info editor Natasha Herz, MD, will talk about solo practice.
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About the author: Mike Mott is a contributing writer for YO Info and a former assistant editor for EyeNet Magazine.