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Article Reprint - Transitioning to Private Practice (February 2008, Perspectives)

Transitioning to Private Practice: The Peaks, Valleys, and Steps to Success

By Kyle Fleischmann, PT, MS, OCS

Whether the dream starts prior to, during, or following physical therapy school, many physical therapists (PT's) get an urge to one day control their own destiny through private practice ownership. An entrepreneurial spirit pushes to the forefront of their thoughts, telling them they can be their own boss, they can treat patients the best way they see fit, and they can reap the rewards that come from owning their own business.

What thoughts or actions come next depend on the individual’s experiences, personality, and risk tolerance. What becomes important on the road to practice ownership is how the PT's deal with the peaks and valleys of this new venture and realize steps to success along the way.

Fear Factor
All business owners had to take that first step, that leap of faith to start their businesses. They made this exciting, life-changing decision despite fears they may have had or barriers they had to overcome.

Fear and barriers can be healthy in that they force us to prepare before making decisions. They make us question ourselves and seek out assistance. Thorough planning and the right assistance can help convert fear into wise decision-making. Let’s look at a few of the potential barriers to opening your own practice and how to overcome them.

I don’t have enough money
Many physical therapists dream of owning a practice but are paralyzed by monetary needs. They may not have much money personally, may have heard it is difficult to get a bank loan, don’t like the idea of borrowing money, or don’t have a high tolerance for financial risk. Financial risk is a common fear and ultimately
keeps many from opening their own practice.

To leap the financial hurdle requires planning and sometimes creative ways to finance the business. It’s vitally important to calculate financial projections for your business. You’ll need to plan for capital needs, determine what expenses you can afford, and have clear profit expectations. Projections never perfectly match what happens in reality, but they’ll help you make key decisions and give you more confidence along the way, making it less likely that you’ll run out of money. Concerning financing, there are numerous solutions to consider: personal loans from family or friends, small business loans, additional investors or partners, second mortgages on your home, to name a few. Find someone familiar with these financing options, and discuss pros and cons for each.

I don’t understand running a business at all
Most of us do a great job of taking care of our patients. However, this doesn’t mean we have all the answers when it comes to starting and running a business, and great patient care alone won’t ensure a private practice will succeed.

There is a lot to consider when running a business, especially during the start-up phase—financing, business planning, entity formation, insurance contracts, marketing and advertising, policies and procedures, compliance issues, fee schedules, accurate and efficient billing, etc. All of this can become overwhelming, especially when some “well meaning” colleagues start sharing IRS or Medicare audit horror stories or major insurance denial issues.

To ease the process, systematically break all of these issues down into simple steps. Check with experts (lawyers, accountants, consultants) or resources (how-to books) to make sure you have included all of the necessary steps and that you are performing the steps correctly. Have a mentor, group of mentors, or advisory board review your planning and operations on a regular basis. Include PT's who have started their own practices among your mentors. Ask your accountant and attorney if they will participate at advisory board level as well. These individuals, with their outside perspective, are in a better position to catch oversights or mistakes you might make along the way.

Most businesses fail in the first year
Most businesses do fail in the first year; in fact, about 80% of businesses fail in the first year with another 80% of the remaining businesses failing within the next 5 years. What’s the common denominator of businesses breaking these odds? Usually, these businesses have performed comprehensive business and counsel well in advance of opening the doors.

Unfortunately, a large percentage of those venturing into business ownership, and perhaps even a higher percentage of PT's, don’t take these steps seriously. With the odds stacked against you, you should take every step possible to move the odds in your favor.

I don’t want to worry about the back office; I just want to treat patients
Most physical therapists entered the profession to treat patients, not to do daily bookkeeping, create and follow up on claim submissions, and the multitude of other ongoing tasks required to keep the practice running. Rightfully so, many new practice owners recruit knowledgeable staff or find an outside company to perform these tasks.
 
The other option is to learn as you go and tackle all of these tasks yourself. We tend to caution against this approach, because more often than not the owner becomes so busy with patient care, marketing to physicians, documentation, and other daily provider tasks that there is little time left to give the office tasks the time and energy necessary to have a truly strong business. Yes, it is going to cost more to find the right staff member or to outsource your needs to other companies, but these extra costs may have a huge return on investment if the tasks are done more efficiently and with less error, and allow you to focus your efforts on what matters most: your patients and your referral sources.

Steps to Success
There are so many variables along the path to practice ownership that, unfortunately, there is no step-by-step instruction manual answering every question. However, there are some common steps to success you definitely should consider.

1. Find a lawyer and accountant who understand medical practices to join your advisory board team.
2. Find mentors who have started a private practice to join your advisory board.
3. Create a business plan that includes a marketing plan and financial projections. Have experienced individuals read and discuss these documents. Review these documents frequently, and make changes as necessary along the way.
4. Read as many resource or how-to books about starting and operating a practice as you possibly can.
5. Join the APTA Private Practice Section, and attend regular continuing education in practice management.
6. Join applicable listserves and/or blogs, read them frequently, and post a lot of questions.
7. Find knowledgeable staff and/or outside companies to support your practice for such things as bookkeeping, medical billing, and payroll.

Hundreds of physical therapists have ventured into private practice and have no regrets in their decision to do so. Despite fears and barriers to overcome and steps to success that needed to be realized, these owners have reached the satisfying position of being their own bosses, providing excellent patient care as they see best, and addressing that entrepreneurial spirit within them.

With proper planning and guidance, you can be in this position as well.

______________________
Kyle Fleischmann is a principal and co-founder of Vantage Clinical Solutions Inc., a practice management and consulting firm located in Bend, Oregon. Fleischmann can be reached at kyle@vantageclinicalsolutions.com.

Article reprinted with permission from the American Physical Therapy Association.  This material is copyrighted, and any further reproduction or distribution is prohibited.