After fellowship training, you—the oncology or hematology fellow—need to make some important decisions. Do you sign on with an academic institution, join a hospital or existing practice, or start your own oncology or hematology practice? If you decide to do the latter, there are many options to consider. And as with almost every business, it is all about location—but confidence in your abilities is important too.
“There are little markets all over the country,” said Dirk Davidson, MD, who heads up Tennessee Plateau Oncology in Crossville. “And probably the main reason nobody is in them is because [the physicians] … don’t think they can start and manage such an operation.”
But with the right game plan, you can open your own lucrative practice in an area previously thought to be unprofitable.
Location, Location, Location
Alan Hill is a certified public accountant and a principal and director of medical services at Rea & Associates, an Ohio-based public accounting firm. Hill said that when considering the location of a new oncology practice, you must determine whether there is a need in the area being served. In other words, if you start your practice in a place that contains other oncologists, it will be more difficult to acquire your own patients.
“Talking with [local] hospitals is a good way to go,” advised Hill. “Hospitals know where there is a need in their area, and you might be able to approach them for assistance in starting up your practice, because that’s where you are going to be referring your patients. They might be able to tell you about the population in that area. Location—knowing what your market ecosystem looks like—is definitely an issue.”
Population is another key consideration. Last November, John Jones, MD, opened the doors to his Simplicity Urgent Care facility in Arlington, Virginia. He and his partner, John Maguire, MD, were looking for an area with a population density of 40,000 to 50,000 people within a 2-mile radius of their practice. They researched population demographics, including the number of young families in the area, and the average local income. They also checked out their competition.
“It’s important to know who’s located near you, as far as other oncologists or any other practice,” Jones said. “A lot of that is simply going through a physician directory and finding out where they are. We did not want [any other physicians] within a 3-mile radius of us.”
As proprietors of an urgent care facility, Jones and Maguire wanted to be on a well-traveled road. It was imperative that they were easily accessible via public transportation. In a departure from the norm, Jones and Maguire looked at retail space, which is likely the opposite of what an oncology practice ought to consider.
“An oncology practice would probably go into a medical office building,” said Jones. “And while medical office buildings don’t [always] have the prime real estate location, such as being on a major road, they’re also less expensive. An oncology practice doesn’t need to be on a major highway because it’s more referral-based and establishes relationships with a lot of local doctors.”
Financing the Deal
Unless you have a rich uncle who will lend you the funds necessary to get your oncology practice up and running, you will likely need to secure a loan through a local bank. But in today’s tight economy, are banks lending? Hill confirmed that they are, but the loan terms are more restrictive than they used to be.
Hill said he is starting to see more banks targeting loans to the healthcare field. “Within the bank you’ll want to seek out the healthcare department—those who do the financing in that area,” he said. “Because it is a little different; it’s not a machine shop. There isn’t inventory attached. There’s machinery, but not like a large widget manufacturer employing 100 people. So…you need to make sure you align yourself with a banker who works in healthcare.”
Nevertheless, Jones said, be prepared to make a presentation that includes a spreadsheet with predicted expenses and a cash flow forecast. It can be challenging for an oncologist coming straight out of a fellowship who is starting a medical practice for the first time because there is much you don’t know. For example, how much will you earn per patient? How many patients will you see? How much do you plan to spend per square foot on build-out (ie, the process of finishing a raw space)? What is the average salary of a receptionist? How many receptionists will you need?
“There are a lot of variables in the equation,” Jones said. “And the bank is going to want to see all of these numbers so they know that you’ve thought through the entire process…before you go to them.” He pointed out that it might be helpful to hire an accountant or attorney who understands this process. Jones said, “We used an urgent care consultant who helped set up other urgent care practices and she was very helpful.”
Staffing the Practice