With the right game plan, you can open your own lucrative practice in an area previously thought to be unprofitable.
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.
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.”
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.”
Davidson is also the co-founder of Crossville, Tennessee—based Oncology Partners, which helps oncology practices maximize their efficiency. He cautioned that an oncology practice just starting up should consider doing so with minimal employees: perhaps just a receptionist and a nurse, in addition to the physician.
“That’s always an issue: how many people do you really need?” said Davidson. “A lot of people think they need to project an image of strength and size, so they automatically hire more people than they need. If you think you are going to administer chemotherapy soon, then hire a good chemotherapy nurse who can also draw blood and run an IV. But remember that as you grow, you can always add people appropriately.”
Hill advised that when it comes to running the practice, physicians need to determine how hands-on they want to be in managing the day-to-day tasks as opposed to hiring someone else to do it for them.
“I’m a big fan of getting somebody who can manage your office for you.” he said. “Look for someone with credentials, such as MGMA [Medical Group Management Association]. They stay on top of office issues and what’s going on in the practice of medical office management. That way you can spend more time seeing patients and less time on office matters.”
Jones agreed with that advice. He and Maguire brought in a business manager a couple of months before the center opened its doors, and Jones believes that it was one of their best decisions. Jones said, “She had run a practice before, she knew what questions to ask, and we…let her manage most of that.” It is a strategy he suggested that oncology fellows employ. Jones said that when oncology fellows leave their fellowship, “they’re going to be moonlighting or working for other groups. They’re going to be working in order to maintain an income, so setting up a new practice is something they will be doing in their off time.”
Jones acknowledged that there are “a million” pitfalls to avoid when starting a practice. He said one lesson that he and his partner were surprised to learn is that things end up costing more than they expected. When they initially spoke with their banker, they asked for a set loan amount. But the banker said, “Let me give you 20% extra, because no matter how you cut this project, it’s going to cost more than you think it will.” Jones said, “And you know what? He was right.”
Hill outlined the importance of relationship building. Before starting the practice, he said you should make some phone calls to an accountant, an attorney who practices healthcare law, a banker who handles healthcare finance, and a malpractice carrier. You will also want to consider whether you should open a practice on your own or with a partner. Davidson said that’s a decision a physician has to feel comfortable with. “If you go into a partnership and you’re at odds with your partner, that’s chaos,” he said. “When you go [into your own practice] you want career satisfaction. Do you feel like you’re in charge or that you can practice medicine the way you feel is right? Those are important considerations.”
Jones said that he has known his partner for 10 years and they have worked together in a hospital. For him, it has been crucial to have someone with whom he can bounce ideas around.
“Picking the right partner is critical,” Jones said. “And you also have to figure out how many partners you want. The more partners you have, it becomes more of a committee decision rather than you and another guy just getting it done.”
Ultimately, deciding to start your own practice requires careful consideration of all of the variables involved. (See “Should You Start Your Own Practice?”) Doing the legwork to research and evaluate locations, the competition, financing, staffing, potential partnerships, and other key factors will help you launch a successful medical practice.
Ed Rabinowitz is a veteran healthcare journalist based in Upper Mount Bethel Township, Pennsylvania.
This edition of Oncology Fellows is supported by Genentech, a member of the Roche Group.