Starting a New Practice

June 1, 2008

I am an employed pediatrician considering going into equal partnership with the administrator of another practice. Our goal would be to develop offices in several locations, employing others to staff them. What is wrong with this picture? What should I be aware of? What precautions should I take?

Question: I am an employed pediatrician considering going into equal partnership with the administrator of another practice. Our goal would be to develop offices in several locations, employing others to staff them. What is wrong with this picture? What should I be aware of? What precautions should I take?

Answer: Here are a couple of things that come to mind:

What are the state laws concerning how your practice can be organized? Is it an LLC? You may not be allowed to form a professional corporation with a manager as a partner and there may be negative tax consequences. Just look into how you’ll form.

Carefully work through what happens if you or the administrator leave or are asked to leave.

Why multiple locations to start? You'll have extremely high overhead and low revenue in the beginning. You'll want a robust business plan with detailed expected revenue and cost projections over the first year. It would be less risky to grow organically.

Consider the reimbursement scenarios for your employed physicians. Pediatrics is high-volume, as you know. Flat salaries don’t encourage productivity.

Consider recruitment scenarios for employed physicians. A good, experienced doc with a following is unlikely to join as an employee. She’ll want a piece of the pie and longer-term security. She’d certainly not want to report to a manager. It may be OK to have mostly young physicians who rotate out as they get older, but keep in mind the impact on patient loyalty and revenue (slower physicians, high recruitment costs).

What distinguishes these practices from all the others in your area? What is your brand? What would make a mom switch practices to you? Or would you target newcomers? If so, would you do hospital rounds to infants? How does that impact the staffing and reimbursements model?

None of these issues are insurmountable. You'll just want to make sure you have it covered.