What it takes to start a small private medical practice

One of the main challenges in any new venture is knowing where to begin. What used to be handled by your administrative assistant / accounting department / janitor will now be your responsibility.

Of course, you can hire help. But most things you can DIY... at least once. Generally speaking, you will:

1. Save money and
2. Gain direct knowledge of what it takes to do a good job for when you do decide to outsource.

With so many tasks, organize around four phases: Plan, Protect, Launch, and Run.

1. Plan

Understand your prospective patients and what they want

"Make what you can sell and not the other way around," is an old saying to help remind ambitious entrepreneurs that no matter how good you think your idea is, it's really about the customer.

Start by researching your competition. Articulate your unique selling proposition and define your service offerings. And remember, a key part of strategy is choosing what not to do.

Next, visualize the experience from the point of view of your patient. This end-to-end description of how you will serve your patients will help you estimate your startup costs and operational expenses.

Design your patient experience

Outline every activity which you or your patients will perform. This is known as the patient experience. Start with how patients will learn about you. End with how they will return, provide you with written feedback, or refer new patients. Describe supporting capabilities, activities, and potential pitfalls for each step.

Aim to create a seamless experience: avoid imposing additional effort such as asking for the same information more than once.

Next, use your patient experience to estimate your costs for people, tools, software, supplies, utilities, etc. Document assumptions such as how long each patient visit will take and how often your equipment will need to be replaced.

Now you're ready to combine your costs with what you might earn. From your competitive analysis, determine what your prospective patients will be willing to pay you. Don't simply assume they'll pay what your competitors charge. For instance:

• You may be (or want to be perceived to be) offering a higher-touch service.
• You may be operating with fewer staff.
• You may be located in a more expensive neighborhood.

Also, it may not be obvious from your research how busy other clinicians are in your area. Maybe they charge more but see fewer patients, whether or not intended.

Determine profitability

Add assumptions about your costs and fees to a spreadsheet.

Eventually, you should have a mathematical representation of a medical practice. Adjust variables like cost per visit and number of patient visits based on valid assumptions. Eventually, you must plan to earn more than you spend. Use this spreadsheet model to help secure your financial resources.

Ideally, you should document all of this in a business plan document. Many practices skip this part but it's especially important when others will be involved. Remember what they say about assumptions...

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🔥 For all but the simplest arrangements, seek advice from reputable lawyers, CPAs, financial advisors, and insurance brokers who are familiar with small medical practices.

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2. Protect

Once you have a location, get permission to operate

Note: To avoid making a long post longer, I am assuming that you've already found a suitable location. I understand this may be a major undertaking for some so I may post about it at a later time.

Professional due diligence

Early in your exploration process, scour the website of your professional licensing board and understand your scope of practice. Note guidance, rules, examples, and limitations. Review recent disciplinary notices to get a sense for enforcement priorities. Make sure your license is active and in good standing.

If in doubt about what you are authorized to practice, work with a lawyer and insurance broker who are experienced with your specialty. You don't want to discover a costly limitation later.

Also, consider additional training. You may need to bolster your experience and training with a recognized or accredited certification. Medical specialization continues to accelerate and you want to be informed and taken seriously. It will build your confidence in yourself and in the minds of your patients.

Pay "the man" his money

One of the benefits of living and working in a modern democratic society is that business interests are protected by the state. This means that assuming you already have the right qualifications (medical license for doctors, CPA for accountants), you can pay a fee and register to do business with your state, county, and municipality.

In return, the government will allow you operate a business which protects you from unlimited personal liability if you make an honest mistake. Importantly, your governmental financial support also helps maintain a healthy soil in which to grow your business. Not just anyone can offer psychedelic medicine without the major risks of operating illegally underground.

Incorporation

One of your first steps towards getting your name on your door is bureaucratic: Hiring a registered agent of service.

Essentially, this is your representative who will "be home" to answer the door or open the mail if you're ever served papers. In other words, the government needs to where to send official government correspondence so that you cannot say, "Sorry, I never received it."

With a registered agent, you can now submit an application to create a professional corporation. (In California, this is the only legal entity that's authorized to practice medicine.) You can submit an application on the CA Secretary of State's website called BizFile Online and pay the fee of $100.

Tax matters

Since your medical practice will be a separate taxpaying entity from you, obtain taxpayer IDs with the IRS and state agencies.

• Apply for an Employer Identification Number or EIN on the IRS website for $0.00.
• In California, register with the Employment Development Department or EDD, again for $0.00. Even if you don't plan on hiring employees, you may need to pay yourself as an employee. It'll also make it easier if you do decide to hire later on.
• Note: When making your annual payment to the CA Franchise Tax Board, you'll use your entity number given to you by the CA Secretary of State that's printed on your articles of incorporation.

For some, this is also the time to change how your professional corporation is taxed. While you should ask your CPA about your specific situation, you may be able to avoid some self-employment / payroll taxes if you elect to be taxed as an s-corporation with the IRS on Form 2553.

What's in a name

Unless you plan to open a medical practice that's literally in your name, you probably need to a fictitious business name with your professional licensing board. For doctors, you'll need to part ways with $70 and apply for a Fictitious Name Permit or FNP with the CA Medical Board.

Also, depending on your county and municipality, you may need more approval to use your fake name. For example, in San Luis Obispo, you need to apply for a Fictitious Business Name or FBN from the county but not the city. Instead, within city limits, you'll offer your financial support via a business license and business tax certificate.

Before paying all these fees, open a business checking account and credit card early in your process. It's a very good habit to keep your personal and business finances separate.

Controlled substances (very important)

If you're planning to handle controlled substances, register with the feds using DEA Form 224 and pay $888 which is good for three years. Remember that you'll need a DEA registration for each principal place of business (ie, where you will be storing your controlled substances). Also, depending on your state, you may need a second license to handle controlled substances.

Note: As of April 2024, California does not require a second controlled substance license requirement.

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🔥 While a competent lawyer can complete the steps above for you, it may be worthwhile to complete yourself. A better use of your lawyer's time—and your money—is to have your lawyer review your website verbiage, marketing messages, and policies / standard operating procedures or SOPs.

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Stake your claim online

All business, including medical practices, should have an approach to building and maintaining a trusted brand across the world wide web and social media. You will need to register domain names, open email accounts, find a website host, and setup various social media profiles (Instagram, YouTube, LinkedIn, etc.).

Budget a lot of time and financial resources to design, build, and test an accessible website too. Find a trustworthy web developer with a good reputation who can provide recent examples. You'll likely be working with them lots as you construct your online identity so make sure they're responsive and make good use of your time.

Regardless of how you feel about putting yourself online: Now's a good time to start drafting your first content too. This can be in the form of social media posts, blog articles, or email newsletter issues. Start drafting now so that you can solicit feedback and make revisions before it's time to go-live.

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🔥 How you present yourself online reflects how you care for patients IRL. Many consider an attractive website, active social media presence, and updated Google Business or Yelp profile to be "table stakes" when choosing a specialty medical provider.

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Understand and manage risks

Insurance

Obtain policies for malpractice, business owner’s, and worker’s comp insurance. While it may increase your premiums, make sure that your insurance carriers provide you with written policies that accurately describe your practice. For malpractice insurance, this means that your policy should explicitly cover the type of psychedelic therapy that you provide. Lastly, remember to review and update your insurance policies yearly or whenever there’s a significant change to your practice.

Patients

Create a template to obtain informed consent from patients. Adopt policies and standard operating procedures which adhere to HIPAA and medical records. Document agreements and handbooks for employees and independent contractors. Print physical copies of emergency procedures for your practice. Remember to review and revise any documented policies and SOPs at least yearly.

Operations

Medical providers are familiar with continuing education or CE/CME. While you may miss the mandatory hospital trainings, you likely need to prove that you received sufficient credits the next time you renew your license. Therefore, get in the habit of attending relevant learning and training opportunities throughout the year to avoid the panic later. Not only will you earn new certificates to proudly display, but you’ll meet practitioners with similar interests.

Course topics where CE/CME credits tend to be included:

• Education on the treatment or management of patients with opioid or other substance use disorder which is now required by the DEA
• Advanced and basic life support ALS/BLS and CPR for healthcare providers
• Fundamentals of Psychedelic Assisted Therapy or PAT from accredited providers

When planning your physical location, remember physical security and safety. You may need to install security, safety, and accessibility measures such as lights, locks, safes, sensors, cameras, alarms, signs, mirrors, handrails, safety and accessibility features, fire and water protection, backup power, etc.

Last but not least, it pays to build relationships with multiple distributors of medical equipment and supplies. As you know, shortages are commonplace but unexpected and can lead to turning patients away.

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🔥 Don’t forget to carefully manage access to your tech tools and online accounts. Scams targeting small businesses are sophisticated, so it pays to be paranoid. At best, compromised credentials are a major distraction. At worst, they can lead to catastrophic and irreversible damage to your practice and reputation.

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3. Launch

Evaluate tech tools and vet service providers carefully because of high switching costs

Most will need the following to get going:

1. Email list management: Target different people with custom marketing messages
2. Phone, texting, and collaboration: Communicate with patients and colleagues
3. Electronic medical and health record system: Save HIPAA-compliant patient information
4. Payment processing: Accept payments and provide refunds
5. Calendar and scheduling: Manage when you can treat patients
6. Bookkeeping: Maintain financial health and support tax calculations
7. Creative tools: Create, edit, and share documents and brand assets such as logos, brochures, apparel, signs, banners, merch, etc.
8. Password manager: Save and share secure credentials with colleagues

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🔥 Make sure you ask potential service providers about onboarding and configuration, customer service, fees, and service levels. Also, if you have any doubt about the their ability to secure and protect your information, go elsewhere.

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Prepare to open

Revisit with the pros

Meet with your lawyer, CPA, financial advisor, and insurance broker to review your progress and plans. This is also a good time to ask about establishing employee benefit plans for health insurance and retirement even if you are your only employee.

Download all the apps

This is also when you should be selecting and configuring your tech tools. These tasks may include:

• Establishing a way to sync work and personal email and calendars
• Compiling email distribution lists
• Recording phone greetings and preset messages
• Customizing patient intake forms
• Setting rules for scheduling appointments
• Initializing your chart of accounts and linking bank accounts
• Provisioning user access

Be memorable

Create a brand identity that may include a logo and service mark. Order custom apparel. Design and install your practice’s signage. Display relevant certificates and required permits and disclosures. If required by your municipality or insurance carrier, schedule health and safety inspections.

Hire, onboard, and train

Recruit your first employees and collaborators such as independent contractors who will provide licensed therapy to your patients. Like finding a location, this can be a significant, time-consuming step so I may post about it later.

Final touches

Purchase and install furniture, fixtures, and equipment. Procure and inventory supplies. Dry run with friends and family and listen to their feedback. Take photos of your team and your clinic. Order business cards and brochures.

Get involved in your community

Introduce yourself to potential collaborators, competitors, and patients. For those offering psychedelic medicine, this means:

• Local therapists, nurses, psychiatrists, clinical psychologists, primary care physicians, and other medical specialists like pain clinicians.
• The holistic wellness community.
• The public, including local news outlets, event organizers, and non-profits.

Join professional alliances, trade groups, directories, and referral networks. Consider hosting a grand opening or open house event for your friends and family including prospective employees, collaborators, and patients.

4. Run

Serve and delight your patients in an ethical and caring way

Other practice management routines to follow include:

• After your patients complete their treatment, check-in and ask them for feedback. You may also want to solicit a Google review and ask for referrals.
• Support and develop employees and collaborators. Monitor compliance with your policies and SOPs. Provide feedback and evaluate performance regularly. Reward outstanding efforts.
• Track financials closely. Perform (or outsource) bookkeeping and payroll routines. Forecast P&L and cash flows. Look for ways to save money. Analyze scenarios based on proposed changes to your prices, costs, and level of activity.
• Feed the algorithms with responsible content. Post content such as images, videos, and articles to promote your practice regularly.  But resist the temptation to overpromise results. Maintain your website and online profiles. Offer thoughtful comments in online forums, discussion boards, and threads. While it can become a full time job, regular content creation will send an unmistakable signal to potential patients that your practice is thriving.
• Get in the habit of optimizing and growing. Review and renegotiate subscriptions and agreements. Conduct experiments (eg, run a Google Ads campaign) before you make changes to how you operate. From time to time, it may be worth exploring whether to offer new services or serve new patients by accepting insurance.
• Continue to engage locally. By publishing newsletters, attending meet-ups, speaking at events, and presenting research, your community will start to notice your thought leadership and influence.

Now, get started!

This article was inspired by a recent engagement where I helped my good friend, Dr Ray Rivas, start Innerbloom Ketamine Therapy in San Luis Obispo.

My hope is that this advice helps you move one step closer towards opening your own private practice in California. Keep in mind that your situation will be different. For example, you may need to acquire real estate, accept health insurance, or prescribe remotely.

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🔥 If you are considering offering ketamine therapy, I also highly encourage you to explore Ketamine StartUp and register for their course. It is run by Drs Sam and Kim Ko and is an indispensable resource for clinicians who plan to offer ketamine therapy.

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‍I wish you good luck!