Financial Planning for Young Healthcare Professionals Starting Their Own Practice

June 14, 2024

7 MIN READ

Imagine the thrill of owning and running your healthcare practice—an endeavor that stands as a significant milestone in your career. But how do you ensure everything runs smoothly from the start? The answer lies in meticulous financial planning. Starting a healthcare practice, whether you are a doctor, dentist, pharmacist, physical therapist, or psychologist, requires strategic financial management to navigate the complexities involved. In this guide, we provide you with essential tips and steps to help ensure that your new practice thrives from day one.

Choosing the Right Business Structure

Selecting the appropriate business structure is a critical decision when starting your practice. Many healthcare professionals opt for a Limited Liability Company (LLC) due to its liability protection and financial benefits. (Note: Some states require a PLLC, the P stands for “Professional”.) An LLC provides a separation between personal and business assets, protecting you from potential legal issues. However, other structures like sole proprietorships and corporations have their merits. For instance, an S Corporation (tax filing) or C corporation might offer tax benefits, while a sole proprietorship (tax filing) allows for simple setup. Evaluate your specific needs and consult a business advisor to make an informed decision.

Appointing a Registered Agent

A registered agent is vital for handling legal documents and ensuring your practice complies with state regulations. This person or business will receive important paperwork on your behalf, including court documents and official state communications. Having a reliable registered agent keeps your practice in good standing. Services like ZenBusiness can assist in fulfilling this role, making sure all necessary legal documents are handled professionally and timely. (Disclosure: Mainstay Capital utilizes ZenBusiness for our own registered agent services.)

Filing Necessary Documentation

Setting up your practice involves filing several key documents. Start with the Articles of Organization, which you can submit to the Florida Department of State. This document includes essential information about your practice, such as its name, principal place of business, and whether it will be managed by members or managers. Utilizing resources like ZenBusiness can streamline this process.

For example, Dr. Smith, a newly licensed (fictional) dentist, used ZenBusiness to set up his PLLC, and they submitted the articles on his behalf, as well as assigning themselves as the Registered Agent for the company, while providing some of the next documents in a streamlined workflow.

Creating an Operating Agreement

An operating agreement outlines the ownership structure and operational procedures of your healthcare practice. Although not required by Florida law, having this document can provide additional legal protection and clarify roles within your practice. For example, setting clear guidelines about decision-making processes and profit distribution can prevent potential disputes among partners. Templates or professional services can help draft a comprehensive agreement tailored to your specific needs.

Obtaining an Employer Identification Number (EIN)

An Employer Identification Number (EIN) is crucial for tax purposes and banking operations. The EIN acts as a unique identifier for your practice with the IRS. You can apply for an EIN through the IRS website, which is a straightforward process essential for managing your practice’s finances. For instance, securing an EIN helped Dr. Jones, a (fictional) physical therapist, open a business bank account, credit card, and accounting software all with her EIN, ultimately streamlining her payroll operations, ensuring her financial activities remain organized and compliant.

Operating Fundamentals

Patient Communication

Effective communication with patients is essential for building a successful practice. This includes establishing clear expectations for appointments, treatment plans, and financial policies. It also involves actively listening to patients’ concerns and addressing any questions or issues they may have. Maintaining open lines of communication can foster a strong patient-provider relationship. Just make sure it’s done efficiently!

Creating an Effective Treatment Plan

You (as the healthcare professional) should know this better than we do, but here are our notes.

When it comes to patient care, having a well-defined treatment plan is crucial for not only the outcome, but as a business as well. It should outline specific goals, timelines, and expectations for both the provider and the patient. This not only helps ensure that patients are receiving appropriate care, but it also helps them feel more involved in their own treatment.

The end goal here is referrals! The more important the patient feels (from being involved and treated well), the more referrals and good reviews!

Equipment/Supplies

As a provider, it’s important to have all necessary equipment and supplies on hand to effectively treat your patients. This may include medical devices, medications, and other tools specific to your practice. It’s also important to regularly check and maintain the quality of these items to ensure they are functioning properly.

Hiring/Training

In order to provide the best care possible, it’s important to have a well-trained and competent staff. This includes hiring individuals who are not only qualified for their positions, but also have a passion for helping others. Investing in ongoing training and development opportunities for your team can also help improve the overall quality of care provided.

Payroll/Billing

In order to run a successful practice, it’s important to have efficient payroll and billing processes in place. This includes accurately tracking employee hours, managing insurance claims, and promptly sending out invoices to patients. These tasks can be time-consuming, but implementing effective systems can help streamline the process and ensure timely payments.

Procedures/Protocols

Having clear procedures and protocols in place for different scenarios can help streamline patient care and improve efficiency. These should be updated regularly as new information or practices become available, ensuring that you are providing the best possible care for your patients.

Location/Accessibility

The location and accessibility of your practice can also play a crucial role in attracting new patients. Having a convenient and easily accessible location, with ample parking and public transportation options, can make it easier for patients to schedule appointments and receive the care they need.

Marketing Strategies

In addition to word-of-mouth referrals, utilizing marketing strategies can help increase awareness of your practice and attract new patients. This may include creating a website, utilizing social media platforms, attending local health fairs, or partnering with other healthcare providers in the community.

Patient Satisfaction

Ultimately, patient satisfaction should be at the forefront of all provider’s minds. By consistently providing high-quality care and actively listening to feedback from patients, you can improve their overall experience and potentially generate positive reviews

Mitigating Risk

Liability/Operating Insurance

Having liability and operating insurance is essential for any business, none more so than a medical practice. These policies protect your practice from potential legal action in case of injury or damage to a patient. Liability insurance covers negligence claims related to treatment, while operating insurance protects against property damage or other incidents that may occur within the practice. It’s crucial to obtain the right type and amount of insurance for your specific needs, as each practice will have different risk levels.

HIPAA Compliance

As a healthcare provider, it’s essential to comply with the Health Insurance Portability and Accountability Act (HIPAA). This act protects patients’ personal health information from being disclosed without their consent. HIPAA compliance includes implementing security measures such as firewalls and encryption software, creating secure passwords, and regularly training staff on handling sensitive information.

Data Security

In addition to HIPAA compliance, it’s crucial to prioritize data security within your practice. This includes securing patient records, financial documents, and other confidential information. Cyber attacks and data breaches can result in legal consequences, loss of trust from patients, and damage to your reputation. Invest in robust security measures such as firewalls, encryption software, and regular backups to protect against potential threats.

Professional Licensing

Maintaining proper licensing is another important aspect of running a successful healthcare practice. Depending on your specific field, you may be required to hold certain licenses and certifications to legally provide services. It’s essential to stay up-to-date on any changes or updates in licensing requirements and ensure that all staff members are properly licensed as well.

Annual Compliance

Maintaining compliance with state laws requires filing annual reports to keep your practice in good standing. In Florida, annual reports are due by May 1st each year following the formation of your practice. Timely filing ensures that your practice remains active and avoids penalties.

Additionally, the federal government (FINCEN) requires a one-time report (BOI) within 90 days of forming a company, and then when any changes are made to the ownership of that company. This report helps stop terrorism, money laundering, etc. and comes with heavy penalties for failing to complete it.

Finally, your tax preparer will ensure that your books and records (from your accounting software) is properly communicated with the IRS. Make sure to listen close when they bring up quarterly payments or withholdings!

Financial Management Best Practices

Managing your practice’s finances effectively is crucial for long-term success. Open a dedicated business bank account to separate personal and business transactions, making accounting easier and maintaining your limited liability status. Securing a business credit card helps track expenses and simplifies tax filing. Additionally, using cloud-based accounting software like QuickBooks or Wave Accounting can streamline financial management.

Tax Planning and Management

Effective tax planning is essential for your practice’s financial health. Keep track of all business expenses, as these can be deducted from your taxable income. Consider working with a tax professional to develop strategies that minimize your tax liability and ensure compliance with tax laws.

Utilizing Financial Advisors

Consulting with a financial advisor can provide personalized financial planning tailored to your practice’s needs. Advisors can help you navigate financial decisions, from securing funding to optimizing your tax strategy, ensuring that you execute each step correctly.

Conclusion

Starting and managing a healthcare practice involves several critical financial planning steps. By choosing the right business structure, appointing a registered agent, filing necessary documentation, creating an operating agreement, obtaining an EIN, maintaining annual compliance, and following best practices in financial management and tax planning, you can set a solid foundation for your practice. Moreover, seeking guidance from financial advisors can enhance your planning efforts and lead to long-term success. Take proactive steps and utilize available resources to effectively navigate the financial aspects of your new practice, ensuring a bright future for your healthcare career. To get started on personalized financial advice, contact Mainstay Capital for expert assistance tailored to your unique needs.