Keeping an orthopaedic practice—particularly a solo practice—profitable is challenging. Solo practitioners are usually the only revenue generators for the practice. To be successful, they must also assume the roles of office manager, administrator, and accountant. In my experience, the solo practitioner must take a very active managerial role in the practice, even though he or she will likely have little formal business training.
A good business plan increases the chances of success, but on-the-job experience is probably the most important asset. The solo practitioner should design a business model around an efficient workflow and personally do any research. Consultants may be beneficial but are also very costly. Colleagues are better sources of information, especially for evolving technologies such as electronic medical records (EMR) or practice management software. Solo practitioners shouldn’t be afraid to challenge vendors and negotiate. The key to success is profitability. Revenues must be greater than expenses, period.
Here’s my interpretation of a successful solo practice model.
A clear understanding of patient demographics and payor mix is essential to determining the profitability and viability of a practice. Is the city economically diverse or is it reliant on one or two medium- to large-sized corporations as the major employers? Are the companies economically solvent? Are they in a growth or a contracture pattern? If one of these companies has major layoffs, how will this affect the economy of the city and the practice?
What is the penetration of health maintenance organizations (HMOs)? If just a few dominate, what are the present negotiated rates and the trends for the past 5 years? This situation can be dangerous to practice viability for several reasons. Soloists have little negotiating power with these HMOs. Membership in an independent practice association may result in better representation, but the impact on reimbursement is limited. Network participation is another concern. Finally, corporate layoffs may result in a potential loss of patients and income.
Who are the referral sources? What is the ratio of primary care physicians (PCPs) to orthopaedic surgeons? A successful practice needs 10 to 20 referring PCPs for each orthopaedist. Establishing a professional rapport is essential to maintaining an uninterrupted flow of patients. A continued hospital, emergency department (ED), and practice presence should be one of the goals.
Where is the office located? Accessibility is essential. Being close to the hospital and near referring PCPs is important. With more than one hospital in town, a soloist should have an office equidistant from the hospitals. The use of satellite offices will increase accessibility, and sharing spaces with other colleagues can lower overhead significantly. To have the greatest patient mix, avoid the appearance of alliances that might discourage referrals from rival PCPs.
Owning or renting office space have different tax advantages. Owning provides negotiating power with financial institutions. Without equity, securing credit for major capital investments such as computer hardware, software, and radiographic equipment may be difficult. Discuss the options with an attorney, accountant, and banker.
Before leasing any space, carefully review any long-term lease and financial responsibilities (projected tax burden, maintenance fees) with an attorney.
How large a space will be required? Be sure to consider space for a physician’s assistant (PA), if needed. Most soloists can function well with three exam rooms and one cast room. Radiography is an important component of orthopaedic practices for both diagnostic purposes and generating income, but equipment and installation costs can vary by region (Table 1). Digital radiography is costly outside the hospital environment. Think economy—buying on the secondary market is a great way to get technology at a discount.
Other office space considerations include available parking, the waiting room, and common space. My experience is that patients with orthopaedic conditions dislike elevators and prefer seamless entry to the physician’s office, so having an office on the ground floor is key.
Don’t waste office space on record storage. Medical records and radiographs for a busy practice can quickly occupy up to 20 percent of the office space. Digitizing records and storing hard copies offsite requires less space and will lower costs significantly. Make every attempt to have a paperless office.
The number of staff that an orthopaedist requires varies. A solo practitioner needs to create an office environment that functions efficiently. Employees should be experienced, versatile, and able to work independently and together simultaneously. The front desk person is key—a combination of receptionist and manager. A mature, professional appearance and demeanor sets the tone for the office.
The billing staff can be the difference between success and failure. An experienced coder/biller may be hard to find and demand a substantial salary. In the long run, however, onsite billing is cheaper than a billing agency, which charges 7 percent to 8 percent of collections. If the agency requires that onsite personnel collect, organize, and forward superbills, this responsibility may require an additional employee, making the total cost prohibitive.
Both the solo practitioner and the office biller should regularly attend training seminars and courses, especially those that provide quarterly supplements and Medicare updates, which can enhance collections.
Employing a nurse or PA is a personal decision. Employees equal expenses, so a small, efficient staff is best. Try to foster a dynamic and collegial atmosphere and keep competition among employees to a minimum. Allow independence where necessary, but manage the office by staying informed on a daily basis.
Use of EMRs will soon become standard practice. EMRs can vary in complexity—from an electronic file cabinet to complex systems that manage all office information. Although some systems have monthly maintenance and license fees, EMRs are quickly becoming more affordable for solo practitioners.
Practice management software should be user-friendly and compatible with the EMR system, allowing appointment scheduling and generating superbills seamlessly. Ideally, an EMR enhances efficiency by generating clean claims daily and avoiding the weekly batch billing. Electronic bill submission has become standard. The digital paper trail makes it more difficult for insurance companies to deny claims and makes appeals easier. Medicare requires electronic submission and now deposits directly into the provider’s account.
I recommend investing in a commercial shredder. Shredding patient documents after they are scanned eliminates paper and promotes HIPAA compliance. Most EMR companies provide quarterly or yearly back-up discs upon request.
Durable goods, including injectables, should be scrutinized carefully to avoid unnecessary overstocking. Purchasing office supplies online may result in discounts and free shipping. Joining the AAOS Group Purchasing Program is another option. (See “A simple way to cut office expenses,” AAOS Now, September 2010.)
When managed effectively, durable medical equipment (DME) is a great source of revenue for a practice, but it can also negatively impact profits.
Ancillary sources of income
A solo practitioner could offer in-office surgery and ancillary services. Venture arrangements with hospitals and profit sharing from ambulatory surgery centers are completely different discussions and beyond the scope of this article. Compensated ED coverage should be negotiated to offset malpractice insurance costs.
Among the strengths a solo practitioner has are alliances with peers and hospitals. The soloist should play an active role in the hospital community, make friends, and never burn bridges for personal reasons.
Table 2 lists examples of monthly expenses. Many are fixed and recurring; others, such as utilities and phone, are variable. It’s important to have a reasonable idea of required expenses before pursuing a credit line (equivalent to at least 6 months of operating expenses).
Solo practitioners should make every attempt to be available to patients and PCPs as much as possible, even if that means rescheduling hours to be in the office each day and part-time in the operating room. The strategy should be to emphasize availability and continuity. Finding a specialty ‘niche’ may also help. A soloist will usually see all types of orthopaedic problems in the office, but developing a subspecialty will set him or her apart from larger groups and enhance name recognition in the community.
It’s not for everyone
The decision to begin a solo practice is a difficult one. The obstacles to a successful solo practice may initially seem insurmountable. A sound business plan, a clear understanding of the patient base, and some financial support are needed to succeed. The reward for taking on this challenge will be complete autonomy in decision-making. For those who work in small and large groups and want more independence, the chance to be your own boss is worth the risk.
Adam D. Soyer, DO, is a member of the AAOS Practice Management Committee. He can be reached at firstname.lastname@example.org
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