Starting a new Direct Care Practice is an exciting venture, offering more autonomy and the opportunity to shape the healthcare landscape. However, establishing a successful practice requires careful financial planning and strategy.
This article was created in collaboration with Nicholas Shiver, a Financial Advisor. He has assisted numerous Direct Primary Care clinicians in navigating the financial challenges of starting new practices.
Financial planning in healthcare is the comprehensive process of allocating financial resources and managing financial operations to ensure efficient and effective healthcare services delivery.
In the Direct Care Model, financial planning has unique particularities that set it apart from traditional healthcare financial planning.
Transitioning from a hospital system to your own practice means leaving behind certain benefits like retirement plans and life/disability insurance. It's vital to ensure your personal financial security is intact. This includes:
Understanding the costs associated with starting and running your practice is crucial for maintaining healthy finances. The budget should encompass the setup and maintenance of your medical office, the technology platforms you use, personnel costs, and other essential elements.
Direct care practices often operate with an emphasis on cost efficiency, utilizing lean staffing models and avoiding unnecessary expenses. Adopting best practices in prioritizing expenditures and avoiding unnecessary purchases, such as brand-new equipment or luxury office furnishings, can help in minimizing expenses.
It's crucial from the outset to have a solid financial forecast. This involves understanding your targets, planning for the break-even point, and estimating the time needed to reach it. Such considerations are fundamental in business planning. Knowing that you're on track with your financial plan offers significant peace of mind. It helps you feel more grounded and confident in your strategy.
'Break-even' is a term used for when you reach a point in a business venture where the profits equal the costs. For Nick Shiver, two critical factors contribute to this: the size of the patient base and overhead costs management. He explains that each Direct Care practice is unique, with every physician bringing a distinct financial situation. Some may need to reach their break-even point sooner than others due to their specific financial circumstances.
A key advantage of the Direct Care Model is that it typically operates on a subscription basis, where patients pay a monthly fee. This creates a more predictable revenue stream. And, as a business owner, you're in charge of all the costs and responsible for attracting patients.
Patient subscriptions directly impact revenue, making it crucial to develop a marketing strategy that suits your target audience and prioritizes effective, cost-efficient methods to attract patients. Additionally, analyzing your pricing strategy is important. Setting the right membership fee is crucial; it should reflect the cost of living in your area and cover operational costs while remaining affordable for patients.
For Nick Shiver, finding a balance between affordability for patients and financial viability for the practice is essential, ensuring the service is both respected and sustainable. He notes that a monthly rate of $60 in a rural town in Mississippi might align perfectly with the cost of living, whereas the same amount in a larger city in California may not. It could be perceived as insufficient for the services provided, affecting their perceived value. Moreover, it could make breaking even, covering overhead costs, and maintaining sustainability challenging, even with the intention to be affordable.
You are certainly intelligent and capable enough to run a business. Believe in your ability to manage a business effectively and study hard for that. At the same time, having the right mindset to seek help when necessary is crucial. Knowing when to ask for help, including in financial matters, is an essential part of successfully managing a business.
Starting your own DPC is a journey of both personal and professional growth. By focusing on your personal financial security and the financial health of your practice, setting realistic goals and prices, you can create a successful and sustainable practice that changes the culture of healthcare for the better. Remember, the road might be challenging, but with the right healthcare financial management and support, it’s a rewarding endeavor.