Private practice versus academics versus hospital-based employment. Clinicians for years have stood at this crossroads, weighing the options against each other, envisioning where each choice might lead them in their passage through medicine.
But what about those interested in launching their own practice? At what point are they ready to make the move? And how might they even get started?
Those questions were top of mind for board-certified ophthalmologist Dagny Zhu, MD, on the last day of her fellowship training at Bascom Palmer Eye Institute in Miami. Having attended medical school at Harvard and residency at USC, she was ready to return home to Southern California and start a career in ophthalmology. Unlike most of her colleagues, however, she did not have a job waiting for her after fellowship. Her eyes were set on private practice, but none of the offers she received aligned with her long-term goals. And in a saturated market, especially in cataract and refractive surgery, she was in a bind.
“For me, I always knew that I wanted to come back to Southern California because that’s where my family was,” Dr. Zhu said. “I decided to go into private practice for the opportunity to become my own boss, but as with a lot of the entry level positions available today, they didn’t necessarily guarantee partnership and were seen as a revolving door.”
Working part time and per diem, she spent months searching with a recruiter for a good fit in the area. That’s when she struck gold. A refractive surgery practice went up for sale not far from where she grew up. Initially, a large corporation intended to purchase the practice and employ Dr. Zhu as one of its associates. Her vision was different: She saw herself as an owner.
The biggest hurdles to acquiring the practice, according to her, were not knowing much about the process and figuring out how to finance the deal. “In medical school and training, we learn medicine, we learn how to take care of patients,” she said. “We didn’t learn anything about the finances of purchasing or running a practice, or even about personal finances. It was all very new and intimidating to me.”
So she turned to books and online blogs, and paid for the opinion and advice of experts. Entering the conversation equipped with this newfound knowledge, she was able to broker a deal that positioned her as principal owner.
The catch? She had to finance her end from the get-go. Due to the unconventional nature of the deal involving partnership with a corporation, banks were reluctant to furnish her with a loan. In the end, she chose to use her personal savings and borrow money from friends and family to clinch the deal.
“I had to put in everything on my own with no guarantees and just go with my gut,” she said. “For me and my husband, it was the biggest financial risk of our lives because we didn’t know if it would ever get rewarded, if we would ever see any of that back.”
Now, roughly four years since her decision, Dr. Zhu works as medical director of her own corneal, cataract, and refractive surgery practice in Los Angeles. The beginning required considerable sacrifice, she said; she worked almost nonstop, taking only two weeks of unpaid vacation during the first two years. Despite its challenges, practice ownership has given Dr. Zhu unique opportunities not only to hone her surgical craft, but also to engage in collaborations with industry leaders as a key opinion leader, participate in clinical trials using cutting-edge technology, and serve as a clinical instructor and mentor for trainees throughout the greater Los Angeles area.
“Seeing where I am now in my career and the opportunities and experiences I’ve gotten this early on, I feel it was all worth it in the long run,” she said. “I would not be where I am today had I not seized that once-in-a-lifetime opportunity.”
For clinicians seeking to establish or buy a new practice, Dr. Zhu details four steps she found to be fundamental based on her experience.
1. Create a Business Plan
A business plan is an outline of your own short- and long-term goals for what you want your practice to become, Dr. Zhu noted.
“It's not only good for yourself, but also necessary for loans,” she said. “Banks are going to want to see a business plan. As part of that, you have to figure out what your mission statement is — what you want to provide for patients.”
For the financial aspect of the plan, a strong budget is key, she said. It should cover month-to-month operational costs as well as the initial investment into setting up a practice.
It’s also helpful to determine early on how much profit the practice is expected to make, she continued, calculating how much annual revenue is needed to offset overhead costs and allow the practice to hit its financial goal. This entails understanding how to create and interpret a profit-and-loss statement (P&L).
Another important part of the business plan she highlighted is marketing. Determining whether it would be better to rely on more traditional marketing (e.g., print, radio, TV) or digital marketing through social media and internet ads is critical.
2. Do Your Due Diligence
“The real value of a medical practice is actually its goodwill, or the brand and reputation of the practice or physician,” Dr. Zhu said.
In her case, Dr. Zhu planned to buy a practice with 20 years’ worth of reputable care, led by a surgeon well respected across the community. “I definitely advise you to get a proper valuation,” she said, pointing out that there were companies that assessed medical practices based on historical profits and context. She also suggested servicing an accountant to help review a practice’s P&Ls, as well as a lawyer who specializes in medical practice transactions.
“You want to pay for expertise, pay for marketing consultants, pay for good lawyers and accountants, invest in the technology from the get-go, and invest in making your practice the way that you want, because long term, that's how you're going to be successful,” she said.
Beyond purchase price, Dr. Zhu emphasized the importance of establishing non-negotiables, requesting a noncompete clause, and preparing a backup plan.
For those looking to start a new practice, reputation has to be built over time. There could be greater risk involved in first-time ventures as a result, depending on neighboring competition. In that scenario, “you want to know your competitive advantage, and advertise the strengths that differentiate your practice from others around you,” she said.
3. Transition Smoothly
The goal of the transition, be it to an existing practice or an entirely new one, is to make everything as smooth as possible, Dr. Zhu said. Transitioning into ownership entails a number of challenges: What personnel should stay on or need to be hired? What backend operations are required? How will the patient base view the practice?
“In the beginning, you’ll have to wear multiple hats to decrease overhead: physician, medical director/CEO, marketing, human resources, accountant,” she said. “So make sure you’re 100% prepared mentally, financially, emotionally.”
One arrangement Dr. Zhu negotiated was to have the previous practice owner stay on for a brief period to introduce her to the patient community. That agreement proved invaluable during her transition.
4. Identify What Works
The work does not stop once the deal is done, Dr. Zhu said. Practice owners have to continuously monitor what works well and what needs changing, and make sure to upgrade or invest in new equipment to make the practice run smoothly.
For her practice, Dr. Zhu augmented the previous owner's traditional marketing strategies through digital and social media. She also made substantial investments into new laser machines and imaging devices, with the intention of ensuring better patient outcomes.
“Providing excellent, ethical care and running a profitable business are not mutually exclusive … they complement each other,” she said. “If you truly believe that you're providing the best service and outcomes to your patients, the revenue will come.”
Dr. Zhu encouraged physicians to seriously consider owning a practice, keep an open mind, and remain confident in themselves, particularly as medicine becomes more corporatized.
“It's becoming even more crucial for doctors to retain some control over the operations and type of clinical care being provided, because we understand how to prioritize patient outcomes,” she said. “We cannot just become employees who let [those with] MBAs and CEOs dictate how patients are cared for — we cannot let that go.”
Have you considered starting your own private practice? Share your experiences in the comment section.
Illustration by April Brust