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Monday, June 09, 2008

How can an established medical practice go under? It is easy.

The used to be a saying that went something like this: there are no starving doctors. When I decided to become a physician, in 1987, that was certainly true. Now, established practices that have served communities for 40 or more years are going bankrupt. The question is how can this be happening?

It is actually quite easy. Here's how:
  1. Take a practice full of established patients that are older and sicker.
  2. Combine that with rock bottom reimbursements especially for that exact patient demographic
  3. Add to this brew soaring medical liability premiums and rising payroll costs
. . .and you have a ship on the verge of foundering.

Then throw onto the already struggling business disruptions in cash flow, the inability to get additional financing, ie loans, and rising energy costs and voila, the ship goes down like a rock.
Very easy indeed and it can all happen in the span of 3-4 months.

Here's how to defend your practice from this demise.
  1. Have 3 months of operating expenses for the business, minus your salary.
  2. Have at least 3 months of savings to cover your personal costs.
  3. Develop a 5 year plan for your practice and strive to achieve it.
  4. Know your numbers amd metrics inside-out, backwards and forwards.
  5. Be lucky!
Good luck.