The cost of starting a medical practice is one of the top concerns of physicians and rightly so. There are a lot of different factors that support the smooth functioning of a medical practice and can add to the overall expenses. While Chapter 1 covered the various pre-steps involved in starting a medical practice, in this chapter we look at the necessary legal steps that you need to take and other costs associated with starting your own medical practice. Plan on doing this 4-6 months before opening your practice.
Buying or Leasing Your Medical Practice
To start a medical practice, you’ll need a physical space. This is one of the most important costs of starting a medical practice. Your choice stands between leasing or buying a practice. Considering most physicians are looking to build a long-term business and have established clients, buying a place seems like a better choice. That said, there are a lot of factors that go into deciding whether you should be buying or leasing your medical practice. Here are some of them:
Pros of buying a medical office space:
- You get the complete freedom to transform that space and not have to worry about the rental increase.
- Commercial estate is a great investment in the current times.
- You do not have to worry about paying rent every month.
- Locking in long-term mortgage plans helps you better plan your financial resources.
Cons of buying a medical office space:
- With the rising interest rates and market fluctuations, you may end up paying more than the place is worth.
- Expenses such as property taxes, utilities, and maintenance costs can increase your expenditure.
- You’ll have to think about the additional investment you’ll have to make to make your medical practice open for business.
- You’ll have to keep the building defects and environmental contamination in mind when you buy a practice.
Pros of leasing a medical space:
- You’ll be free of any additional responsibilities that come with buying a space.
- You’ll be able to get a space in a prime location that would be too expensive to buy.
- If your practice grows in the future, you’ll have the option to upgrade without much fuss.
- It helps you with tax deductions.
Cons of leasing a medical space:
- Your rents can increase every year increasing your overall costs.
- Leasing won’t help you earn any equity.
- You’ll have limited control over the maintenance and overall renovation of the space.
- Your landlord may refuse to renew your lease affecting your stability.
Choosing to lease or buy a space for your medical space depends on the resources that are available to you and the level of expertise you’re at.
Insurance and Finances
You might want to incorporate your medical practice as a legal entity.
Incorporating your medical practice is an additional cost of starting your medical practice and it means that you wish to create a fresh legal identity (the corporation). This identity becomes the owner of your practice. Essentially, incorporation is a separate legal identity for your medical practice.
Advantages of incorporating your medical practice:
- It helps you with your personal income tax savings
- It helps you in tax deferral
- It helps a married couple save on their overall household income
Disadvantages of incorporating your medical practice:
- You’ll have to deal with administrative and legal fees
- You’ll have to pay a provincial health tax once the corporate payroll has exceeded a certain threshold
- You’ll be required to keep up-to-date records of all your activities
Here’s a simple 3 step process of incorporating your medical practice as a legal entity:
Step 1: Find a lawyer who can help you get all your documents and application in place.
Step 2: Choose a corporate name that is free of any copyright or trademark issues.
Step 3: Submit all your docs and your Professional Corporation Application.
While incorporating a medical practice comes with a lot of benefits, you must still look at all the pros and cons and its impact on the overall cost of starting a medical practice before deciding to turn your practice into a legal entity.
Opening The Right Business Accounts for your Medical Practice
Operating your new medical practice involves taking care of all the administrative details such as setting up all the right bank accounts and ensuring you have the right resources allocated for the right tasks. Here are a few bank accounts that you need to start:
Primary Operating Account
This will be the account that you’ll use for all the finances of your medical practice. For most businesses, this is the only account that they use. Consider factors such as financing your operations, transaction fees, interest rates, and convenience to your location before deciding on the bank.
This account primarily exists so that you can keep track of what you pay to your staff. For this, pick an account with lower transaction fees as you’ll be transacting on a regular basis.
If you receive electronic funds transfers from your patients, then it may be a good choice to have an account for receiving and depositing them. Having this account will streamline your process of accepting funds.
This account helps you accept funds from patients or insurers and keeps other payments separate. This helps you get a clear picture of the inflows and outflows of money from your medical practice.
Project Related Accounts
This account can be for specific projects such as renovations, equipment, infrastructure, and more.
As a small business, you will need to remit your GST/HST payments to the government regularly. Having a dedicated account can help you keep tabs on everything that you need to spend.
There are many other factors for which opening the right business accounts for your medical practice can help you better plan your finances and lower the overall cost of starting a medical practice.
How to Get Insurance For Your Medical Practice
A major cost of starting a medical practice once you’ve established it as a legal entity is to get insurance to protect it. There are different types of insurance needed to safeguard different aspects of your medical practice. Some of them include:
Medical Liability Insurance
Having the medical liability insurance will give you the right to legal representation in the event that you harm a patient and are sued. This insurance is a must for any doctor running their own medical practice.
Medical Practice Business Insurance
This covers various areas of businesses such as business overhead insurance, business interruption insurance, and general liability insurance. There are various packages available for this insurance. You need to pick the one that best fits your needs.
Having property insurance will insure your building from natural disasters and damage as well protecting the equipment you own.
Worker’s Compensation & Group Disability Insurance
This insurance is to ensure the well being of your employees.
As a doctor and an entrepreneur, you are the primary asset to your medical practice. So, protecting yourself and your loved ones through a good life insurance policy is a beneficial idea.
If you’ve taken any loans to run your practice, you need insurance in case of any unforeseeable loss or damage to your business.
Insurance is a major cost of starting a medical practice and you need to make sure that you get insurance for your medical practice to safeguard its longevity.
Professional Obligations (Licensing, Memberships & Credentialing)
Before you start hiring for your medical practice, you need to ensure that you have all the licensing and other documentation in order. For example, for an employee to be able to work at your practice, you need to ensure that they fulfil all the professional obligations such as licensing, memberships & credentialing.
This refers to the assessment and confirmation of qualifications. This indicates that the doctor you hire has the necessary skill to offer care to patients. This involves documentation to prove the following:
- That they have all the requirements needed to practice medicine
Privileging involves receiving the legal authorization by a health authority that defines the medical services, procedures, and treatments that a doctor can offer as a professional. This privilege, however, is limited to that specific facility.
Licensing and Memberships
If you’re starting a medical practice, you need certain licenses and memberships to practice medicine. This depends on the province you belong to. Processing these documents can often take a couple of months so it’s important that you start as soon as possible.
It is important for you to know your licensing and membership obligations, both within the province or territory you work in and also nationwide. Having the correct credentials and documentation can help you establish a safe and successful medical practice, along with ensuring anyone working for you meets those same standards.
Create a Team of Experts
Creating a team of experts will help you navigate the business side of your practice. You should think about getting an accountant, a lawyer and a financial planner and include these resources under the cost of starting a medical practice section of your business plan.
Having a good accountant can help you manage money for your medical practice and help you save on your tax bills and prepare you for the future. Here are 3 ways finding the right accountant for your medical practice can help you:
Establishing your Accounts Payable System
Starting and managing a medical practice comes with a list of bills to pay – you’ll be processing invoices from suppliers as well as bills for things such as rent, utilities, water, Internet, and phone. Your accountant can help you set up a system that ensures all these bills are paid on time while keeping a track of your overall expenses.
Establishing your Accounts Receivable Systems
Similar to accounts payable, your accounts receivable system is to track and receive all income flowing into your medical practice. This, however, will depend on the nature of your business and factors such as the number of doctors billing from your office, do you see private clients or only insurers, is your accountant shared by other doctors too, and more.
Setting up your Payroll System
Setting up a payroll system isn’t complicated but you have to ensure that it is systematic. You need to keep the provincial and federal regulations in mind. Your accountant can help you create a payroll system that’s best suited to your business needs.
Having an accountant can go a long way in ensuring that you have strong financial planning and can save on the overall cost of starting a medical practice.
How to Find the Best Medical Lawyer for Your Practice
One of the most important costs of starting a medical practice is to find the best lawyer who can help take your practice forward. A good lawyer can help you iron out some of the most important aspects of your medical practice such as getting all the necessary permissions, documents, and processes set in place. Here are few factors to keep in mind when you’re looking to find the best medical lawyer for your practice:
Look For Referrals
If you know other doctors who’ve built their own practice, then ask them for a referral. If you know any lawyers personally then you can ask them to recommend someone who specializes in your field.
Look For Online Reviews
People like to let others know of their positive or negative experiences and this is why online reviews can be a great source of information when doing your research. Going through reviews can help you understand what it is like to work with someone and can help you make a decision.
Look For Their Qualifications
Qualification and experience are two of the most important factors to consider when you’re looking for a lawyer. Ensure that they know how to handle the smaller details of starting a medical practice and are well-versed with the Canadian medical industry.
Consider The Costs Associated
Some lawyers charge a flat one-time fee while some work on retainers. Understand the financial aspects and make sure you include the additional smaller expenses such as courier charges, filing fees, any out-of-the-pocket expenses, etc.
Before you choose to work with a lawyer, ensure that s/he is properly vetted and come with great professional recommendations. Study their work and read the online reviews to get a sense of what it’s like to work with them before you make a decision.
Find a financial Planner
Opening your own medical practice also means learning to manage your income and future money differently. A financial planner will help you manage debt, invest wisely, and keep track of your cash flow.
They can also help you save for large purchases and future goals like home ownership or your kids’ education and will help you identify and plan for your broader retirement and financial goals.
Financial planners often assist with estate planning, life insurance, and other insurance contracts to ensure you and your family are protected. Both in the short and long term, a good financial planner sets you up to meet your financial goals.
Need help with your financial planning?
RBC has a team of 500 Healthcare Specialists dedicated to providing support, guidance, and value when it comes to your finances. From securing loans to financial planning, they can assist you with your financial needs every step of the way through residency, fellowship, and independent practice.Through the RBC Healthcare™ Advantage program you can get exclusive access to unique benefits that can help during your training and throughout your career.
Ready to get started?
Learn more about RBC Healthcare Advantage or connect with an RBC Healthcare Specialist.
Costs of Hiring Medical Practice Staff
The staff you hire will form the foundation of your medical practice. It will impact your culture, the level of service, and the overall success of your medical practice. Therefore, it is important that you hire the right people for your practice. Here are few factors to keep in mind:
Before you start hiring, you must be aligned with your budget. People with a lot of experience, great references and qualification will demand a higher pay and benefits compared to someone who is just starting out.
Education and Training
Depending on where you are in your business, you need to decide how much time and resources are you willing to allocate in the training of your staff. This factor will decide the person you hire to do the job.
What values make up the culture of your practice--creativity, compassion, drive to succeed, etc. Decide that and hire people who boast of those values.
How much time do you have before you hit the ground running. If you need someone on an immediate basis then you could consider seeking help from a hiring agency or referrals from another practice.
Before you start hiring, you must make a list of all the people that you need to hire and what would be their job descriptions. Once you have those details, then reach out to other physicians and ask for what kind of qualifications would each of those candidates need. This will help you better plan their role and responsibility.
Finding the right staffing for your medical practice is crucial. Your staff will be the backbone of your practice for years to come. They will play a vital role in the patient’s overall experience and the growth of your business.