This is part one of a multi-part series on setting up an anesthesia practice. In this post, we’ll be discussing the basics of setting up an anesthesia practice. In part two we review everything you need to consider when deciding between in-house vs. outsourced billing.
The process of starting an anesthesiology practice is slightly different than for other types of specialties. In particular, anesthesiologists typically don’t have to maintain an office like pediatricians or dermatologists, since they usually operate out of a hospital or other facility.
This means, amongst other benefits, that anesthesiologists can often get away without any direct support staff. Forgoing support staff can significantly decrease the cost and hassles of starting your practice.
Starting an Anesthesia Practice
To open an anesthesia practice you need to:
- Pick a name for your practice
- Determine the type of entity
- Come up with a strategic/marketing plan
- Evaluate your various contract options
- Secure your capital and initial financing
- Determine how to handle your billing
- Begin staffing and running your practice!
There are lots of steps and decisions to make when it comes to starting an anesthesia practice.
Although the specifics may vary slightly depending on your state’s individual regulations, these are the steps that most anesthesiologists must take to establish their practice.
1. Pick a name for your practice
This may seem obvious but it is crucial you have a name to associate with your practice as you begin the official legal process. How you come up with your name is completely up to you, but we recommend you pick a name that will be flexible going forward. Changing your corporate name can be a hassle.
2. Determine the type of entity
Once you have a name, you will need to determine what type of entity you want your business/practice to operate as. This is not always a simple question so we strongly recommend you discuss this with your accountant and business advisors. Some common anesthesiologist business structures include:
- Sole Proprietorship: This is the easiest option but puts you at the most liability. This is a one-person business that is not registered with the state. In a sole proprietorship business there is no distinction between the owner and the business. In this case, you would be completely responsible for all debts, liabilities, and court judgments. All of your income and losses are reported on your personal income tax return.
- Pass-through entities such as an “S” corp or Limited Liability Company (LLC): Both LLC and S corporations are registered with the state and require an EIN number from the IRS. Many individuals look to the LLC option as it provides a distinction between the owner as the business, limiting the owner’s personal liability. Taxes are paid via the owner’s shared income on their personal tax return, but the LLC itself does not pay any taxes to the IRS even though it must file a tax return. Keep in mind that most Anesthesiologists will NOT be able to take advantage of the 20% pass through deduction since their income will typically pass the $415k threshold.
- “C” Corporation: A traditional corporation provides slightly stronger owner protections than an LLC but are harder and more expensive to establish and maintain. After registration, the corporation must have annual stakeholder meetings, regular director meetings, as well as file and pay taxes. There can be tax advantages to being a “C” corporation in the event of an acquisition versus a sole proprietorship or pass-through entity.-
3. Come up with a strategic/marketing plan
With your entity established you need to have a strategic plan or marketing strategy in place in order to build your business. The first step is understanding what you want your practice to accomplish. You may want to specialize in a certain area or keep your options open with general anesthesia services. You need to understand your core philosophy, differentiators, and core competencies.
Remember, your strategic and marketing plans may change as your business grows and evolves.
Once these decisions have been made you can flesh out a complete marketing and strategic plan, which you can periodically review and update based on the current market and trends.
4. Evaluate your contract options
With your goals established you need to decide what type of anesthesia contract you are going to operate under. There are three types of anesthesia contracts:
- Straight fee for service, where risk is shared between the anesthesia practice and the facility the practice operates out of. This shared risk means you have no guarantee of being profitable but are motived to increase efficiency.
- Fee for service with a subsidy is similar to a straight fee for service but the facility makes up for losses with a subsidy payment to the anesthesia group. Subsidies can be floating (collections vary based on the fee for service) or fixed (regular payments are made).
- Management contracts, where the anesthesia practice is contracted to manage all anesthesia services in a facility. This is common for anesthesia practices working in surgery and endoscopy centers. However, you want to be careful with these contracts as there have been some regulatory and legal concerns.
5. Secure your capital and initial financing
You’re going to need some initial financing so you can grow and pay your bills. Building a Pro Forma can help you calculate your financial gains and losses based on projected data and help you keep track of these things in the future. This can help you make better long-term financial decisions and secure your initial financing.
The amount of funding you need to start your practice depends on what type of contract you are operating under. A general rule is that you will need three months of expenses covered to finance a new contract. To obtain financing, physicians have a few options:
- Small business loan
- Line of credit
- State or federal business loans
- Angel investor
6. Determine how to handle your billing
Up to this point, starting an anesthesia practice is fairly similar to starting other types of specialty practices. However, billing is where things get complicated.
Anesthesia billing is unlike any other type of billing; we recommend utilizing an outsourced specialist.
Anesthesia billing is unlike any other type of billing. When running your anesthesia practice, you need to determine if you want to do your billing in-house or outsource it to a billing company. There are pros and cons to both options, but keep in mind that you want a specialist to ensure this job is done correctly.
Outsource Your Billing with Fusion Anesthesia
As an outsourced billing provider for over 400 anesthesiologists nationwide, we may be a bit biased when it comes to how we think anesthesiologists should handle their billing. We believe that you should let an expert, like us, take care of your billing because we have the experience necessary to file clean claims and kick-back underpayments until you are paid in full.
You could hire staff to do this yourself, but wouldn’t you rather focus on your patients and running your practice rather than managing part or full time staff?
We can help you with the following:
- Revenue cycle management
- Accounting, tax preparation, and payroll
- Practice management services
- Bookkeeping and bill paying
- Business consulting
- Compliance services
With these final steps completed, you can begin step 7, staffing and running your anesthesia practice!
Starting an Anesthesia Practice
No one ever said starting a practice would be easy, but with the enough willpower and the right resources you can get your own anesthesia practice up and running in no time. Plus, if you choose to work with Fusion Anesthesia you’ll have a business consultant and partner you can count on to help with all of your back-office concerns without needing to hire additional support staff.
Want more general information about how to start a medical practice? Check out this book by Judge Huss and Marley Coleman.
If you want personalized advice, contact us.
Or, if you want to get notified when we post part 2 about in-house vs oursourced billing just leave us your email.
Nothing in this blog post should be interpreted as legal or tax advice. It is presented purely for informational purposes. You should always consult an expert with the particulars of your situation.