Thinking of starting your own healthcare business? Already have your own and want an idea of how to do things a bit differently? Practice owner and physiotherapist, Michael Dermansky, has some advice on different practice models to help you make an informed decision.
Michael Dermansky, MD Health·
.Running a business isn’t easy. Each day there is no guarantee how much revenue is going to come through the door, nor how much your expenses will be for that day. Your training and education are geared toward making you a great practitioner and furthering your technical skills, but this does not guarantee commercial success, or a successful business.
Just like when I first started my physiotherapy practice in 2002, there are many different business models you can choose to follow.
If you are thinking of starting your own healthcare business or are already in one and want an idea of how to do things a bit differently, I would like to help you make an informed decision by sharing what I know about four available practice models.
The sole practitioner business model is a great option for those wanting to start from scratch with relatively low-costs.
Being a sole practitioner is the easiest and most cost-effective way to begin, because the expenses are relatively small. You only have to look after yourself, so you only need limited space and equipment to get started.
When I started out, I rented a small room and bought a second-hand treatment couch, along with a desk, computer, and some basic stationery. Then I opened my doors. The biggest challenge with being a sole practitioner is that you are everything—the business and the service that produces the income.
The first, and hardest, step is getting clients in your door. You don’t know enough potential patients and you may not have any referral partnerships yet, so these relationships have to be established, which takes time and effort. The problem is, you also need to see patients to generate income, which takes time away from marketing, and building a client base—and vice versa.
When starting out as a sole practitioner, you’ll need to find your balance between generating enough income to cover your business costs and your salary, as well as finding the time to perform all of the required business activities. I found that marketing, especially, was a monumental challenge when working by myself.
The biggest upside of being a sole practitioner is that you can do what you want and you are accountable only for yourself. This means you can concentrate on a small aspect of your craft that you want to be really good at.
For example, if you wanted to be a ‘shoulder’ physiotherapist and nothing else, you can direct your study, equipment, set-up and everything else toward only shoulder issues. You won’t need a lumbar traction table or stock knee braces if you are only seeing shoulder patients. Those purchases would be a waste of your resources.
As you are the only practitioner, you also don’t have to worry about training staff and other practitioners. You can focus on your own training, your own reputation, and the results you get for your patients, without having to worry about the services anyone else provides.
The downside is that you only have a limited amount of time in the day, so you can only see so many clients. Even if you hire a receptionist or practice manager to run the business side of your practice, your time and income will always be restricted by the number of patients you can see, and the amount you can charge for your services.
Another way to get into your own practice is to buy a share of an existing business or starting as a junior partner and progressing to a senior or managerial role.
The biggest advantage of a larger, multi-practitioner practice model is that you are no longer alone, and the income of the business is not as limited by your time and your ability to generate it. If you need to increase your business’ income, you can hire more practitioners.
There is a shared responsibility between practitioners. Together, you can often solve bigger problems than one practitioner alone can.
In general, the costs of running a multiple practitioner business are higher. The building, equipment, and staff costs are higher to accommodate more staff. However, as these costs are generally fixed, and the larger the business the more margin for profit there is.
The other, bigger cost of a multi-practitioner practice is the marketing. If we assume that practitioners have appointments 60% of the time and see the average patient for six 30-minute consultations, each practitioner will need to bring in 7.6 new patients per week—more than 30 new patients each week for a practice of four practitioners. That’s why marketing and sales must be a major consideration for this business model.
You’ll also need to think about the training, development, and management of staff. To ensure that everyone knows what their role is, what is expected of them and that everyone in the business is working in the same direction, good training and communication systems are needed for the business to run well. That’s how everyone knows what their role is, what is expected of them, and keeps the business moving in the right direction.
Everyone is different, so being able to work well with other people is a very important aspect of this type of business. If not managed well, colleague relationships can be a major cause of conflict (and headache) for the business and take attention and resources away from the main function of the practice—seeing patients and making them better.
The idea of a multidisciplinary clinic is a popular concept. This is, theoretically, ideal for patients to get all the services they need under the same roof. For example, a patient might see their general practitioner, physiotherapist, podiatrist, and maybe even their dietitian all in the same place.
The biggest advantage about this style of business is the proximity to other practitioners who can refer their patients to you, and vice versa . But, just because you are in the same building, doesn’t mean you will automatically have a relationship with the other practitioners, you have to deliberately work on it, and you may be the one who has to initiate it. To succeed in this model you need to find a way to regularly communicate, and interact, with the other practitioners and really get to know them and their services. This may mean regular group meetings, taking the time to go out to lunch together, or taking the time to regularly discuss mutual patients. It will take time and effort, but will pay off in the long term.
The other advantage of this model is that it can reduce your marketing costs because you’re all referring patients to in-house partners.
Your big challenge when choosing to take on the multidisciplinary model is selecting partners. You need to seriously consider, ‘are they all great practitioners?’ The convenience of having close access to other practitioners may not make up for having poor skills and abilities. You can’t refer a patient to a practitioner under the same roof if they just aren’t good at what they do.
This is not good for the patient, nor is it good for your reputation/personal brand, or the practice’s brand. So, if you are going to go into business with, or share the same space as, other disciplines in a one-stop-shop scenario, be very discerning about who is also under your roof and whether they are great at what they do.
How good your colleagues in the practice are plays into the risk of this model. If the partners aren’t great practitioners, and you don’t put in the effort to create strong relationships with them, the model doesn’t work. The professions become no more than a bunch of practitioners sharing rent.
This is not a model that will work for all allied health modalities but this is the model my physiotherapy practice uses. I suspect it can be modified to focus on a single service of almost any modality. It is not a blueprint for how to run this type of model, but the one that works for my team.
As a physiotherapy practice owner, I’ve chosen to direct my business into an almost singular service within the physiotherapy discipline. Our major focus is exercise-based rehabilitation and strength training for our patients. We are focussed on treating patients with long-term rehabilitation needs, such as lower back problems or post-op rehab after hip or knee replacement.
The setup and layout of the clinic is focused on the gym area and the rehabilitation equipment, not the rooms and hands-on treatment.
Because our model focuses on the one service - the rehabilitation exercises of long-term patients, our patient turnover is lower, so our need to market is lower. Our major marketing strategies focus on patient retention rather than getting new patients through the door.
The result is that the average patient value increases from about $650 per patient (based on $150 initial consultation plus five standard consultations at $100 each) in the traditional business model to about $4,000 per patient (based on our own internal data).
In addition, because this model is focused on time in the gym area instead of time spent in treatment rooms with the physiotherapist, we can have services where multiple patients work simultaneously with the same practitioner, which allows us to increase our hourly billing rate without charging the patients more.
The challenges of this practice model are different from the other models. Although this single service model needs fewer new patients to grow and maintain the business, we do need to make sure everyone is educated on our services and when long-term rehabilitation is required.
And because we are seeing more than one patient at a time, we have to invest more in systems and IT to maintain the quality of our service without the patient requiring one-on-one attention.
Because this example of a single service model shares patients with different practitioners (within the practice), we need to work very heavily on communication to make sure we (the practitioners) understand each other and work together to produce a great service for the patient.
Also, this model provides great long-term rehabilitation and exercise training, but since we don’t spend much time in the treatment rooms, other physiotherapy practices are better suited than we are at manipulative treatment and focusing on reducing a patient’s short-term pain.
The point of this article is not to tell you the ‘right’ model for running an allied health practice, but to give you an overview of the benefits and the challenges of each system.
Do your research and do what works best for you, what works with your long-term goals, and what really stirs your passion.
Michael originally wrote on the topic of clinic business models for APA InMotion.
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