Investing in Medical/Dental Practices

Lets begin with the most simple fact here. Your friends don't have their residencies completed and haven't gotten their boards yet. Just because they have completed Med/Dental school does not mean they are able to go ahead and practice. Now, lets flash forward this a number of years, after they have their boards, they begin this endeavor with you. You all hop in a time machine and come back to 2015, where, for argument's sake, all of the boards taken are magically valid. Under the current rules and regulations, you need to make the following considerations:

1) What are the rules regarding ownership of a medical practice by a non-Physician? You want in? You gotta know those rules.

2) State Licensing - are you doing this as a multistate practice or a single state? It's one thing to have a license and see patients in 1 state and treat in a 2nd. It's another to see patients and treat in two different states.

3) Location and Scope of Practice - What geographic area are you covering?

4) Are there any other ownership issues that you may need to consider (Owning/investing in Surgicenters, other healthcare service companies, etc.) that you need to disclose?

5) How many specialties are you going to cater to?

6) Types of practices you are buying. Some practices are bought for the Book of Business (preexisting clients) itself while others are bought for the referrals being made and OR/ER Coverage that they have. Certain specialties are built on referrals from other providers, so you need to be aware about what you are actually buying?

7) Size and Scope. While I did mention the number the number of specialties, Size and Scope have a much bigger impact as it plays into the kinds, types and coverage policies you need for your "health group". It also falls in line with number 8.

8) Insurance Policy provisions - The bigger you get, the more negotiating power you have with insurance companies and hospitals. This gives you leeway for being in or out of network and the fee rates you could attempt to negotiate for. It also is important when considering the type of practices you are looking to get into and the specialties you are seeking, as what insurances they take will have an impact on the A/R of a practice. For example, what would be a $10,000 procedure billed out of network, would be paid out at $1,000 for the procedure when billed in network. Likewise, how much of the A/R is tied to variable sources, such as Legal under a Letter of Protection, Workman's Comp and Motor Vehicle Accidents, which all have their own sets of rules and have a major impact on the A/R. Likewise, PIP Arbitration, particularly in No Fault States, will shape the A/R as well because of the process, one that varies from state to state, by which PIP Arbs happen. Getting into the finances, particularly with specialties, can be a bit hairy.

Trust me when I said this, unless your friends understand the intricacies of medical billing, practice management and the finer points of Healthcare right off the bat, which I highly doubt because 99% of med students don't get it until they are well into their tenure in private practice (assuming they aren't employed in a non-ownership capacity by a medical practice or are employed by a hospital which does everything on the back end for them in the first place), on top of being able to grow a business and practice medicine, this is something that won't happen for a good 5-7 years after they get their boards. Or... your friends are studying to be Chiropracters... in which buying a practice is doable right out of school, but your a Chiropracter and that's a joke in it of itself.

@"thebrofessor", those only hold true when you aren't practicing in a heavily populated area. It's definitely nicer if you have a monopoly on the practice of a certain specialty at a given hospital, but in the larger cities and more densely populated states, that's not always the case. And even then, you'll generally find a couple providers for a given specialty within a 50 mile radius of each other. The thing is with that one, to get a Medicare One Time Out of Network Exemption to treat, there cannot a single physician in network within a 50 mile radius of the treating physician and the patient in question's residence. This has to do with having patients who will be referred to physicians and travel a bit of distance but may have a qualifying in network physician closer to the patient than attending physician is. Even then, being the big fish in an area comes with it's own set of issues. I'll give you the perfect example. In Jersey, there's a group called Summit Medical Group. They have 564 Healthcare Practitioners on staff (and I imagine that this is what the OP is looking to build to an extent). Malpractice Insurance isn't an issue since they have to self insure due to the size (and given the broad spectrum of practice, they have a blended rate that accounts for all of their specialties which reduces the net cost for their higher risk practitioners). They refer to other doctors in practice and keep the business in house as much as possible. They have offices in almost 30 towns. Despite having that large of a staff, they compete for OR Time in the same hospitals against dozens of doctors across all of the same specialties. They are on staff at maybe a dozen hospitals, surgicenters and facilities across North and Central Jersey and have affiliations with Atlantic Health, HackensackUMC, Carepoint Health System and Newark Beth Israel Medical Center. While they bring in a great deal of revenue (especially seeing approximately 55,000 Patients a Month), they aren't the only game in town. Unless you are practicing in some podunk area, expect there to be at least some degree of competition no matter what field your in.

@"Rumplesmoothspin", If you haven't gotten at least 1 Malpractice Suit against you, consider yourself lucky. There are hundreds of reason why a suit will be filed whether it has merit or not. It shouldn't sink a career if it's just 1 suit. If there were board sanctions.. that's entirely different.