Starting a dermatology practice is a dream that many dermatologists share. The freedom to decide how and when you work, building a business, increasing physician autonomy, and starting a legacy are some attractive aspects of starting a practice. However, when taking in the immense burden of building a business, things can seem quite daunting and overwhelming. At the 2021 ODAC Dermatology, Aesthetic and Surgical Conference, we were fortunate to hear from two inspiring dermatologists who opened up their practices successfully: Dr. Aanand Geria of Geria Dermatology in Rutherford, NJ and Chesahna Kindred of Kindred Hair & Skin Center in Columbia, MD.
Read on for my top pearls and a summary of their excellent talk!
Pearl #1: Start planning…now! Even if you are a resident or just starting your career there are many things you can do now to set you up for future success in starting your practice. Read on to find out.
Pearl #2: Get professional help. Assembling a team of CPAs, attorneys, billing/credentialing specialists will help ensure that your practice is set up correctly.
Pearl #3: Hire a call center to book patients ahead of opening as a way of being busy from day one!
Pearl #4: Save money and regularly re-negotiate costs with vendors to lower overhead for your practice and increase profitability.
Pearl #5: Spend your effort and money on making the reception area and waiting room aesthetically pleasing.
Pearl #6: Incentivize staff to take time off when you go on vacation.
Naming Your Dermatology Practice
There are many things you can do today if opening a practice is right for you. Begin by brainstorming a memorable name for the practice. This is the start of building your brand so consider including the word “Dermatology” in the name to distinguish yourself from other businesses in the skincare space. After you have the name, it would be a good idea to buy the google domain you want for your practice which covers your e-mail address and other services under the google ecosystem (i.e., YouTube). You can consider naming the practice after yourself but keep in mind that this may lead to patients wanting to see you exclusively and it may be harder to recruit other dermatologists to work for the practice.
Legal Matters
Speak to a professional such as a certified public accountant or a tax attorney about what type of legal entity would be most advantageous in your specific situation. Options include setting up an LLC vs an S-Corp which varies based on your goals and future scope of your practice.
Financing
Something you can do now to get ready to open up your practice is to save money! If you have the opportunity to work for a period of time or have money saved you can self-fund your practice. This is the route that Dr. Kindred took and she was able to spend $25,000 to open her practice despite saving double that amount. With this model, she was able to break even 8 weeks after opening! In addition, since she owned her practice outright, she was able to purchase an 8600 square foot building less than 4 years after starting the practice because mortgage lenders offered her better rates and more lending options for the purchase.
However, for many individuals, self-funding is not an option. In this case you have several options for financing. Dr. Geria recommends going with a smaller bank due to his negative experiences with a larger bank. The customer service experience, in general, is better with a smaller bank because you will likely be able to work with one person throughout the entire process (i.e., business development, build out, and repayment). Bigger banks tend to do a poorer job in understanding geographic considerations as well. A line of credit is another option to pursue if you need funding for shorter term needs such as repairs and payroll.
Location
Deciding where to start your practice is a highly personal decision that depends on a variety of factors that combines personal, business, and professional considerations. One strategy for deciding where to open is to look at a list of towns within a desired commute radius from where you wish to live. Additionally, if you plan on focusing heavily in cosmetic procedures, you can use US census data and Wikipedia to determine the median income of these areas. In general, demand for dermatologic services remain high and Dr. Kindred recommends considering locations that are low rent/low traffic as a strategy to save money on fixed expenses.
Leasing vs. Buying
There are pros/cons for buying vs. leasing the building for your practice. For most that are starting off, leasing is the more practical option due to the significant capital required to purchase in most areas. Benefits of leasing include having more working capital, more flexibility to move, and less maintenance tasks to address. A good strategy could be to lease initially and to buy once the practice is thriving financially and you are sure about staying in that location.
Buying real estate can be a smart long term financial decision if you know that you will stay in that location and are willing to deal with the additional administrative and maintenance tasks associated with buying.
Credentialing
In order to become credentialed with insurance companies, you will need a medical malpractice policy in place and an address for your practice. Some insurance companies will also require a hospital affiliation. Both Drs. Kindred and Geria highly suggest that you outsource this process as it is administratively burdensome. Also, consider going with a billing company that also provides credentialing services to make this as process as seamless as possible.
Full Buildout vs. Refurbishing an Existing Practice
Dr. Geria and Dr. Kindred took differing paths in preparing their spaces for opening day. Dr. Geria undertook a significant renovation of his space as it was not previously a medical office. His full buildout was more expensive, costing approximately $200,000 in a high cost-of-living area, but a clear advantage was that he was able to do everything to his exact specifications. He was able to design everything from the size/number of his rooms to the cabinetry used.
Dr. Kindred on the other hand, took over an existing OB/GYN practice with rooms that were already up to code for a medical clinic and ADA compliance. Her renovations were more modest in scope and cost considerably less (around $12,000).
Both Drs. Kindred and Geria suggest putting extra attention into the reception areas and waiting room of the practice as this is the space that the patients will interface with the most.
Medical Supplies and Equipment
The main players in the medical equipment/supply space are: McKesson, Delasco, Henry Schein, and Medline. Henry Schein is good for day-to-day materials (suture, punch biopsies, etc.) but it is important to cross shop with Medline to get the best prices. Delasco is a good vendor for specialty/surgical items. To ease the administrative burden of ordering supplies, put a medical assistant or office manager in charge of ordering and renegotiating prices every 6 months.
Lasers
In general, lasers can be quite expensive and not necessary in starting your practice. It is not recommended to purchase one in the first year of opening unless you are specifically focused on this area of dermatology. It is a good idea to find a device with a number of different functions that can be versatile in treating different conditions and skin types (i.e., Scition device with BBL, Er:YAG and Nd:YAG). Do a financial analysis with an assessment of patient demand when deciding which device to purchase. Start with lower expenditure services for cosmetics such as: fillers, neuromodulators, chemical peels, and microneedling.
Marketing, Social Media, and Branding
Having a clear vision of your social medial strategy is key. Keep a clear focus on procedures offered and conditions treated and do not get wrapped up in the “popularity contest” mindset. Remember that you are a board certified Dermatologist and already have a built-in brand that is valuable. Beware of outsourcing social media posts as these can come off as inauthentic.
Third-Party Vendors
Below are quick hitting points on options for various vendor categories:
Payroll software
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- Quickbooks and Paychex are unwieldy and not recommended.
- Gusto is affordable and focused on small business.
- Ask your CPA for suggestion as they will need to be familiar with the software.
EMR
Billing
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- You can use the built in billing system within the EMR you are using.
- The Drs. Kindred and Geria suggest investigating a local billing company because of the improved customer service you can have with them.
- The billing services need to be familiar with the practice management system.
Hiring Staff
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- Word of mouth/prior relationships can be the best place to start.
- Indeed is well organized but can be more expensive compared to other platforms.
Bonus: Additional Resources and Further Education
Facebook groups:
Books
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- The Business of Dermatology by Jeffrey S. Dover and Kavita Mariwalla
- The Medical Entrepreneur by Steven M. Hacker
This information was presented by Drs. Aanand Geria and Chesahna Kindred at the 2021 ODAC Virtual Conference held on January 14-17, 2021. The above highlights from their lecture were written and compiled by Sang Kim.
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