Financial Considerations
Money is perhaps the number one consideration after your why that will ensure your DPC success. Prior to giving notice and quitting your present job, you must have a very strong grasp of your personal and professional financial situation.
There are innumerable tools to help with financial planning, and a brief online search will open a world of financial self-help for you to explore.
At the least, you should consider addressing the following:
- Figure out your home budget. Or — taking a step back — look back at several months’ worth of spending and income. Where is your money going?
- Get your debt under control. Refinance, consolidate, and pay off credit cards.
- Come up with a plan to stop adding to your debt.
- Think about what financial resources you have: a benefactor? Access to free office space? A DPC doctor near you looking to partner? A spouse who has a stable income?
- Sell what you don’t need: switch neighborhoods, change schools, sell a car. What can you change to have more money available to you?
- Make it rain while you can: there are a lot of jobs in medicine that are temporary and pay well. These jobs might be a tool to help you create a more secure financial foundation.
The general saying for new small businesses is to plan for minimal to no profit for at least three years. This has not necessarily been the case for DPC startups, but in terms of managing money, if you chose to leave an employed position with a secure income and open your own practice, you need to plan for a dramatically different financial future. Stop spending; start saving now!
Building a Financially Viable Practice
Steps toward financial stability include:
- Getting a firm hold on your personal/home finances. (See Financial Consideration)
- Write a business plan with financial projections. A guide to help with your business plan is available from the Small Business Administration. You may also find some free in-person help through a Small Business Development Center at your local college or university. (See Writing a Business Plan).
- Important elements for initial financial projections include:
- Determine your pricing. Many variables go into this. (See Setting Membership Pricing).
- Anticipate and budget for one-time expenses needed to open.
- Plan for and budget your ongoing business expenses.
- Choose your accounting software. Check out Xero.com and Quickbooks.intuit.com.
- Find an accountant with small business expertise to help you transition from being an employee to a small business owner (which comes with the responsibility of properly tracking expenses, managing write-offs, utilizing the business to pay for business-related expenses, and tracking owner contributions and owner distributions — among others).
Setting Membership Pricing
First and foremost, create a financial plan to help guide you. You might want to talk to a local DPC mentor about their start-up costs and expenses to get a better idea of these numbers in your area. Remember that the lower your overhead and start-up expenses, the less you have to charge and vice versa.
- Calculate total start-up (one-time) costs = $ _____________
- Calculate ongoing (operating) expenses = $______________/year
- Determine desired self-pay (take-home) pay = $ _____________/year
- Determine what portion (if any) of your patient panel will be offered charity care
- Determine per-member-per-month need
Once you have these numbers in mind you should consider the type of population you want to take care of in your practice. For example, if you prefer to have younger patients or small families with children, you might consider instituting an aged-based membership. This gives a lower cost to younger adults and families with children under 18, who generally feel that they are healthy and only need care on occasion.
An example would be the following:
- Children up to age 18: $40 without adult membership, $20 with adult membership
- Adults to age 44: $60 per month
- Adults 45-64: $80 per month
- Adults 65 and older: $100 per month
Conversely, if you prefer to have older patients in your practice or perhaps you do not see children, you may want to institute a single cost per member, which may be higher than what a younger person would want to pay but lower for the older patients.
- For example, if your per-member-per-month need is $80 per member, charge each member a flat $80 per month.
Some prefer to set one cost for children and one cost for adults to simplify things. For example:
- Children: $40 per month
- Adults: $80 per month
If you are a pediatrician, you may want to consider a higher cost for newborns and infants when you know they will need more well care and lower the cost as they get older. For example:
- For children less than 2 years old – $100/month
- For children 2 to 5 years old- $75/month
- For children 6 to 18 years old – $50/month
Some doctors will set a “family rate”. While this can be a good way to gain members and young families, proceed with caution as some very large families may be very time intensive.
Obviously, there is no one right answer with regards to how to charge and every practice is a bit different. Consider your location and population as well. You might be able to charge more if you are in an affluent neighborhood or prefer to attract this population. You might consider charging less if your town’s per capita earnings are low or your practice is in a lower-income part of town.
Remember, this is YOUR practice. You can choose to set pricing however you see fit.