Talking With the Bank

Patrick Carlton

The Financial Side of Growing A Practice

Will 2019 be the year you launch a new medical practice? Are you hoping to update, expand, or move to a new location? Lining up financial resources is one of the key steps in moving your goal from plan to reality.

"Typically, it is a good idea to sit down with a banker from six to 12 weeks in advance. We can help you get a sense of the range of financing you are likely to qualify for, and go over financial services you might want to consider for your practice," Patrick Carlton, Birmingham Market President for National Bank of Commerce, said. "For a new practice, credentialing and building relationships with insurance companies and other payers should also be early priorities.

"To move your plans toward a successful completion, one of the most valuable things you can do is put together a team of professionals who have expertise in the medical field. You'll need an experienced accountant, banker, lawyer and realtor who understand the unique requirements of the business side of health care.

"A medical accountant should be able to help you estimate and budget what you'll need to cover operating expenses, equipment, payroll, lease or mortgage payments and other startup costs. They can also help you with tax strategies and setting up a system to manage accounting data. Electronic Medical Records software is a major budget item, and it helps to have a clear idea of how your billing system will tie into it."

An attorney specializing in health care can assist you with credentialing, contracts, government requirements and in planning for insurance and other resources you may need to protect your interests.

Realtors with a background in medical real estate can help you locate a lease space or building site that is a good match for your requirements. In addition to being near a hospital where you will be sending patients, you'll want a property that offers the features your specialty needs. For an orthopedic, geriatric or cardiology practice, plenty of easily accessible parking or valet parking might be a priority. A pediatrician or family practice physician may need space for a children's waiting area where young patients and siblings can play and calm down before their appointment. Two other important considerations are a location with demographics that match the patient population likely to seek health services in your specialty, but avoiding areas where there may be more physicians in the same specialty than demand will be likely to support.

"The type of financial services you need will depend on your particular situation," Carlton said. "A physician joining another practice may need a personal loan to finance a buyout of a retiring doctor. If a practice decides to build rather than lease, you'll need to get started early with a construction loan, and then later permanent financing.

"A new practice will need a merchant account for taking credit and debit card payments, and you will want cards for your practice for ordering supplies and paying other expenses. A business checking account will allow you to accept direct deposits from insurance and other payers, take check or debit copayments from patients, and pay bills and set up automatic payments for recurring expenses. A line of credit may also be a good option for managing operating expenses while you build your practice and attract new patients."

As a practice grows, deposits above current needs can either roll over to a money market account to earn interest until needed, or you may want to pay down debt, depending on your accountant's advice.

Considerations in qualifying for financing depend on whether you are a new physician opening a solo practice, a group of physicians who have been in practice a while and are joining to start a new one, or a group practice that simply wants to update and expand, or perhaps move to new facility.

"In determining how much we can approve for a loan to an individual, we look at the overall financial picture," Carlton said. "How much debt does the applicant have and how much will they need to cover living expenses? Do they have equity or other assets they could turn to in an emergency, or a spouse who could help with living expenses while they become established?

"For a new group of physicians who have been in practice a while, we have more to go on in determining whether future projections are in line with past earnings and expenses. If the loan is for equipment or software, we encourage all our medical clients to think in terms of the useable life they can expect from the purchase when considering the term of the loan. Healthcare technology changes fast and you wouldn't want to be paying a five year loan if you are likely to need to update in three years.

"Overall, when you look for financial services, you'll want a bank that understands that a practice is also a business, but a business with important differences to consider. You'll want a bank with experience in health care, and a banker you can call on with confidence any time you need financial services as your practice grows."


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business banking, health care banking, medical practice financial services, Medical practice financing, money market account, National Bank of Commerce, Patrick Carlton


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