THE MEDICALENTREPRENEURPEARLS, PITFALLS AND PRACTICAL BUSINESS ADVICE FOR DOCTORSPEARLS, PITFALLS AND PRACTICAL BUSINESS ADVICE FOR DOCTORS
Steven M. Hacker, MDSteven M. Hacker, MDThird Edition
Foreword written by Daniel M. Siegel, MD, MSNew 2016 Bonus Section for Third Edition Includes:
Author’s Recommendations for Vendors, Products and Services.
iii
Nano 2.0 B
usiness Press
Copyright ©
2010 1st edition, C
opyright © 2013 2
st edition, Copyright ©
2013 2st
nd Edition,
Copyright ©
2015 3rd E
dition
Steven M. H
acker, MD
All rights reserved.
ISBN
-10: 0615407137
EA
N-13: 9780615407135
Library of Congress C
ontrol Num
ber: 2010938047
Nano 2.0 B
usiness Press, Delray B
each, FL
REV
IEWS FR
OM
LEAD
ING
PH
YSICIA
NS A
ND
BUSIN
ESS EX
PERTS:
“We do not do enough to prepare our trainees for the business of practice. Likew
ise, so
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good idea does not a successful business make. H
acker’s book is a gem in that it speaks to
both of these challenges in an engaging way. It is chock-full of w
isdom, easily read, and
very enjoyable reading. I’ll be recomm
ending it to all of our trainees.”Joseph C
. Kvedar, M
DD
irector, Center for C
onnected Health
Partners H
ealthCare System
, Inc.A
ssociate Professor of D
ermatology
Harvard M
edical School
“After reading this book, I am
now m
ore certain than ever that my im
pressions of Dr.
Hacker nearly tw
enty years ago were correct. H
is book is an honest, open, forthright
attempt to share w
ith his colleagues those precious details he has learned about establish-
ing a medical practice and becom
ing an entrepreneur. I thought this book was fun to read,
informative, concise, and blatantly honest. A
s I told Dr. H
acker after reading his book, ‘I
think you have taught an old dog some new
tricks.’”F
ranklin P. Flow
ers, MD
Professor, U
niversity of Florida C
ollege of Medicine
Departm
ent of Medicine, D
ivision of Derm
atology and Cutaneous Surgery
viv
TH
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Excerpts from
foreword w
ritten by Dr. D
aniel Siegel“Part I allow
s the reader to envision the necessary activities for opening his or her own
practice in the voice of the author, while Part II is a guide for budding entrepreneurs.
Part II covers victories and defeats in clear, concise tones that anyone can appreciate and
empathize w
ith.
Hem
ingwayesque, concise, and practical, this book w
ould be an ideal gift from depart-
ment chairs to their senior residents at the start of their last year of training, or a personal
purchase around the same tim
e if the chairperson is too cheap to buy it for you. If you
are reading this, turn the page and take the roller-coaster ride. Enjoy!”
Daniel M
ark Siegel MD
, MS (M
anagement and P
olicy) C
linical Professor of D
ermatology, SU
NY
Dow
nstate A
merican A
cademy of D
ermatology P
resident 2012
“Dr. H
acker’s book effectively dispels the notion that ‘doctors aren’t good business peo-
ple.’ His personal exam
ple proves otherwise, and now
his book can help other doctors
break through that mold, too. W
ritten with clear exam
ples drawn from
his experience,
the book lays out—step by step—
the tools and mind-set needed to create, launch, and
SURÀ�WDEO\�UXQ�D�EXVLQHVV��.XGRV�WR�WKH�DXWKRU�µ
Jeff Zbar, A
uthor & B
usiness Journalist
CO
MPLET
E FOR
EWO
RD
by D
aniel Mark Siegel M
D, M
S
Steve Hacker is a neat guy. (If I thought he w
asn’t, I would not have agreed to w
rite
this foreword!).
In addition to being a real doc who sees patients in a private practice that he built
from the ground up, he is a serial entrepreneur (unlike a serial killer w
ho may dine on his
victims, Steve can, as you w
ill learn after reading the book, sometim
es afford steak and
OREVWHU���ZKR�KDV�IRXQG�D�Z
D\�WR�ORRN�DW�DQ�XQÀ�OOHG�QLFKH�LQ�WKH�EXVLQHVV�ZRUOG�DQG�À�OO�LW�
LQ�D�SURÀ�WDEOH�IDVKLRQ�
In contrast to many of us w
ho can simply connect the dots, he can w
ring money out
of the dots and the lines between them
that, in this regard, makes him
more like Steve
Jobs than you or me. In fact, Steve H
acker goes one up on Steve Jobs, as the latter has
never been known to effectively treat skin cancer (though an app for that is rum
ored to
available in the next version of the iPhone OS).
Despite the explosive grow
th of digital technologies, medical students, residents, and
fellows still w
alk around with a soft-cover, often spiral-bound “m
anual” that is a concise,
readable summ
ary of the core techniques and knowledge of a particular specialty tucked
into the pocket of their white coat. T
hese white coats they w
ear have large pockets, as this
little tome (I am
assuming handbook sized or annotatable electronic, as a big, hardcover
book such as Surgery of the Skin: Procedural Derm
atology, by Robinson, H
anke, Siegel, and
)UDWLOD��GRHV�QRW�À�W�LQ�D�SRFNHW�EXW�VKRXOG�EH�ERXJKW�DQ\ZD\�w
ill be a requirement for
À�QLVKLQJ�WUDLQHHV�WR�KDYH�RQ�KDQG��DQQRWDWH��UHIHU�EDFN�WR��DQG�RWKHUZLVH�XVH�DV�D�URDG�
PDS�WR�WKHLU�À�UVW�\HDU�LQ�SUDFWLFH�
Part I, in the voice of the author, allows the reader to envision the necessary activities
for opening his or her own practice, w
hile Part II is a guide for budding entrepreneurs.
vi
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vii
Part II covers victories and defeats in clear, concise tones that anyone can appreciate and
empathize w
ith.
Hem
ingwayesque, concise, and practical, this book w
ould be an ideal gift from
department chairs to their senior residents at the start of their last year of training, or a
personal purchase around the same tim
e if the chairperson is too cheap to buy it for you.
If you are reading this, turn the page and take the roller-coaster ride. Enjoy!
Daniel M
ark Siegel MD
, MS (M
anagement and P
olicy) C
linical Professor of D
ermatology, SU
NY
Dow
nstate D
irector, Procedural D
ermatology F
ellowship
Am
erican Academ
y of Derm
atology President 2012
AC
KN
OW
LEDG
MEN
TS
I would like to thank the follow
ing people:
The loves of m
y life: my w
ife, Jill, and my children, Sim
on, Em
ily, and Elliot. T
heir endur-
ing patience with all m
y crazy ideas, including the writing of this book, m
ade everything
possible.
My dad. H
e inspired me to be an entrepreneur.
Gary Lesnik and C
raig Sterling. As the closest of friends, their encouragem
ent and will-
ingness to discuss my business ideas are w
hat made m
any of them both successful and
possible.
ix
TABLE O
F CO
NT
ENT
S
YOU
CA
N BE A
CA
RIN
G D
OC
TO
R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xi
AN
D A
SAV
VY BU
SINESSPER
SON
PAR
T I: EV
ERY
TH
ING
YO
U N
EED
TO
KN
OW
BEFO
RE Y
OU
SEE YO
UR
FIR
ST PA
TIEN
T
Congrats, you’re a doctor, now
how do you m
ake money? . . . . . . . . . . . . . . . . . . . . .1
Licenses, laws, and acronym
s (DE
A, N
PI, CA
QH
, PEC
OS, . . . . . . . . . . . . . . . . . .24
HIPA
A, H
ITE
CH
, CLIA
)
Hospital privileges, M
edicare, and managed care plans . . . . . . . . . . . . . . . . . . . . . . .44
Em
ployees, contracts, and payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
Billing and getting paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75
7HFKQRORJ\�DQG�WKH�HOHFWURQLF�KHDOWK�UHFRUGV�IRU�WKH�RIÀ�FH . . . . . . . . . . . . . . . . . . .81
3ODQQLQJ��GHVLJQLQJ��DQG�ORFDWLQJ�DQ�RIÀ�FH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .93
Marketing and Public R
elations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .104
CO
NC
LUSIO
N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
PAR
T II: FO
R A
LL PHY
SICIA
N EN
TR
EPREN
EUR
S
An idea and a dream
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .115
8QGHUVWDQGLQJ�À�QDQFLDO�VWDWHP
HQWV��LQWHOOHFWXDO�SURSHUW\� . . . . . . . . . . . . . . . . . . . .118and raising capital
Reality check before you launch your dream
business . . . . . . . . . . . . . . . . . . . . . . .150
The m
anagement team
, board of directors, and advisors . . . . . . . . . . . . . . . . . . . .152
xix
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Everything is negotiable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .156
Hope for the best, prepare for the w
orst . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .160
CO
NC
LUSIO
N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .164
PAR
T III: PEA
RLS A
ND
PRO
CEED
ING
S FRO
M
TH
E MED
ICA
L ENT
REPR
ENEU
R
SYM
POSIU
M
DA
Y ON
E TO
DA
Y TH
REE: PEA
RLS A
ND
PRO
CEED
ING
S . . . . . . . . . .169-187
NEW
BON
US SEC
TIO
N: V
END
OR
REC
OM
MEN
DA
TIO
NS
. . . . . . . . . . . . .188
APPEN
DIX
I: TH
E FIRST
25 STEPS T
O TA
KE . . . . . . . . . . . . . . . . . . . . . . . . .192
WH
EN SET
TIN
G U
P YOU
R PR
AC
TIC
E
APPEN
DIX
II: A LIST
OF TA
BLES IN BO
OK
. . . . . . . . . . . . . . . . . . . . . . . . . . .194
ABO
UT
TH
E AU
TH
OR
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .195
ABO
UT
TH
E EXPERT
CO
NT
RIBU
TO
RS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .197
YOU
CA
N BE A
CA
RIN
G D
OC
TO
R
AN
D A
SAV
VY BU
SINESSPER
SON
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in private practice and in business. I have written this book because m
edical school does
not prepare physicians for business. As doctors, w
e spend so much tim
e learning about
the human condition that w
e neglect to learn the basic fundamentals of running a busi-
ness. The irony is that to practice m
edicine successfully today, a doctor must be equally as
versed in the art of business as he or she is in the art of medicine.
A doctor can w
ear both hats. He or she can be both a caring physician and a savvy
businessperson. This book steps in w
here no other book or course does for physicians.
As a physician in private practice, I bring a unique perspective that offers practical
knowledge to doctors, young and experienced, w
ho open the pages of this book. I have
gone through the challenges of setting up my ow
n solo practice. I set up my practice
imm
ediately out of residency. It became very successful and quickly grew
to over twenty
thousand patients.
At the sam
e time I also built and sold tw
o unrelated Internet-based technology busi-
nesses. As a “serial entrepreneur,” I have started com
panies that have grown to becom
e
household names. T
he companies that I have started have gone on to serve m
illions of
people and generate hundreds of millions of dollars in cum
ulative revenue over the last
decade. While practicing m
edicine, I single-handedly negotiated deals with Fortune 500
companies, including M
icrosoft, Holland A
merica Lines, L’O
real, and more.
I have made several m
istakes. I write this book in the hopes of helping others avoid
those mistakes. T
he lessons I learned from m
y mistakes as a businessm
an and physician
are the basis for this book.
I have written this book in three parts.
7KLV�À�UVW�SDUW�RI�WKLV�ERRN�LV�IRU�DOO�P
HGLFDO�VWXGHQWV��GRFWRUV�HQWHULQJ�SULYDWH�SUDF�
tice, young physicians that are in residency training programs, and experienced health care
xii
TH
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xiii
Steven M. H
acker, MD
providers that are leaving a group practice to “go it alone.” I write about the struggles I
encountered and mistakes I m
ade as I set up my ow
n practice. I will detail the initial criti-
FDO�VWHSV�WKDW�HYHU\�KHDOWK�FDUH�SURYLGHU�PXVW�WDNH�EHIRUH�VHHLQJ�KLV�RU�KHU�À�UVW�SDWLHQW�
The second part of the book is for all health care providers, no m
atter their age or
specialty, including those in academia, research, and private practice. It is not uncom
mon
for academic or research-based physicians to w
ant to comm
ercialize their research or
ideas or medical device developm
ent. Since they have no experience in creating entrepre-
neurial ventures or medical devices, this part of the book w
ill help academic physicians
better understand this process. Also, due to decreased reim
bursements, m
any creative
physicians in private practice want to supplem
ent their incomes w
ith entrepreneurial ven-
tures. This part of the book explains w
hat these doctors need to consider before launch-
ing any business. The second part of this book w
ill teach an understanding of raising
capital, negotiating contracts, hiring a managem
ent team, organizing corporate structure,
delegating board seats, medical device developm
ent and more.
The third part of this book is new
for the second edition. This portion of the book
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held in Delray B
each, Florida. This part of the book w
ill contain pearls and proceedings
from the m
any expert lectures and discussions that took place at this exciting meeting.
This is a business book for all health care providers regardless of their specialty.
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remem
bered. I notate those sections with term
s familiar to m
edical students and
doctors, such as “Pearls” and “Pitfalls to Avoid.” A
pearl is a term that w
e used in
medical school to refer to sm
all facts about a condition that should be remem
bered.
I annotate “Pearls” for those facts that I think you absolutely need to remem
ber. I
annotate “Pitfalls to Avoid” so you w
ill not make costly m
istakes as you set up your
practice. Throughout the book, I have also included lists of action item
s on a variety
of subjects. For your reference, I have designated these areas as “Tables”.
I have also included unbiased expert opinions from attorneys on critical topics
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HGLFLQH��,�KDYH�LGHQWLÀ�HG�WKHVH�RSLQLRQV�DV�´6WDW�
Consults” and separated them
into easy to read textboxes. As a result, this book w
ill pro-
vide you with instant access to expert legal opinions that w
ould generally cost hundreds
of dollars per hour if you were to ask an attorney the sam
e question.
AC
AD
EM
IA O
R P
RIV
AT
E P
RA
CT
ICE
?
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ible and inspiring career. It is different from private practice. A
cademia w
ould include
faculty positions at teaching institutions. The rew
ards of academia often are less tangible
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personal decision. Teaching and research can provide exciting, engaging, and unique life
opportunities. I wrestled w
ith this decision throughout my residency training. For m
any
UHDVRQV�ZKLFK�,�Z
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the book is for those doctors, like myself, that have elected to enter private practice rather
than academia.
IS PR
IVA
TE
PR
AC
TIC
E ST
ILL
AL
IVE
AN
D W
EL
L IN
TH
E U
NIT
ED
STA
TE
S?
Anyone that is a health care provider can go into private practice and be successful
regardless of age, sex, race, and faith. You can be successful regardless of governmental
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The private practitioner is prototypical of the sm
all Am
erican business. The private
practitioner, no matter the political rhetoric, w
ill always survive and thrive. W
e are the
essence of small business in A
merica. W
e are emblem
atic of the spirit of capitalism.
And although corporate A
merica w
ants to shut you down, acquire you, convert you, or
push you into a large group, as long as capitalism survives in A
merica, you w
ill not only
survive, you will succeed.
Initially it may be intim
idating, but don’t allow it. A
nyone, even without any form
al
business education or experience, can start his or her own practice.
In most situations, you w
ill make m
ore money than you w
ould in a group practice.
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own rules and your ow
n hours. You will answ
er to no one. Going it on your ow
n is excit-
ing, liberating, and rewarding. So, don’t hesitate! You w
ill not regret it.
Everyone that I have ever spoken to, encouraged, or helped to go into solo private
SUDFWLFH�KDV�DFKLHYHG�SHUVRQDO�DQG�À�QDQFLDO�VXFFHVV�EH\RQG�WKHLU�H[SHFWDWLRQV�
I have never met a single doctor w
ho has started his or her own practice and regret-
ted it. Have the “guts” to do it! You and your fam
ily will be grateful.
xiv
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WH
AT
DO
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O W
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A G
RE
AT
IDE
A?
Part II of this book is for you, the creative doctor, in private practice or academia,
young or old, who has the desire to create another business or m
edical device and become
an entrepreneur. If you have a great idea or a creative urge to try another business, then
this section is a must read. If, like m
any other doctors, you are looking for additional
sources of income or are inspired to have a side business, then m
y experiences will help
you avoid making the sam
e mistakes that I m
ade. If you are in academia and w
ould like
to comm
ercialize your research, then this section will help you understand how
to create
that business.
In medical school w
e are not prepared for business. We are not taught how
to raise
capital. We are not taught about the business ow
ner or founder’s liabilities and the impli-
cations of raising capital. We do not learn about “burn rates,” “dilution,” “board seats,”
“options,” and “angel investors.” We are given no books to read about venture capitalists,
trademark protection, patent protection, online com
merce, and W
eb development. W
e
are not schooled in executive managem
ent, organization charts, and sales and marketing
teams. W
e are not given courses on negotiating contracts and leases.
,�KDYH�IRXQGHG�WHQ�FRUSRUDWLRQV�LQ�WKH�ODVW�À�IWHHQ�\HDUV�ZKLOH�SUDFWLFLQJ�P
HGLFLQH��
My experience in raising capital and selling these com
panies is invaluable for health care
providers. I am excited to share m
y stories with you and, m
ost importantly, point out the
mistakes I m
ade and successes I had. This part of the book w
ill provide you with real-life
advice based upon the incredible ups and downs I have had as a m
edical entrepreneur.
I have added a Part III to this book in the second edition of the book. Part III cov-
ers the salient details, pearls and excerpts from our annual m
eeting. I tried to pick out the
details I thought would be m
ost helpful. If you cannot attend in Florida in April, then you
will still get valuable inform
ation by reading this section. Regardless, I encourage you to
attend the next Medical E
ntrepreneur Symposium
in Delray B
each, Florida in April 2013.
For the third edition, I have added a bonus section that includes many of the cur-
rent products and services I use every day in business (and in the medical practice). I
added this section so the reader would have easy access to vetting out their ow
n decisions
regarding products and vendors. So, as the reader, do your own due diligence, research,
and bidding process and then make selections on the m
erit of your own research. D
o not
rely solely on what I have w
ritten in this book. As for any inform
ation in this book, you
should make your ow
n decisions, after careful evaluation, and understand that choosing
any product or service or vendor based upon information in this book is done at your
own risk.
PART
I: PA
RT I:
Everything you need to know
before you see E
verything you need to know before you see
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answer. T
hroughout medical school and residency, the allure of academ
ics and the urging
of my professors had led m
e down the path of academ
ics. The collegiality and sense of
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my professors. H
owever, I w
anted to get into private practice. Honestly, I w
anted to make
some m
oney. It had been a long haul, and twelve years of education and training had
brought me to this juncture. I had no debt, thankfully. I had no m
oney either.
My biggest concern w
as the same concern that m
any residents had: if I chose private
practice, would m
y professors consider me a sellout? If I did not join them
in academics,
would their disappointm
ent affect my ability to get a com
petitive job in private practice?
I knew I needed their letters of recom
mendation to get a position after residency. I w
as
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ulty that I would not be entering academ
ics. I was hesitant to let them
know that I w
ould
be looking for a job during my senior year of residency.
It turns out, after speaking to many residents, that these trepidations are com
mon.
Many during residency share them
. How
ever, these concerns are unfounded. The fac-
ulty are aware of and understand your situation. T
hey are eager to help you get a job
after graduation. Teachers know you m
ust begin looking for work. Y
ou may feel like you
are betraying an unspoken code of comm
itment to academ
ia. You are not. Planning for
private practice should begin in your senior year of residency. And, if you are going to
set up your own solo practice, then you m
ust start at least ten to twelve m
onths before
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Steven M. H
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Once you have decided to m
ake the leap into private practice, you must decide if you
are going to join a group practice or set up a solo practice. I wrestled w
ith this decision
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no private practice experience. I was w
orried because I didn’t understand medical billing.
I was concerned that I m
ight need “backup” if I didn’t know how
to treat a patient. I
didn’t think patients would w
ant to come see m
e as their doctor. It is easy to understand
why m
ost people choose group practices over a solo practice. These concerns and fears
are universal. They are also com
pletely unfounded.
Nevertheless, I w
ent down the path of joining a group practice. I interview
ed with
several groups. Each group had a different personality. In selecting a group practice, I had
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be well respected, and the physicians had to tolerate various personality types. A
group
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odds are overwhelm
ing that you will not be happy in that practice.
The experiences I had w
hile interviewing w
ere interesting. I won’t forget the tim
e a
senior partner of a large, well-know
n practice went out of his w
ay to let me know
that all
the doctors in the group were expected to attend the sam
e church. Although these w
ere a
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The one group I liked the best happened to be the m
ost successful and most
respected group in our area. They entertained m
y wife and m
e with a very expensive din-
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my personality. I w
as told that partnership would be offered. H
owever, after I received
the contract offer in writing, the details of the partnership and com
pensation were low
er
than I expected. It appeared that I would generate hundreds of thousands of dollars
in revenue for their practice. I would only receive a fraction of the revenue collected. I
would w
ork for three to four years before becoming a partner. Partnership m
eant that I
would be able to keep w
hat I collected minus the cost of overhead. A
nd yet, the overhead
expenses included, amongst other things, rent in the building that som
e of the partners
owned. T
he discrepancy in my incom
e as compared to the am
ount of revenue I generated
was so great that it prom
pted me to consider other options.
Solo practice was one of these options. I m
odeled out what I thought I could gener-
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I still would m
ake more m
oney than I would if I joined the group practice. I realized that
it did not make sense for m
e to join the most alluring, m
ost well respected practice in our
area. I politely sent a letter thanking the practice for my offer and their tim
e. I comm
itted
myself to learning everything I could about starting m
y own practice. Ironically, that sam
e
group practice split up over the ensuing few years due to partner disagreem
ents.
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call “sex appeal”) of another practice. Analyze objectively, not em
otionally, the offer you
receive before accepting it. Do not get seduced by the practice size and appearance. I
often advise senior residents to not sign an employee contract w
ith any group practice
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practices. You may spend tw
o days a week w
ith one practice and three days a week w
ith
another. You will learn all you need to about yourself and the practice in that tim
e period.
You will see if there are any “w
arts” in the practice. You will avoid contractual problem
s
in the event the practice is not right for you. It is very comm
on for doctors to sign an
employee contract, join the w
rong practice and regret their decision later.
If you are set on joining a group practice, make sure you understand the rev-
enue model for ow
ners, partners, associates and employees. C
alculate the precise
amounts you w
ill make for the practice and m
ake for yourself. You can estim
ate how
much revenue you w
ill earn by understanding how m
any patients you will be seeing
per day. Multiply that num
ber by the average amount billed or the average am
ount
collected per patient. Subtract the overhead percentage from that total am
ount.
That is w
hat is left over for you and the practice. These num
bers are readily avail-
able. The partners in the practice can provide them
for you. In order for this to be
an accurate estimate, the am
ounts must be relevant for the type of practice you w
ill
have. In other words, if you w
ill be mostly surgical or m
edical, then the respective
fees projected should reflect that. Understand w
hat “partnership” means. If, as a
partner, you have to pay overhead to other partners, then be cautious. Make sure you
ask about “comm
on” revenue earned and shared. For instance, lab revenue gener-
ated from the practice is considered com
mon revenue. F
ind out how you share in
that revenue as either a partner or employee. G
o through the exercise of analyzing
amount collected versus am
ount received with any group practice offer. Y
ou will
find more often than not that you w
ill make m
ore money on your ow
n than in the
group practice. The reason is sim
ple. The group practice m
ust make a percentage
of the revenue you generate. The am
ount that it makes from
your work w
ill be the
extra amount you w
ould keep for yourself if you went into solo practice. A
side
from incom
e issues, some specialists feel that they m
ust join a group practice due
to call and hospital coverage. How
ever, now there are m
any “hospitalists” and other
soloists that share call or provide hospital inpatient coverage with each other. T
he
4
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Steven M. H
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burden of call and cross coverage is much easier to overcom
e today than it was
years ago. So, don’t worry about that.
You will earn m
ore money in solo practice, have m
ore personal freedoms, and be
your own boss. It is a no-brainer. You m
ust go out on your own. A
nd you must get started
as soon as possible.
FIR
ST ST
EP, SE
T U
P A
CO
RP
OR
AT
ION
There are m
any theories about picking a name for your practice. You can pick a nam
e
that uses your real name and is very professional, such as John D
oe, MD
PA.
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Medical Institute.” You can do both. U
se one as a corporate name registered w
ith the
state. Use the other nam
e as a “D/B
/A” (Doing B
usiness As) nam
e.
Years ago people would create a nam
e for the business starting with an A
. The
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Pages. For instance, my practice nam
e was A
dvanced Derm
atologic Care and C
ancer
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The Internet is now
more im
portant than the Yellow Pages for advertising. Sophisticated
search engines utilize complex search algorithm
s to populate search returns. This m
akes
having an A to start your practice nam
e obsolete. Sites do not get listed on search engines
in alphabetical order.
The nam
e of your business should be short. It should be easy to remem
ber so
patients can easily recall your Web site. T
he name itself m
ay include comm
on search
terms or com
mon keyw
ords. Terms should be relevant to your practice.
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O A
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DNH�WKH�PLVWDNH�RI�VHOHFWLQJ�D�SUDFWLFH�QDP
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purchased a matching Internet dom
ain name.
The Internet dom
ain name is the U
RL (U
niversal Resource Locator) or the W
eb
address of your Web site. You should have a W
eb site domain nam
e that matches your
practice name. M
ake sure your domain nam
e is available on the Internet. This is easy to
check by visiting sites such as Netw
ork Solutions or GoD
addy.com. You can search these
sites and buy the domain nam
e that closely matches your practice nam
e.
You need to decide what type of corporation you w
ill be forming. B
usinesses incor-
porate for many reasons, including tax advantages and debt and liability protection. In the
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tion. The corporate veil w
ill protect your personal assets from debt or liabilities associated
with the corporation.
There are a few
different corporation types to choose from. E
ach structure has tax
implications and liability im
plications. The corporation types that you m
ay choose from are
subchapter C corporations (C
corps), subchapter S corporations (S corps) and Limited Lia-
bility Corporations (LLC
s). The S corporation rules are contained in subchapter S of C
hap-
ter 1 of the Internal Revenue Code (sections 1361 through 1379). A
C corporation is a cor-
poration in the United States that, for federal incom
e tax purposes, is taxed under 26 U.S.C
.
§ 11 and Subchapter C (26 U
.S.C. § 301 et seq.) of C
hapter 1 of the Internal Revenue Code.
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corporation types. I relied completely on m
y accountant. In hindsight, he was not the
best person for the job. He w
as what I call a “schm
oozer.” He spent m
ore time asking m
e
personal questions about my fam
ily then he did actually working on m
y accounting. He
was “too” friendly. H
e would try to im
press me by rem
embering the ages and birthdates
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accountant can be great, while a bad accountant can be disastrous. I have gone through
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Initially we set up m
y practice as a C corporation. A
lthough not wrong, it certainly created
extra work. E
very year we had to pay attention to incom
e and expenses to avoid double taxa-
tions. Subsequently, I went through a series of accountants. A
ll of them suggested I convert
to an S corporation. I eventually did convert from a C
to an S corporation. I was w
arned that
if I sold my practice w
ithin ten years of converting from a C
to an S corporation, I would
still be taxed and potentially double taxed as a C corporation. D
ouble taxation occurs when a
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of the year) and then again at the individual level (personal income).
There are differences betw
een corporation elections (types) that are important to
understand. You should understand these differences so you can elect the most appropri-
ate for your situation.
PE
AR
LSom
e advantages of S corporation:
1. Avoidance of double taxation.
6
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Steven M. H
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2. Savings on payroll taxes via shareholder (owners of the com
pany) distributions.
3. Taxes may be less on sale of practice if S corporation.
4. Income passes through to individual shareholder.
A C
corporation carries the risk of “double taxation,” or tax on corporate income and on
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through to the shareholders’ (owners’ of the com
pany) individual tax returns. This m
eans that
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for sole proprietorships and LLCs (lim
ited liability corporations). In summ
ary, the S corpora-
tion itself does not pay income tax. It is often the easiest election for a doctor to m
anage.
PE
AR
LSom
e of the requirements of an S corporation election are:
1. Each S corporation shareholder m
ust be a U.S. citizen or resident.
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interests. For example, if you only ow
n 10 percent of a business, then you can only
claim 10 percent of the am
ount lost or earned from that business on your personal
income tax.
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shareholders that own m
ore than 2 percent of the corporation.
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Once you have decided on the corporation nam
e and elected a corporation type
(i.e., S corp or C corp), you w
ill need to write the articles of incorporation and corporate
bylaws and create a board of directors. You w
ill need the help of a corporate attorney
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so that you can issue stock to shareholders. In a medical practice, you are usually the sole
shareholder.
Don’t let these steps intim
idate you. They are m
ostly boilerplate processes. Attor-
neys will do the w
ork for you. There are “do it yourself” W
eb sites and forms for this.
How
ever, the few dollars an attorney charges are w
orth it. This w
ill ensure that the setup
process is done right from the outset.
8
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Steven M. H
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STAT C
ON
SULT
FRO
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A C
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RN
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Everyone is entitled to conduct business through a corporate entity to avoid personal liability for
obligations to vendors and other creditors. Doctors should take advantage of this and avoid operating as
sole proprietors. However, doctors, like other regulated professionals, cannot avoid liability for m
alprac-
tice by operating as a corporation or LL
C. A
ny practicing doctor should investigate the pros and cons
of acquiring malpractice insurance.
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between your salary, subject to withholding taxes, and dividends, subject only to ordinary in-
come tax rates applicable to dividends, generally lower than the withholding tax burden. The
IRS m
ay review this allocation and insist on payment of “reasonable” salaries. A
s an obvi-
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dend distribution of $500,000. If you demonstrate consistency with salary and bonus paym
ents,
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accountant on this issue. If you have other partners or investors in your business, dividends must be
distributed to them on a pro rata basis, tied to ownership of shares in your com
pany.
NE
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NA
ME
After you have filed form
al paperwork w
ith the state for your corporation and
purchased a matching dom
ain for your Web site, you can tradem
ark the name. T
his
is something you can do by yourself. It is very easy. Y
ou can trademark the nam
e at
ww
w.uspto.orgw
ww.uspto.org. If an attorney is already preparing your corporation docum
ents, you
could also ask him or her to tradem
ark your business name, too. A
sk him or her to
do this for the amount of the filing fee ($275-$300) since he is already doing other
work for you.
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defensible, but probably not as defensible as a registered trademark. R
egistering a trade-
mark online is inexpensive. It m
ay costs less than $300 if you do it yourself online. If
your name is original and you fear som
eone might steal it, then tradem
ark it. I register my
trademarks online w
ithout the help of an attorney.
10
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STAT C
ON
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FRO
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OW
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M.
GIT
TEN
, INTELLE
CTU
AL P
RO
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ATTO
RN
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TRAD
EM
ARKS
What A
re They?
Trademarks protect the goodwill of your com
pany. They in effect identify your company as the
source of certain goods of a certain quality. A tradem
ark is any word, name, sym
bol, or device used
to identify the source or origin of products or services and to distinguish those products or services from
others. When you hear M
cDonald’s, it has a different connotation in your m
ind than Burger King,
even for very similar products. You, as a consum
er, know what to expect when you eat at McD
onald’s.
Now think how confusing it will be and how upset M
cDonald’s would be if Burger K
ing changed the
name of its fam
ous burger to the McW
hopper.
Everyone knows that words such as Sprite soda, C
orvette convertible, and Google searches are
valid and appropriate use of trademarks. It is also well known that num
bers and letters have become
very famous tradem
arks, such as BMW
, 3M, and 1-800-FL
OW
ER
S as sources of goods and ser-
vices; and, lastly, designs and logos also have great power as trademarks. Think of the N
ike swoosh,
Adidas stripes, Starbucks m
ermaid; all very strong tradem
arks in the mind of the consum
er.
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such as the roar of the MG
M lion, the opening notes of M
icrosoft software, and even an
attempt to tradem
ark the Harley-D
avidson engine sound. Fragrances such as stationery treated
with a special fragrance can be trademarks. Shapes such as the unique shape of the A
pple
iPod or Lego building blocks have been given tradem
ark protection. Colors such as the brown
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packets have all been used to establish brand awareness. I am sure that each of you, when
UHDGLQJ�WKLV��KDYH�DOUHDG\�LGHQWLÀ�HG�WKH�RZQHUV�RI�WKH�UHVSHFWLYH�DUWLÀ�FLDO�VZHHWHQHU�FRORUV��
that is the ultimate test as to whether som
ething has become a tradem
ark. Lastly, the overall
look, the trade dress, has been given trademark protection. For exam
ple, a distinctive décor
and layout for most franchise restaurants, such as H
ooters’ orange and white uniforms and
wooden décor or Chipotle’s accent colors, m
etal, and wood, would be given trademark protection.
The governm
ent, in effect, is giving you a monopoly over a word and its use in com
merce. So,
like patents, there are certain hurdles which must be overcom
e in order to establish the strength and
validity of your trademark. W
ords may be generic, descriptive, suggestive, or fanciful. W
here your
proposed trademark lies on that spectrum
will govern the strength of its use as a trademark. By
way of example, if you are a farm
er and you wish to brand your new red, shiny fruit APPL
E, the
government will not grant you tradem
ark rights because “apple” is generic for the red, shiny fruit.
What would other farm
ers call their red, shiny fruit?
Similarly, if you are a baker and you wish to tradem
ark your cakes and cookies which taste
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cookies you will not be allowed to enforce monopoly rights in that brand either. Such use is descriptive.
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the most part, not enforceable.
However, if you are m
anufacturing a perfume which sm
ells sweet or fruity and wish to brand that
perfume A
PPLE
perfume, then the word is only suggestive of a characteristic of the product, and you
will most likely be entitled to tradem
ark protection. Better yet, if you are starting a computer com
pany
and name your product line A
PPLE
, then this is fanciful and a strong mark.
However, words can change their status, and the spectrum
discussed above is only a general
yardstick. History is littered with exam
ples of marks across the spectrum
, including famous m
arks
which have become generic. G
eneric marks such as “aspirin” and” therm
os” both began as fanci-
ful marks; M
ovie Channel or H
ealthy Choice m
ay be considered descriptive bordering on suggestive
marks. Suggestive m
arks are marks such as Priceline.com
, and fanciful marks are m
arks like Kodak
and Windows.
There are other rules as to which types of m
arks are not acceptable for protection even if fanci-
ful. Imm
oral or scandalous matter, such as curse words, will m
ost likely not be granted trademark
protection. Deceptive m
atter such as “Fresh Florida Oranges” for oranges grown in C
alifornia, or
anywhere other than Florida, will not be granted protection. Lastly, surnam
es such as Anderson or
Smith or fam
ous names such as Johnny C
arson can’t be trademarked unless you are that person or
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