Starting Your Own Private Practice: A Business Model

How did you go about setting yourself up in a group practice?

Dr. Byrne: After completing my residency, I moved to North Carolina and initially started out as a solo practitioner in 2010. Now, 6 years later, my practice has 5 psychiatrists, 3 full-time administrative staff, 2 part-time administrative staff, and we are probably adding some more next year. I also do consulting work.

Can you tell us a little about your consulting work?

Dr. Byrne: Sure. I work with local psychiatrists to help them figure out if they want to start a private practice, what kind of model they want for their practice, and then to troubleshoot problems in their practice model.

Interesting. I think that most of us consider starting our own practice at some point in our careers. Based on your experience, what is the number one question we should ask ourselves before taking the leap?

Dr. Byrne: If you are doing a private practice, whether it’s solo or group, it’s going to be a small business. So here’s the question: Are you ready to run a small business? You have to be willing to learn how to think like a business person to some degree to do well in the current environment.

If the answer is “yes,” then what’s next?

Dr. Byrne: The next question is, “What’s my business model going to be?” The business model drives the clinical work. And whether you take insurance or not will somewhat dictate that model. In my opinion, with the limited number of psychiatrists taking insurance these days, you are going to be in high demand if you do accept it. On the flip side, though, that will push you into a high-volume practice.

Why is that?

Dr. Byrne: Because of the way reimbursements work and the administrative overhead required to do the paperwork. If you want to do psychotherapy with your patients, you’re not going to get reimbursed very well, so you are going to be pushed into doing medication management. And that is going to require you to see multiple patients in an hour.

I’ve heard from some colleagues that they have found the reimbursement with E&M codes to be much greater than it used to be, that it’s much more lucrative now to have an insurance-based practice. Can you speak to that?

Dr. Byrne: Sure. Using E&M codes in combination with therapy codes may allow clinicians to provide therapy to many of their clients at a higher reimbursement than in the past.

Do you mind sharing some insight about your practice? Did you ever go the insurance route, or did you start immediately with a private-pay model?

Dr. Byrne: I struggled with that a lot at the beginning. I ended up not going the insurance route. So as a doctor, I am not in network; I am what’s called an out-of-service provider. For my business model, I use what I like to call a high customer service model in that I submit claims electronically for out-of-network patients who have insurance.

Can you explain this model?

Dr. Byrne: Sure. We tell patients we are an out-of-network provider, which means that they pay us in full at the time of the appointment. But if they want to, we will take their insurance information and electronically send their claims to their insurance company for them. It has to go through a third party—what is referred to as a “scrubbing system”—to make sure that it will be accepted. If so, then insurance will receive the claim and apply the amount to the deductible. After the deductible is met, they will pay a percentage of that claim back to the patient. It does not come to us.

The third-party scrubber—what does that mean exactly?

Dr. Byrne: Again, when you’re thinking about a practice, you’re going to have to think about your electronic medical record (EMR). I don’t think anyone should be on paper, in my opinion. There are free ones that are perfectly good. When you get your EMR, one of the things to look at is the billing component. Ours is integrated into the EMR so that it is fully integrated into one system. Insurance will pay the deductible if you process it electronically with a third-party scrubber. If you are trying to do it manually, maybe only 25% or so will go through because insurance will invent all sorts of reasons to reject claims, oftentimes saying they were coded incorrectly or something like that.

You bring up a point that I think a lot of us haven’t really thought about, which is that it might be easier to bill as an out-of-network provider if you use EMR.

Dr. Byrne: Right. Again, going back to the business component, if you’re going to have a small business, you want to have customer satisfaction. Obviously a high level of clinical care is one kind of satisfaction, but there are other kinds too, and the ease of use of your submitting claims for them—people do really like that.

So imagine a patient comes to see you and says, “Dr. Byrne, I understand that you have this system in your practice where you will try to bill the insurance company. How does that work, and am I really going to get money back?” What do you tell them?

Dr. Byrne: I would generally say something like this: “Once you hit your deductible, you’re going to get some money back; the percentage will depend on your plan. Our administrative staff can take your insurance information and help you estimate what your deductible will be.”

And that deductible, does that include all healthcare spending that they might have, or is it just out-of-network outpatient visits?

Dr. Byrne: Typically insurance companies have an in-network deductible and an out-of-network deductible, as well as individual deductible and a family deductible, so the level of complexity obviously is growing. For our practice, patients would have to look up their out-of-network deductibles.

In your experience, what’s an average out-of-network deductible?

Dr. Byrne: I’d say the average is 1,500 dollars, and whether patients meet that depends on how many visits they have with you. If they’re coming regularly for therapy, they’re going to hit that deductible pretty quickly. If they’re coming in quarterly for just stable med management (and we require a quarterly check-in), they’re probably not going to hit it.

So if we decide to go the out-of-network route, do you have any suggestions for how much we should charge and how to determine that? Obviously we can look up people’s practice fees on the Internet, but it’s not as simple as that.

Dr. Byrne: When I first started, I looked around and talked to other practitioners, and what I found was that people were charging fees that varied widely. So I developed my own approach, which is one I use in my consulting work with new practices. The idea is to design a sustainable practice that is not going to cause you to burn out and overload yourself, because that’s what doctors tend to do. Only you can answer the question, “What do I need to make to feel good about what I’m doing?” So start with how many hours you want to work a week and decide how much money you need to make. And working backwards from there, come up with an hourly rate for your services. You also need to figure out what your administrative overhead might look like and how many hours your staff would need to work as well. You base your fees on time, much like a lawyer does. Your time is the critical component; instead of the patient receiving a service, what they’re getting is time with the doctor. So everything you do with patients is built on a time model.

Can you walk us through an example?

Dr. Byrne: Sure. Let’s say you need to make 250 dollars an hour and then take off your administrative overhead so that you walk home with 150 dollars an hour. And then you figure, well, if I see someone for a therapy appointment, it’s about an hour. If it’s a med management visit, I do half an hour. That’s enough time for me to see the patient, write the prescription, schedule the next appointment, and write my notes. That’s how you decide how much visits are going to cost. Maybe you live somewhere with a low cost of living and you don’t need to charge that much to make what you want and work 40 hours a week or 20 hours a week. Or maybe you live in New York and it’s super expensive and if you want to do those same work hours, you’re going to have to charge a lot more, but it will be sustainable. It’s a very different way of thinking about it, but I think it provides a higher quality of life and less chance of burnout if you do it this way.

I think that’s great advice, particularly since burnout is a big problem in our field. Within your practice, is there a specific structure to your patient appointments?

Dr. Byrne: Yes. First of all, patients have to be on time. We promise no wait time, so a lot of our business is structured to make sure that people are seen on time. If they arrive 15 minutes late, they don’t get an extra 15 minutes. Administrative staff checks them in, calls us, then we come out and greet them. The actual appointments I structure into thirds. The first third is open-ended questions to let them talk: what’s going on; how they are doing. The next third is more targeted questions: the things I need to know. The last third is to talk about what we’re doing: the next treatment step, the overall plan, prescriptions. And when they leave the office, I’m pretty diligent about doing their notes immediately. I really strongly believe if you can walk home at the end of the day with no notes to do, you feel like a million bucks. I build time buffers into my schedule to do my notes.

How long are your visits?

Dr. Byrne: Typically, adult psychotherapy is going to be a 45–50 minute appointment, and a medication management visit is going to be 20–25 minutes. For children, we’re doing 60–75 minutes face-to-face and a 90-minute block for intake since you have parents coming. In our practice, what we say is 20–25 minutes face-to-face, but we block 30 minutes so we can do notes, go to the bathroom, take a break, etc. Our long appointments will be 45–50 minutes face-to-face, and again we build in that 10–15 minutes in between. I think it’s really important to know what you need as a buffer between appointments and that you don’t shortchange yourself because you’ll regret it. And you have to be really practiced and skilled at starting and stopping on time.

Definitely, and with some of us that does takes practice. In terms of billing time, how do you handle paperwork charges, phone time, and those sorts of things? I know that there are often misunderstandings when patients are billed for things they don’t expect.

Dr. Byrne: Everything that our administrative staff can do that does not involve the doctor’s time, they will do, and we will not charge extra. These are things like prior authorizations, nonclinical phone calls, and basic paperwork like an excusal note to an employer saying the patient was at a doctor’s visit on a given day. If there’s something that specifically requires the doctor’s time, then we would bill in 15-minute increments, and it’s at the doctor’s discretion whether to bill for it or not.

That makes sense. Do you talk to your patients about this in advance?

Dr. Byrne: That’s a really good question. Let me start by saying this is where training your administrative staff is huge. In our office we practice with scripts to learn how to talk to patients about this. We say something to our patients like, “You can expect a really high quality of service from us, and we will respect your time. We don’t double or triple book. If we call you on the phone, we’re going to have your chart open and be ready to talk to you; we’re not going to be taking other phone calls; we’re not going to be doing other things. We want to make sure that your time with the doctor is used effectively and efficiently, and we ask in return that you respect our time as well.” We have a “free pass” system that we don’t really advertise, but if somebody cancels or misses an appointment, we will say, “Okay, it happened once. Let’s reiterate the policy; next time it happens, we’ll bill you for it.” We do get some frustrated patients, especially if they’re new to the practice, so we spend time up front going through these types of details.

How would you explain to your patients the difference between a clinical and a nonclinical call, for example?

Dr. Byrne: If I start a patient on a new medicine and they call me a day later and say, “I’m having a side effect; what do I do?” I would not typically bill for that time. But if a patient wants to talk to me for 15 minutes to get through a panic attack, I would bill for that phone time. I make the distinction this way: If my patient wants me to do therapy outside the sessions, which a lot of people do, then that time has to get billed. Another tricky area is refills.

In what way?

Dr. Byrne: We have a separate fee for refills outside of appointments as well as controlled substance refills outside of appointments. We want to disincentivize people to miss their appointments because if we think they need to be here, there’s a reason. And we charge more for a controlled substance refill because that requires extra work on the doctor’s part to provide a proper level of high-quality care. You have to go into the controlled substance database, check the chart, make sure you’re not trying to fill something too early. Patients will complain, “Well, I’ve never paid for a refill anywhere else.” And we’ll say, “You will always have enough medication if you come to your appointments as scheduled.”

On your website, you tell patients that they will need to provide a copy of their credit card at the initial visit. How did that come about? I would guess that many people would say, “Are you kidding me?”

Dr. Byrne: We tell them upfront: We keep your credit card on file for any charges outside of your appointment, like therapy phone calls or missed appointments. Sometimes people get upset, but at this point we have a system here that’s been working long enough that the administrative staff handles these conversations really well.

It sounds like you’ve put a lot of time and thought into running a successful, business-minded practice.

Dr. Byrne: I think it’s a really great time actually to be in private practice. If you think about it as a business and you start out on that foot, you’ll do very well. You’re never going to be wanting for patients; we have something that people really need. And you can design your practice to be all sorts of different things depending on how much time you are willing to put into it.

Thank you for your time, Dr. Byrne.