How NOT to open a Physical Therapy clinic (or other business)
If a lowly (ass)istant pulled it off....why haven't you?
Most of my readers don’t care about this stuff, but you might be entertained by the embarrassing failures. Some of these stories will help any aspiring business owner.
In 2006 I got a call from a PT friend at a former clinic. He was going to strike out on his own in a small town, out of the county. We both had a non compete clause with a former employer.
I went to work for him, but after one year, to the day of his non compete, he went back to the former county, to compete against the previous owner. Pretty funny actually. Two Texans. You get the picture.
He took me to lunch, and asked me if I had ever thought of owning my own clinic. I should have thought, “no, because I’m smart, and I’m only a PTA.” Instead my ego thought, “oh yeah, I can do that! Other PTAs have owned clinics”, albeit in much larger markets. That’s an important factor I’ll get into later.
So, I found PT’s who were as business naive and idealistic as I was, to join me. “Screw the dress code! We’re gonna wear jeans to work every day, and drink beer in the clinic.” And we did many times. We thought we were cool business owners.
I was so naive about business, I didn’t realize I had to start paying Gross Receipts Tax the first month, and every month. “What’s that!?” I asked my poor accountant..who looked at me with mild curiosity, (why is this guy in business?) “ I haven’t made a profit yet! How can I pay taxes?”
And so it began in earnest. The first thing you have to do, which is fun, is pick a business name. This first step is so fun, it misguides you into thinking it’s all gonna be a rosy ride. “Lets call our selves Blue Jeans and Beer PT!” (true story). Luckily we came to our senses and I used my name. Or, maybe that wasn’t the smartest. My name, the PTA, and contract PT’s. That’s not gonna seem fair for very long, and it wasn’t. Fair which way though? I had all the headaches, and they thought I was gonna be a millionaire.
Business name is very important, because it’s going to drive marketing, and if you have to change it later, that’s a major nightmare. Your business name is tied to all those insurance contracts and state and federal agencies. You also potentially lose customers if you change later. I learned that from a former employer. He tried changing the name, and the locals still called it “The Wellness Center” until the end of its existence. I only know the small town market, but here it’s all about your first name. “Oh yeah, I love that guy _______ he treats such and such and so and so.” My advice in a small market, put your face out there, and own it. Go all out. They won’t remember your cutesy name, “Applied Therapeutics” or whatever. John Smith Physical Therapy, all the way.
Next, you have to file for a local business license, and get a tax ID from the state, then Feds. Get a good accountant who has the patience for you business idiocy. A lawyer for your LLC. NPI numbers from Medicare, AND you’re facility. Place for your practice, liability insurance. Building insurance, equipment. Thousands so far. Having fun yet? (when’s the money coming?)
Next you’ll be talking to some other clinic owners, who have smartly joined forces to fight the Insurance Cartel. The Cartel won’t torture you physically, just emotionally. You’ll be filling out reams of paperwork. But you’ll be in network for many entities. VA and Medicaid will likely be separate mounds of paperwork. You’ll be in business with companies like (In)Humana, Tri (and) Care, Cartel Unidas…
There once was a Golden Age of Medicare billing and small clinic ownership, called the “80’s”. Claims were limitless and un questioned. Rainbows arced from the Medicare clouds to your luscious green therapy cottage, and leprechauns danced with buckets of gold coins down to…...wake up, your are going to need a billing clearinghouse. They might take 7% or more, but they are going to handle a lot of claims, paperwork, follow up, and hopefully nickel and diming, that you won’t have time for.
Are you hiring a front office? Tech? In the beginning, you might be able to do everything yourself. Oh, and you’ll be cleaning and fixing toilets after hours. “But wait, I have a DPT, and lots of alphabet letters behind my name, and I went to a prestigious college..” Yeah, no….pick up that brush.
Then you start seeing patients! Awesome. That’s what you went to school for. But wait. Where are they? They don’t just come running to your new business? I bought a clinic, so I had some traffic right away, but also a payment for the first two years.
Do you want to network, glad hand doctor’s? Show up at their place? Begging for business? I hated every second of that stuff. I naively thought, “hey, I want customers because I’m good, not because I went golfing with the doc.” Sure buddy. Welcome to reality. I didn’t want to patronize people. Isn’t the other meaning of the word patronize, to participate in their business?
Get to know your competition, and your market. Is it a big or small population to draw from? How many other clinics are there?
So you’re seeing patient’s, and your paying monthly gross receipts tax, the lawyer, accountant, landlord, utilities, liability and building insurances….
But where are the payments? A few months after you’ve been practicing, some EOBs, or explanation of benefits start rolling in. “The insurance claimant has a deductible. They owe you the money, and/or copays.” I literally got checks for .01 cents from Cartel Unidas.
After a couple years, payments start to smooth out, and you have a front office person by now, who is helping with collection. The front office or spouse has to be the bad guy. Try not to collect money. “oh yeah, they take care of that.” You learn real quick that a large percentage of the population does not want to pay you.
My advice on employees? You’re not their friend. That’s the hardest part. You and the employees can be friendly, but you are paying them for a service. With younger generations, this is going to become harder to accomplish. They think they are entitled to a “place to hangout.”
Set out a clear list of written expectations. And yes the first one must be “show up on time.” That’s not obvious, sadly. Take emotion out of the expectations. It’s their choice If they want to follow them, or work somewhere else. And I don’t mean that in an assholish way. It took me years to learn that. I am only on speaking terms with half the former employees. That percentage would have been better if I were friendly, yet professional.
This one’s really embarrassing. You can’t be “just the right enough busy,” you have to have as much business as possible. Being slow is the most depressing feeling in the world. I learned that a business must grow. You need constant cash flow to accomplish that, and for future headaches. It’s not about being greedy, it’s about being solvent in the future.
The perks? Making your own schedule. You can be sick without pressure, though it’s a different kind of pressure. There is more money on the whole, but when you see every gov’t agency nickel and dime you to death, it doesn’t feel like it. It’s a roller coaster of profit and debt. Some months you pay your employees, and are borrowing from your savings. That’s why your current boss is so grumpy this month.
If I were a PT, I would be trying a cash only, travel to their house market. Insurance and gov’t agencies are the real problem. You would not have the headaches of employees, building overhead, insurance claims, etc. Do this before you are required to be a Medicare/Medicaid provider in order to have a license. You don’t think they would ever do that?
Some former colleagues will be upset I’m giving this advice out. Good luck with that. I wouldn’t wish this business stress on my worst enemies.
After I had sold the company (got lucky), I reached out to a former boss to thank him for employment, and apologize for all our bitching. Even if you don’t decide to open your own business, it may help you appreciate your current job. Small clinics are vastly different than large corporations.
Was it a mistake? That’s hard for me to say, because I learned so much about business and management.
I was (was?) an arrogant PTA, but you know what? I busted my ass.
Now are you not gonna do this because of all the hard stuff I just said, or are you definitely gonna do it because an arrogant PTA did it?
Or are you smart enough to skip it?
Oh, and check out this rant about some of your future employees,
