Ever dream of starting your own dermatology practice? While owning a business is hard work, it also gives you greater control over your career.
Starting a private practice lets you call the shots. You can create a legacy as you build a business aligned with your values and your goals.
Even if you’re a few years away from acting on your dream, it’s never too soon to start planning. Here’s what you need to know about starting a dermatology practice.
How to Start a Dermatology Practice
The Business of Starting a Practice
Legal Compliance for Your Dermatology Practice
Dermatology Practice Operations
The Business of Starting a Practice
3. Choose the Services Your Dermatology Practice Will Offer
6. Equip Your Dermatology Practice
Write Your Business Plan
A business plan is the first step in bringing an idea for a business into the real world. It documents your practice’s goals and the tactical steps needed to achieve them.
Besides its value to your planning process, a business plan is required if you’re going to apply for financing. It demonstrates to potential lenders that you’re a professional with a strategy for success. The strength of that strategy is how they will decide whether your business is a good investment.
As you develop the business plan for your dermatology practice, don’t be afraid to ask for help. Starting a business is probably not something your clinical studies prepared you for. You can get free advice from experienced mentors in The Small Business Administration’s SCORE Program.
Parts of a Business Plan
- Executive Summary: This is an overview of the entire plan, including your mission, target market, competitive advantage, and financial projections.
- Business Description: This goes deeper than just “dermatology practice.” It describes the services you plan to offer, the market you will serve, and unique features not found in your competitors’ businesses.
- Market Analysis: Describe the demographics of your market and the clientele you hope to attract. Honestly assess any opportunities or challenges the market may pose.
- Competitive Analysis: Identify other practices offering dermatology services in the same market. How does your business compare in terms of location, services, and clientele? What differentiating features will set you apart?
- Business Management: This is the nuts and bolts of your planned practice. Outline the organizational structure, including roles and responsibilities. Note your credentials and the credentials you will require of the people you plan to hire. Also list any strategic partnerships or affiliations with other healthcare providers, such as hospital systems.
- Services and Facilities: What services will you offer in the beginning? What kind of facility will you require to do that work? Include square footage, layout, equipment, and technology you will need.
- Business Operations: A real-world vision of your business’s day-to-day. Include office hours, patient flow, appointment scheduling, billing processes, and records management.
- Regulatory Compliance: Outline the licensing and regulatory requirements your practice must follow. These will vary from state to state and may vary based on the types of procedures you plan to offer. It’s important you know which requirements apply to you and how you will make sure the practice stays in compliance.
- Risk Management: No business is without risk. What would happen if legislators passed regulatory changes? Or if the major health system the next county over expanded into your market? Identify any threats or challenges your business may face so you can develop strategies to protect yourself.
- Financial Projection: Your business plan should include realistic estimates of expenses and revenues for each of the first three years. Lenders may require you to explain the logic you used to arrive at these numbers.
Choose the Services Your Dermatology Practice Will Offer
When you’re starting your own practice, you’ll want to focus first on the services with the highest return on investment.
When you’re starting your own practice, you’ll want to focus first on the services with the highest return on investment.
Nextech VP of Aesthetics Robin Ntoh suggests dermatology practices just starting out can begin with noninvasive procedures like fillers, microneedling, and chemical peels which have high demand and don’t require you to buy expensive equipment like lasers. Ntoh said as your practice builds and you have predictable revenue coming in, you can invest in more equipment and offer a broader range of services.
Assess your market to decide which services are most in demand. It’s wise to offer a mix of general dermatology and cosmetic procedures so you have diversity in your revenue streams. Monitor each offering so you can lean in on the most profitable.
As you make your plans, don’t miss the opportunities in telehealth. In many areas of the country, patients wait weeks or months for dermatology appointments. A teledermatology system can reduce the wait time for new patients from four weeks to 48 hours. The ability to be seen quickly can make your practice an easy choice for new patients.
Name Your Practice
If you’ve been dreaming about starting a private practice for a while, you may already have a short list of names you like. Before you set your heart on one, consider these tips:
- Choose a name that’s easy to spell and remember. A creative spelling may seem fun and distinctive, but prospective patients may have a hard time searching for you online.
- If you choose to name the practice after yourself, other doctors may be reluctant to work there. This can make recruitment challenging as you grow.
- Once you’ve decided on a name, buy the website domain, even if it’s likely to be some time before you act on it.
Choose a Location
It’s a good idea to lock in a location before applying for your practice’s licenses and credentials. That will save you from the tedium of updating your address with every agency down the line.
As a medical practice, your business will be a destination, so you don’t need to worry about finding a spot in a high-traffic area. However, location can still be an important factor.
First, consider the services you want to perform. You’ll want to locate in an area where there is demand for what you want to do, where the median income is high enough to afford it, and where competitors haven’t already cornered the market.
Next, think about your facility requirements. How many exam rooms will you need? Do you need space for an on-site lab, Mohs procedure room, and/or even an aesthetician or med spa suite? When looking at available spaces, consider the costs of retrofitting them to meet your needs.
Maybe you dream of owning your own building. While real estate is a good long-term investment, it can be risky to buy a location at the very start of your business.
Besides making yourself responsible for building maintenance and administration, buying a site locks you into a location before you’ve tested the market. It’s often wiser to lease space for the first couple of years. This gives you more working capital and greater flexibility.
Equip Your Dermatology Practice
When you choose the location for your practice, you’re likely to have two options: a custom buildout or a refurbishment.
If the site previously housed another medical office, you can simply refurbish it. You might move or replace some fixtures, but much of the layout can remain the same. This is a lower cost option.
If you’re moving into a new build, you’ll have to buy everything new, but you can set it up exactly as you like. Everything from the placement of the cabinets to the color of the countertop will be to your specifications.
It’s important to stick to your budget, even if that means delaying some improvements. You will probably need just one or two patient rooms to start — if your space comes with additional rooms, leave them unfurnished until you need to grow into them.
If you have to skimp on some areas, don’t do anything that would detract from the patient experience. Make sure the reception area, waiting room, and patient rooms are aesthetically pleasing.
Financing Your Practice
2. Hire an Accountant and a Lawyer
Secure Funding
If you can afford to self-fund your new dermatology practice, you’ll be ahead of the game. Without a debt load, you can break even earlier and get better lending rates for future purchases.
Most dermatologists, however, will need to secure funding to get their private practice started. Here are some options you might consider:
- Traditional Bank Loan: Meet with several banks to see what kind of financing you might qualify for. Smaller locally owned banks often have more benefits for small businesses than large national banks.
- SBA Loan: Look into loans from the U.S. Small Business Administration. SBA loans are competitive, but they generally offer more favorable terms and longer payback periods than banks.
- Grants: If you’re planning to locate in an underserved area, there may be grants available from government agencies and local, state, or national nonprofits.
Hire an Accountant and a Lawyer
Bring on a finance professional early in your business journey. Your accountant will help you identify, prioritize, and budget for all the things you need to bring your vision to life.
If you can, hire an accountant with experience working with private medical practices. At the very least, they should have experience serving other professional service providers.
It’s also wise to hire an attorney before you begin filling in legal forms and registrations. Law is complex and experience is key; look for a lawyer with experience in healthcare management.
This kind of specialty experience often doesn’t come cheap. But it’s far less costly than setting up your business incorrectly and finding yourself liable down the road for fees, fines, and tax liabilities.
Negotiate With Insurers
When deciding which insurers you want to work with, consider your market. If your area has a few major employers, their employees are likely to be in your patient pool, so it would be wise to accept the plans they offer.
To bill insurers, you need to be credentialed. You may have to go through a separate credentialing process with each insurer. At minimum, you will need a practice address and a medical malpractice policy. Individual insurers each have a number of additional requirements.
Insurance credentialing is a very important but highly technical process. If you feel out of your depth, it might be wise to outsource it. Many third-party billing companies offer this as an add-on service.
Understand the 4Cs
Every business owner needs to understand the 4Cs of finance: costs, cash, capital, and control.
- Costs: Everything it costs to run your business. This includes static costs like rent and licensing fees, dynamic costs like supplies and utilities, and personnel costs like retirement plans and payroll.
- Cash: Even if you budget down to the dime, it’s important to keep cash on hand to cover any urgent, unexpected costs.
- Capital: Capital is the money you invest in the business. Construction, office expansion, and new equipment are all capital expenses.
- Control: Control tracks where and how money is spent. This is a crucial function to ensure the practice is operating within legal and regulatory parameters.
Manage Risk
Before you start your own dermatology practice, you should be mindful of two types of risk: personal and business.
First, consider your own personal risk. Business owners get paid last, after all the other business expenses are covered. Many practices lose money for the first year or two as they ramp up operations.
Before striking out on your own, make sure you have enough saved that you can skip an occasional paycheck if needed.
Once you’re in business, risk management will be an ongoing concern.
- Manage your credit risk by making prompt payments and not falling behind.
- Reduce safety risks to patients and staff by following regulatory requirements, maintaining a safe physical environment, and adhering to medical best practices.
- Reduce fraud risk by establishing transparent purchasing practices, keeping strict controls on who can access the practice finances, and conducting regular professional audits.
Legal Compliance for Your Dermatology Practice
Choose a Legal Structure
Your business structure determines how it is treated by the government in regard to taxes, licensing, and other legal matters.
Common business structures include corporation, sole proprietorship, LLC, and partnership. Each of these structures has pros and cons, and the “right” one depends heavily on your individual situation.
This is a technical but important step. Talk to a tax attorney, CPA, or business compliance specialist before deciding on the type of legal structure that makes the most sense for your practice.
Get Licensed
Licensing requirements for a private dermatology practice vary by state. Contact your state medical board or a lawyer with healthcare experience to ensure you’re compliant with the rules in your location.
Your municipality or county might also have licensing requirements, such as a business license, pharmacy license, or certificate of occupancy for your office space. Be sure you’ve checked all the boxes before you open the doors.
If you’re providing telehealth services, establish a process to ensure you only serve patients in states where you meet licensing requirements. Not every state allows out-of-state physicians to offer telehealth services.
Buy Insurance
If you’ve been a part of a larger healthcare organization, you may not have been paying for your own malpractice insurance. That bill can come as a nasty shock to providers striking out on their own.
Luckily, dermatology is considered a low-risk specialty. While not cheap, your insurance rates are relatively modest when compared to high-risk specialties.
When applying for malpractice insurance, be clear about every service your practice will or may provide and ensure it is covered.
You need to make sure every clinician in the practice, from dermatologists to medical assistants to aestheticians, is covered. You may be able to get an umbrella policy that covers your entire staff.
Talk to your lawyer about the pros and cons of buying a separate insurance policy for the practice. This is one way to protect the business should you be sued as an individual.
Understand Compliance
Cash flow will be tight for the first few years, so it’s important not to leave money on the table.
MIPS compliance maximizes your Medicaid reimbursements, as well as keeping you in the good graces of regulatory agencies. Explore tools that make compliance easy without creating an additional administrative burden.
Practices that leverage Nextech’s services achieve an average MIPS score of 99.97, gaining an average Medicare adjustment of 2.3% or higher.
Dermatology Practice Operations
Acquire Equipment
When you’re first starting out, flexibility is your friend. When possible, invest in devices with multiple functions that can be used to treat a variety of conditions and skin types.
Be selective about what equipment you really need to get started. For example, you probably don’t need to buy a laser your first year unless you are specifically focused on a procedure that requires one.
Shop around for the best prices on equipment and supplies. You may be able to lease or lease-to-own expensive equipment. It may make financial sense to get different supplies from different vendors, or you may be able to save by bundling everything together with a single vendor.
Once you launch, assign the task of supply management to a medical assistant or office manager. That person will be in charge of tracking inventory, ordering replenishments, and renegotiating contracts every six months.
Hire a Team
For a while, you might be your dermatology practice’s only full-time employee. Hire only the staff you need and ramp up hours as your patient load increases.
One of your most important early hires will be your office manager or practice administrator. Even if this starts out as a part-time role, this person will quickly become your right hand.
They will handle the business tasks of the practice while you focus on serving patients. To keep overhead low, outsource administrative support functions like bookkeeping, payroll, and reception.
When hiring clinical staff, start with your network. Bring in people you already know and trust, or ask those people for recommendations.
For both clinical and administrative roles, hire for attitude as well as aptitude. Look for applicants who are excited about the idea of working in a brand-new practice. Willingness to learn is important. So is a willingness to step up and handle situations as they arise.
Purchase Software
The software you use to run your practice can literally make everything you do either easier or harder. It is not the place to cut corners.
“We see about 150 patients per day,” said Dr. Gene Rubinstein of the Dermatology and Laser Centre in Los Angeles. “If we can save just 30 seconds per patient, that’s 325 hours of time-saving over the course of the year. We’re saving $6,500 based on just 30 seconds per patient.”
An integrated system that combines an easy-to-use EHR with robust practice management tools can save time and money. Your staff won’t have to train on multiple systems, and you won’t have to pay multiple providers.
Look for a system designed for dermatology practices. It will already be equipped with specialty-specific tools, functions, and billing codes that a generic EHR is likely to miss. Plus, you won’t have to navigate through loads of tools and content that don’t apply to dermatology.
Most practices who are dissatisfied with their EHR complain they didn’t receive adequate training. Look for a company like Nextech, with an outstanding training and onboarding process and round-the-clock, U.S.-based customer service.
Establish Partnerships
Connect with other healthcare providers in your area. Build relationships with local primary care providers, med spas, labs, and pharmacies.
This builds your referral network and ensures smooth collaboration to serve your patients.
Market Your Practice
Before you get new patients, you have to let them know your dermatology practice is there.
The key to successful marketing is differentiation. Look for ways you can position yourself differently from the other dermatology practices in your area. Some ways you can set yourself apart include:
- The services you offer
- The patient experience you provide
- Your background and credentials
- Your personality
- The marketing channels you choose
Don’t get caught up in the popularity contest mindset of social media marketing. When it comes to healthcare, people choose the provider they trust the most, not the one with the flashiest profile.
Start your marketing campaigns six to eight weeks before your practice opens so you have patients booked on day one.
The built-in marketing and lead management tools in Nextech’s practice management software have been shown to increase lead conversion rates by 30% or more, even if a practice cuts its marketing spending.
Starting Your Own Practice Is a Big Leap
Starting your own dermatology practice is an exciting – and at times overwhelming – step. Take the time to build it step by step for your best chances of success.
Get your new practice’s operations set up right from the start. Start with a robust, intuitive EHR and practice management system designed to keep your data clean, your business efficient, and your attention focused where it belongs — on your patients.
Book a free demo of our dermatology-specific EHR and practice management software.