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September 2006

New DCs are in trouble

by Dr. Peter Fernandez

It has always been difficult to start a new practice. Think about it. The new doctor has to take himself or herself from a state of professional non‑existence (he or she has never practiced before) to a state of existence (a practice full of patients that stay, pay and refer). That's a big jump. Unfortunately, many new doctors don't successfully make that jump. Statistics tell us that instead of achieving the practice they want, most fall flat on their face and end up with no practice at all. Those who do manage to survive, struggle for years just to pay the essential bills, with nothing left over to show for all of their hard work. This is the infamous "starvation period."

Statistics draw a grim picture for the new DC. At best, only 20% of all new businesses survive more than four years. And, of those that do make it, only about 39% are profitable, which means after four years in business 61% are still struggling just to survive.

Why is it more difficult starting today's practice? There are a number of reasons.

One big factor is the real estate market boom. With real estate values at their highest, landlords are paying a lot more for property today than they have in the past, and guess what? They don't much care because they pass this higher expense on to their lessees ‑‑ the new DCs and other business owners. Rents and leases have essentially doubled in the last two years. It's not uncommon for a new DC to have to pay $4,000‑to‑$6,000 a month for 1,000 square feet of office space. Rent expense alone has caused many new chiropractors to fail and has left others struggling to pay it.

Another contributing cause is the skyrocketing of new construction and commercial build out expenses. Recent extensive hurricane damage in Florida and New Orleans created a tremendous demand for building materials such as drywall, roofing and even cement block. This demand has put a strain on supply, and in accordance with the law of supply and demand, has caused dramatic price increases for these materials. Once again, the landlord simply passes these price increases along to his or her tenants and lessees.

The fact that insurance companies and a number of state legislatures have passed laws prohibiting new DCs from applying to many of the managed care plans, HMOs, PPOs, etc. is also making practice start up difficult today. And, many of the plans simply state that they are not accepting any new doctors. Where does this leave new DCs who need every single patient they can possibly get? It leaves them on the outside looking in as their potential patients choose to go down the street to a doctor that their insurance will pay for. The good news is that there are ways to effectively counter this type of practice‑killing situation.

Even if the new DC gets insurance provider approval, he or she will have to know how to effectively deal with the typical "fee cram‑down" that insurance companies force on doctors. It's very common today to have health care plans that pay doctors less than $18 a visit ‑‑ the amount DCs charged in the early 1970s and when overheads were about four times less than what they are today. There is special knowledge that a new DC should have and follow when it comes to applying to health care plans. Otherwise, he or she could easily have a practice full of patients and still fail.

Today, DCs are up against new laws established and strictly enforced by many state boards. Some guidelines are being used very unfairly. For example, the Mercy Conference guidelines and Best Practices guidelines basically state that anything more than relieving the patient is fraudulent care. The result is that many new DCs end up in front of their state boards being charged with fraud for treating patients beyond the relief phase of care, thus scaring them into treating patients less. It's bad enough that the doctor's fees are greatly reduced and now they want the number of visits greatly reduced as well. Does anyone care about the patient?

How a new DC can succeed

The first step is to recognize what you don't know. If you're a new DC you absolutely do not know how to start a successful new practice. In fact, most established DCs don't know how to do this because a lot of the things they did to start their practices will not work for starting a new practice today.

Next, you need to get expert knowledge and guidance. Keep in mind, opening a new practice is an expensive venture that most can only afford to do one time in their life. So, invest in a practice consultant who specializes in opening new practices, someone who's done it for thousands of other new DCs before you. If you have an IRS problem, you hire a tax attorney. If you have a divorce situation, you hire a divorce attorney. If you want to start a new practice, you hire a new practice consultant, somebody who specializes in opening new practices and has a proven track record for doing so.

Third, follow your consultant's advice and guidance. Adopt a "do or die" attitude and act with urgency to accomplish those things your consultant has advised you on. It's this "get it done and done right" work ethic that has helped thousands of my clients open successful new practices and hit net profit within their first three months open ‑‑ easily avoiding the typical three‑to‑five year starvation period.

(Dr. Peter Fernandez, a 1961 Logan College graduate, is past president of the Florida Chiropractic Association, and past chairman of the Chiropractic Knights of the Roundtable, an organization of the world's most successful chiropractors. His practice with five staff chiropractors and 12 satellite offices was one of the largest all‑referral, high income chiropractic clinics in the US. A practice consultant for the last 25 years, he has consulted with approximately 5,000 DCs and in the opening of more than 3,000 new practices. Visit Dr. Fernandez online at www.DrFernandez.com (be sure to sign up for his FREE newsletter) or www.MBAchiropractic.com (offering consulting and video seminars online). He can be reached by calling Fernandez Consulting, 800‑882‑4476 or via e‑mail: DrPete@DrFernandez.com)