Spinning Up a Financial Model to Choose Your Path

So you’re thinking about starting a new practice. Maybe you’re thinking about opening a new service line. Maybe you have a program in mind, ala concierge.

But, how do you know which path to go down? All of your best friends, relatives, and strangers on the internet keep telling you about this DPC thing, this concierge thing, or the right way to do everything.

Because after all, who knows better than strangers on the internet about how you should practice medicine, how you should make money, and generally, what you should do with your life?

If you aren’t so sure, you can always start simple. Do a gut check. Spin up a simple Pro Forma to see if you are on the right track. If the numbers work from the jump, maybe it’s worth pursuing.

Here’s how that works:

Let’s say you are a primary care physician and the grind has gotten to you. You have decided to take the leap and have heard about this DPC thing. But can you really make enough money on a low monthly subscription fee?

Here’s the fun part! Ok, maybe not fun, but illuminating. Get out your napkin and decision making pen.

Step one: How much are you going to charge on a monthly basis?

Let’s say $100 a month. Keeping it simple.

Step two: How many patients do you want to serve?

Let’s say 400 patients.

Great! maxed out that’s $480,000 a year.

Now, we’re not done.

Step three through more steps: You need an office, you need supplies, you need some help up front, insurance. You know the essentials.

Let’s say all of that costs you roughly $150,000 a year.

There will inevitably be more costs. Likely some unforeseen, so for the sake of our napkin math, let’s call is $200K in annual expenses.

And voila, you have just put together a quick and dirty P&L for a DPC practice, which will generate $280K annually.

It’s not the fanciest, but it really doesn’t need to be. You are in gut check mode. Go/No Go. You can get more detailed later.

Ok, you say, but maybe you don’t want to start a direct primary care practice. You want to invest in another procedure room, buy a new c-arm and hire in interventional pain physician, because you know, growth.

Get that napkin back out. We’re going to start with costs on this one.

C-Arm: $80K
Doctor: $340K
Insurance hike: $15K
Supply increase: $30K
More support people: $100K
Other things that cost more: $50K

There may be more, but we’ll start there. Now, before you look at a $615K price tag and run away, there is more to this. The big one is timing. But first! The napkin part to see if it’s even worth going down that path and trudging through more numbers.

What’s the upside? The revenue upside if another doc pulling in $1.3M in collections a year. Starting to seem better.

This is a perfect world though, timed right and at scale, with a full patient panel. In this world, the $1.3M justifies the investment no question.

But we live in this world where you have to get your new physician enrolled in all your plans. Contracting can take up to 6 months. You are likely going to have more costs that just those listed in this simple version as well.

Do you have $615K+ to float before making any money? Sure, some of that is variable and paid over time, but how are you treating the capital investment. Briefcase full of cash? Or financing?

This is when it’s time to get the Cash Flow statements fired up and do some ROI calculations. But we have run out of digital space, so we’ll save those for another time.

Wrapping up

To see if the path is worth going down, start simple, with a basic P&L. If it checks out, look at the investment you are making and the return. If that works out, look at a cash flow pro forma to see if you can afford it in terms of real cash.

It doesn’t have to be complicated to start exploring the path that makes sense for you. This is your practice, your future after all.

Disclaimer: The content provided is intended for educational purposes only and does not constitute financial or legal advice. This content is not intended to create, and receipt of the launch guide does not constitute, an attorney-client relationship. While efforts have been made to ensure the accuracy of the information presented, it may not necessarily reflect the most current legal developments or regulations and does not provide a complete representation of all associated legal and compliance considerations for any given topic. Therefore, readers are encouraged to seek professional legal advice or consult with appropriate professionals regarding specific legal issues or concerns related to their individual circumstances.