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New Pain Practice Startup Costs Print E-mail
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1. Office Rental
2. Secretarial Staff
3. Office Equipment
a. Telephone
b. Fax
c. Computer system
d. EMR/Scheduling
f. Shredder
g. Office supplies
4. Purchased
a. Cleaning
b. Dictation
c. Billing
d. Startup manuals for
coding, etc.
5. Medical supplies
a. Needles/trays
b. Medications
6.  Taxes-remember to
calculate at least 8% of
the secretarial and
support staff salaries
and set aside this
much from the practice
income to pay for the
employers contribution
to taxes.
7. Recurring costs:
a. telephone
b. electricity
c. gas
d. malpractice
e. property insurance
f.  cable or DSL

Evaluation of Initial Expenses:
Start up costs depend significantly on the expected size of practice, practice  transition scenario (eg. moving from one location to another within the same city  vs. starting a fresh without referral sources, etc), location, and the degree of bells and whistles one wishes to employ.

Principles: 1.  Grow the office to meet the size of the practice.  Overstaffing and overbuilding are wasteful and do not help you meet the financial goals of the practice.  2. Determine the type of practice you will have (see the first section of "Starting a Practice".  If you are to initially have a single physician office and perform injections at a hospital or ASC and not engage in any medical treatment, then you need a very minimal office.  The office space may be conservative in size with a small waiting room, a part time receptionist area, and an exam room .  Time share facilities would work well for this scenerio in that the office space is rented for a block of time, and may include the use of secretarial services that can be used for scheduling.   If you do not wish to employ a secretary and have only an answering machine for physician referrals, then you will save significant $$ but will have to do much of the secretarial work yourself.  If you do anything other than a block practice, then you need a real office at least part time and a real secretary.  3. Do not use the top of the line anything when starting a small practice.  Instead of a $5,000 telephone system, you can manage initially with an off the shelf 2 or 4 line system from Best Buy for a few hundred dollars.   Often the features you need can be added by the telephone company or can be programmed into the less expensive telephones.   You do not need a $1,000 paper shredder to meet HIPPA compliance when a $50 shredder will meet that need.   As the practice grows and more secretarial, nurse practitioner, and physician staff are added, you may wish to purchase more expensive equipment, but this can be done within your own time frame.  Also remember the obsolescence factor in certain equipment such as computers.  Within 2 -3 years the software or hardware in a computer are obsolete. Therefore purchasing a overly expensive computer with too much memory and too high a processor speed or packed with features you will never use can double or triple the computer cost with no discernible gain.

Startup Costs:

Office:  Rental for minimal office space runs $10-25 per square foot per year.  Therefore a 300 SF office (the minimum practical size with a small waiting room, receptionist desk and one office) would cost about $3,000-$7,000 a year.  If you are in an upscale office building, the costs escalate substantially up to $40 a square foot per year.  Many pain physician offices are about 1,000-1,500  SF for a physician, secretary, and modest waiting room with 2 exam/procedure rooms.   A more expansive office for 2 physicians, a NP, a receptionist, a billing/scheduling secretary, an office secretary, and an office manager with 3 individual physician/NP offices plus 2 exam/procedure rooms, and 2 rooms for PT would occupy around 3,500 SF.  Physician offices that incorporate several physical therapists, several MDs, and a full complement of support staff may be as expansive as 7,000 SF.   If it is under a single construction shell and has an ASC of 3-7,000 SF, the overall building size for the ASC plus office practice can be as high as 15,000-20,000 SF. Rental rates for time share offices are usually created in blocks of 4-8 hours.  Some facilities will ask for a flat fee per month to include the use of the waiting room, 1-2 exam rooms, and some minimal secretarial services.  More expansive secretarial services can be contracted separately. If you are a well established pain physician in the area you will be practicing and have substantial accounts receivable you will receive from an old practice, you may want to consider purchase of a building or construction of a building.

Secretarial Services may cost anywhere from minimum wage to $20/hr depending on the skills, expectations, full time vs part time, and whether benefits if any are included.

Office Equipment:

Typical cost ranges for the following purchased equipment:

Telephone system $200-$5000.  The upper end systems permit multiline arrays of up to 24 incoming lines, triage systems, and some have call back and fax server capabilities.  For a small office start up, a Panasonic 4 line system with portable phones with headsets are quite sufficient.
Fax:  Whereas stand alone fax machines ($40-200) frequently breakdown and have high costs for ink cartridges, they may initially be more economical than fax servers which typically cost minimum $400 for analog models to $10,000 for mass fax capabilities on multiple lines.  Microsoft Home and Professional XP have built in fax generators that can be used for both incoming and outgoing faxes, thereby avoiding many printed pages.  The medical record or letter to the referring physician can quickly be faxed via this system through a telephone line to the appropriate location with the caveat that HIPPA disclaimers and regulations must be followed. Some of the Dell Servers have built in fax servers that permit everyone in the office to shunt their faxes through a central pipeline at the server level and subsequently out to the receiving locations.  Fax servers also have the capability to triage incoming faxes and send to the appropriate computer in the office.  The more advanced fax servers also have optical character recognition software permitting faxes to be saved in a word or pdf file that is much smaller (7-20kbytes) than the raw fax converted to a picture or gif file (70-150kbytes).  Therefore with a fax server, the documents can be converted to a digital mode and attached as a letter to the patient's electronic medical record. Fax servers can also be used as internet faxing where the fax is received or transmitted as an email.  I find this to be cumbersome for a small pain physician office.  Finally there are fax services which charge by the document faxed: such systems permit transfer of your information over the internet to a central location and the faxes are routed through their telephone lines instead of yours. Typically these services cost about $0.10-$1.00 per document.  More information on fax servers may be found here.

Computer  A computer system in the office is mandatory except for a practice that uses dictations only and a paper medical record.  The computer system can be a single computer for your secretary's use, a small office network that can connect up to 5 Microsoft XP computers together without a server, or a server network that can have literally hundreds of computers operating off a relatively inexpensive server.The computer in many offices is becoming the workhorse of the office.  It is used to schedule patients, to run electronic medical records programs, to create printed letters and advertisements, communicate via email, send files to other physicians and insurers via email, as a portal for a home laptop computer or laptop computer used at other offices to communicate with patient files, as a fax server, to develop educational material for patients, as a method to check insurance coverage and benefits in real time, as a means to determine at the time of patient checkout any co-pays or unpaid balances, to create powerpoint slides for presentations, etc. Before purchasing a computer system and server, deference must be given to the type of electronic medical record to be used.  Each EMR has their own hardware and software application minimum standards.  If you are not yet purchasing a EMR, then you may do well without a server and simply purchase individual computers as need be.
Desktop computers are meant to stay in one location and not be moved frequently.  Therefore if you have an office that permits placement of a computer and monitor in a fixed location, the desktops may be less expensive and more useful.  However the laptop computer prices have fallen significantly and therefore may be used in many situations where desktops were previously used.  A laptop is an excellent computer if there are satellite offices since the laptop can use the internet to access patient files on the home computer. Because computers have become so fast and have an astonishing amount of storage and memory, an inexpensive computer will work nicely in an office.  The largest computer manufacturers are Dell, Gateway/Emachines, HP/Compac and each have adequate computer systems (computer, keyboard, mouse, monitor, and sometimes printer) for $400-$800.  Dell is forever having sales and special offers and tends to be approximately $100-200 less expensive for the same computer by the other manufacturers, although the others are becoming more competitive.  Suggested individual computer features: Pentium 4 or higher  (Celeron works fine for one-two computer offices), 256MB memory, 40GB or more hard drive, fax modem internal,network card,  Windows XP Home or Professional (Professional will make it possible to add upgrades to all the computers on a server at one time rather than installing software on each individual computer). Servers can be the central storage databank for several computers that share data such as an electronic medical record.  The servers also permit significant security levels to be attached to avoid unauthorized patient file access.  Once more than 2-3 computers are networked, it makes sense to purchase a server since data access speed is markedly enhanced with a server.  Each of the above three companies has server sales.  Inexpensive servers and the Windows 2003 Server operating system can be purchased for approximately $900 and up.  Although the server must have a keyboard and monitor attached, it is recommended by most computer specialists that the server station not be used for routine data entry or access since this slows down all the other computers on the network. Simple home networks or small office networks can be set up using the Windows XP software, however Server 2003 software is not for amateurs.  When setting up a network using this operating system, it is prudent to hire a network engineer to come into your office and set up the network. These services charge $80-120 per hour to set up networks and configure your computers.Internet access is almost an imperative in this day and age.  If an EMR is to be used with satellite off-site computers, it is strongly suggested either DSL or cable be used to access the internet. Dial up is too slow for these programs and may cause the network to crash.   If there are different internet service providers for the satellite office and the home office, it is better to avoid setting up a VPN network and instead use an external service at about $20 a month to permit communications between the satellite computer and the home office computer or server.  One such program is www.gotomypc.com.

EMR (Electronic Medical Records)   Due to the complexity of the EMR/scheduler programs, these will be discussed in a separate area under "Starting a Pain Practice".  EMR is a great idea if you can afford it, and the time to implement such is best immediately at or immediately after the starting of a new practice.  Data, esp. demographics, insurance info, and the initial history and physical exam can all be entered at the time of the initial visit.  The most economical EMR is Amazing Charts. That EMR/scheduler combination program costs around $1,000 which is only a small fraction of all other programs.  For those who cannot type or template, the use of Dragon Medical is recommended.  EMR can cost up to $100,000 for 2 physicians so it is prudent to shop around.  See the section on EMR.

Shredders are a necessary part of patient privacy protection.  The strip shredders may be obtained for $40 while the cross-cut shredders (confetti) are about $100-200.  Obviously the latter is more secure, but it is rare to find anyone with the patience to reconstruct strip shredded documents.  Office Max is an excellent source.

Office Supplies and Medical Office Supplies
are usually relatively inexpensive. Secretarial desks and chairs may be purchased for $200-600, wrist protectors for use of the computer keyboard and mouse (do not forget these...they are important!) cost around $20 for a set, storage file cabinets 5 drawers high (metal) can be acquired for $100 each, expandable physician office linear file system can cost $500 or more.  If you use an EMR, then your file contents in file cabinets can be minimal.  However, if you use a hybrid paper/EMR system (eg. no reports or labs are scanned into the EMR and are instead saved in a paper format), then the storage space requirements will expand at a rapid rate.  Paper file only offices will note an explosive rate of file storage needed.  A spine model can be purchased outright from the internet or may be acquired via a drug company purchase budget.  Neurological reflex hammers, tuning forks, safety pins, and stethescopes cost sum total approximately $200.

Purchased Services

Cleaning Services  Usually these are not included with rent unless you are leasing a time share facility or sharing an office with another physician.  A busy office will need cleaning twice a week, but once a week is more usual.  The cost varies widely depending on the square footage, the exact duties expected, etc.  Typically the cost is anywhere from about $70 to 170 a week.

Dictation Transcription  Depending on the EMR system selected, much dictation can be avoided.  Also, using a Dragon Medical Naturally Speaking system voice recognition software for $869, one may avoid all transcription costs and speed up data entry into EMR by 300% over typing.  The Dragon system has a 35,000 word medical vocabulary.  Also letters to referring physicians may be quickly generated using Word coupled with the Dragon system. However, if one must dictate, there are now several options:   a. local transcriptionist...the dictations may be placed on analog tape from a microcassette recorder   b. local transcriptionist where the dictation is recorded or placed on digital memory cards (eg. Smartmedia) and given to the local transcriptionist for transcription to paper.   c. non-local transcriptionist (may be US, India, or other country. )  Either a digital dictation system such as a Sony digital recorder is used and data transmitted electronically over the telephone or the physician dictates directly into a remote recorder via toll free dictation line.  One US company is located here.  The foreign (esp. from India) services are less expensive than the US services, but their accuracy is not as good as the domestic services.  Also making corrections with foreign services is difficult. d. In-house transcriptionist- for an office practice with at least 3 people with significant dictation, it becomes cost effective to have a transcriptionist in-house. If the transcriptionist can also perform some filing and intermittent secretarial duties, then it is cost effective with less than three physicians/NP/PA dictating. Typically dictation transcription costs for one physician are about $12,000-18,000 per year however an EMR system or Dragon system will help reduce the transcription costs.  The cost of a digital dictation recorder is about $300 and may be seen by clicking here.
Transcription typically costs 6-15 cents per line using transcription services.  For physicians seeing primarily patients in their office, the transcription costs can be significant- $12,000-18,000 per year.  Surgery centers provide their own transcription service, so the transcription costs to the physician will be much less for physicians performing a significant number of procedures in a surgery center or hospital....typically around $6,000-9,000 per year.  By templating the redundant  and verbose sections of the H&P using an EMR, the majority of transcription costs can be eliminated.  Also, Dragon will eliminate transcription costs altogether.

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Last Updated ( Wednesday, 01 June 2005 )
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