American Osteopathic Association

Advancing the distinctive philosophy and practice of osteopathic medicine

Starting a Practice: Action Items

​Purchasing Professional Liability Insurance

Insurance coverage for professional liability, premise liability, workers' compensation, and Errors & Omissions should be purchased by the new practice in conjunction with the opening date. Physicians should consult with their insurance broker to determine appropriate coverage limits and policies. Physicians should consider insurance coverage for fraud and embezzlement in the event that an employee diverts funds from the practice. It is important that the new practice is not underinsured and that the appropriate policies are in place with adequate coverage limitations.

Creating a Compliance Plan

Physicians and physician practices have to navigate a complex regulatory environment on a daily basis in the provision of patient care, to receive reimbursement, and to avoid a government or insurance audit or investigation.  If the new practice is going to provide medical services to government patients, including Medicare and Medicaid, the practice will need to comply with the federal regulations including: HIPAA privacy and security rules, HITECH Act, Stark law, Anti-Kickback statute, and Anti-Markup rule. State and federal agencies, including the Center for Medicare & Medicaid Services and the Office of Inspector General, have expended significant resources and personnel to investigate alleged fraud and abuse in the health care system.

In order to avoid the potential pitfall of an audit or investigation, the new practice should consider developing a compliance plan. The compliance plan should outline the practice’s standards, policies and  procedures, and compliance with applicable state and federal regulations to safeguard against violations of such regulations and ensure appropriate billing practices. While a compliance plan will not automatically block an audit or investigation, it can be a valuable asset to demonstrate compliance efforts in the event of an audit or investigation.

Hiring Staff and Developing an Employee Manual

Recruiting and hiring staff may involve significant time and energy depending upon the physician’s practice, the market, and patient needs.  Physicians should do their due diligence prior to recruiting and hiring staff to ensure that the right staff and staffing ratio are in place prior to opening the practice.  Physicians should check the potential employee’s references and resume to verify credentials, training, and background. A good  hire is invaluable; however, a bad hire will cost the practice a lot of time, money, and energy. Terminating an employee is often a difficult decision and time consuming process for the physician and practice. 

The new practice should consider executing employment agreements or independent contractor agreements with all of its employees and independent contractors that provide employment terms and roles and responsibilities of each party. Hiring an office manager or practice administrator who can handle and oversee a variety of tasks will streamline the operations of the practice and enable the physician to practice medicine and spend less time on administrative functions and tasks. It is imperative that the office manager or practice administrator be a trusted member of the practice’s team and have strong communication skills.

It is a good practice to conduct staff education and training regarding the practice’s policies and procedures and to have an employee manual in place. The new practice should expend the necessary resources and time to develop and establish an employee manual which every new hire will be required to review and follow during their employment with the practice. The employee manual should contain policies and procedures that address:  paid time off, dress code, code of conduct, scheduling, equal employment and non-discrimination, workers' compensation, and leave from the practice.

Payer Mix and Enrollment with Payers

Physicians will need to identify the projected payer mix of the new practice prior to seeing the first patient.  Physicians will need to get credentialed and enrolled as a provider with the right payers, including Medicare, Medicaid, and private insurance carriers depending upon the payer mix. It can take several months for physicians to become credentialed and enrolled with payers and this will cause a cash flow issue to the physician and practice.  Depending upon the state where the practice is located, enrolling in insurance panels in order to get referrals from those panels can be a time consuming process. If a physician wants to be an “in-network” provider, the physician will need to target which health insurance panels to participate in.  When the physician is approved as a provider by an insurance company, he or she will need to sign a participation agreement which outlines their responsibilities as a provider of medical services to the insured patients.   

Equipment and Vendor Agreements

New practices will be approached by many vendors who want to sell the practice services, equipment, and supplies.  Physicians should negotiate and do business with reputable vendors and have vendor agreements in place for the provision of services, equipment, and supplies.  If the new practice is providing medical services to Medicare or other government beneficiaries, the practice will need to execute business associate agreements with its vendors to comply with the HIPAA regulations and HITCH Act.