Be Careful What You Wish For: Thinking Through the Risks and Rewards of Private Practice

Author: Chandace Jeep, Au.D. and Nicole Kovel, Au.D.

Although considered one of the most challenging endeavors in the hearing health care field, starting a private practice can be one of the most rewarding accomplishments for an audiologist. The ability to make decisions and provide treatment that directly influences the quality and standards of care delivered to a patient is often a coveted career choice for clinicians. However, private practice comes with a multitude of obstacles to overcome, hardships, start-up costs to pay, and common mistakes to avoid. This article, geared mainly toward doctoral students and recent graduates, provides a candid review of the essential topics related to stepping away from a salaried position and buying a private practice.

Buying an existing or starting a new private practice is like launching any other small business and is subject to the same statistical analysis as any other newly established business venture. According to the U.S. Small Business Administration, roughly 50 percent of new businesses fold within five years of coming into existence. Audiologists, however, who plan well, secure proper funding and remain flexible in the ever-changing climate of healthcare, face a better overall chance of achieving long term private practice success.

When assessing your appetite for private practice, it helps to have some frank and honest information available to better gauge your willingness to assume the career risk the often accompanies self-employment. After all, given the current shortage of audiologists in many regions of the country, it could be far easier to take a salaried position with an existing organization, where the steady pay and opportunity to advance are appealing. This article overviews many of the common concerns and factors associated with becoming a self-employed audiologist. Every audiologist buying or starting a practice faces two primary categories of financial obligations: (1) start-up costs, the expenses incurred when initially establishing a new business; and (2) continuing costs, the expenses required to maintain and operate a private practice.
Start Up Costs of a Private Practice
The path towards establishing a private practice is different for everyone with varying factors (such as personality, location, specialty) playing an important role in affecting the overall cost to setting up and running any health care-related business.

Consultants estimate that the cost to launch a private practice ranges from $10,000 to more than $100,000 – an estimation that includes the money needed for rent, insurance, equipment, and living expenses for the first few months.
Average Start-Up Costs
Audiologists pay initial fees for registering a small business; business entity formations (such as PLC versus LLC); and/or trademarking a business name – all of which vary on a state-by-state basis. These aforementioned fees are in addition to the various state, county and other localized government fees that audiologists are required to obtain in order to practice in a state.

Malpractice insurance is one of the first items an audiologist should obtain, as medical professionals are required to have it before the processing of insurance credentialing paperwork can take place. The average cost of malpractice insurance depends on the location (state) of a practice.

The cost of renting or leasing office space varies and is determined by location and size by square feet. Leasing and renting space for a practice is generally a multi-year financial commitment. Some experts believe the ideal size of a private practice facility is 900 to 1500 square feet.

When applicable, improvements or renovations to existing office space can cost between $15,000 and $50,000 – depending on the space. For example, some practices may require additional space to store equipment, such as probe microphone equipment. These costs typically run about $40-$60 per square foot.

The purchase of basic office equipment and furnishings includes an up-to-date computer system, printer/ copier/ fax machine, filing cabinet with lock, telephone and voicemail, and furniture (for the audiologist’s office, waiting room and patient rooms). Prices are dependent on an individual’s office space and needs. It is not necessary to purchase new equipment when initially establishing a private practice. Gently used equipment can be bought for half the original cost and can be upgraded or replaced as a practice and revenue grows.

Average high-end costs for furniture, equipment, copiers, computers, and telephones can range from $50,000 to $65,000. A first-class practice management computer system can cost upwards of $20,000, while some are available for less than $10,000.

Sales and marketing costs allow an audiologist to establish a presence within the community, and to build a patient base, he or she may pay for newspaper ads, flyers, postcard mailers, radio spots, TV commercials, and social media ads. Since most individuals locate and research health care providers by conducting an Internet search, an online presence is also essential, such as purchasing a domain name and setting up a website. Business cards and letterhead are both valuable for the start-up of a practice, as well as for ongoing advertisement.

Retaining a consultant or advisor is optional and typically costs an average of $5,000 annually, but their guidance and advice can streamline the transition from school graduate (or salaried clinician) to a health care business owner. Rather than pay a flat fee for a consultant or advisor, new business owners can opt to join a buying group in which a percentage of each hearing aid purchased from a manufacturer can be placed into an account that pays for the consulting services. Buying groups are plentiful and provide useful services, but any prospective owner must carefully consider the monthly or yearly hearing aid unit commitments that might be involved with membership. This is essentially a loan extended to the owner repaid through the purchase of devices with a modest per unit upcharge. An onerous hearing aid unit commitment can easily get in the way of proper or ethical patient care, as the new owner feels an obligation to recommend the hearing aids that will fulfil her unit commitment, rather than the hearing aids that might be most appropriate for the patient.

Tax and legal advisors, such as attorneys and accountants, are also optional yet serve as a long-term investment for the success of a private practice which helps audiologists to avoid costly mistakes. The fees and services they provide vary.
Continuing Expenses
In addition to start-up costs, there are several continuing costs that are typically paid on a monthly or annual basis. Average continuing Costs include: Office rent and utilities paid on a monthly basis—gas, electricity, telephone service, and internet connection needed to run a business. Office supplies and medical materials, from copy paper to clinical supplies, are purchased on a continuous basis in order to maintain the administrative and clinical duties of a private practice – and is oftentimes a monthly expense.

Insurance plays a vital role in providing multiple levels of protection for both a clinician and small business owner and must be renewed and paid on a scheduled basis. In addition to liability/malpractice insurance, other types include an audiologist’s own health and disability insurance; and property insurance for the office space.

Private practice owners are responsible for the bi-weekly payroll, annual salaries, periodic bonuses and yearly benefits of their staff, which may include writing checks for an administrator, assistant and/or other health care workers. It is estimated that an administrator or audiology assistant should be paid a rate of $12 to $20 per hours, possibly higher in some regions of the country. Additionally, business taxes must be paid every year and include the additional payment of self-employment tax – traditionally the responsibility of employers of salaried clinicians.

Optional expenses to consider include monthly living expenses, travel expenses, professional development (such as continuing education and licensure requirements), and membership dues. Also, the marketing of a private practice is a continuous effort. For many, websites, blogs and online networking can attract patients. Some audiologists choose to hire a professional to maintain a Facebook business page, engage with the public on Twitter, or write blog posts related to their field of expertise. Hiring someone to create your creative marketing output should be approached with caution. Although hiring a marketing expert to handle this task saves time, it’s critical that your marketing message reflects your standards and values. Patients and prospects are savvy and can spot an inauthentic or phony marketing campaign from miles away.
The Time Commitment for Owners of a Private Practice
Starting a private practice comes with some of the same type of demands associated with establishing a small business, and a lack of planning is the downfall for any new enterprise. In addition to the time commitment it takes to earn an audiology doctorate degree, audiologists with an interest in establishing a private practice must also devote time to planning for their future business well in advance. It’s advisable to start during their fourth year in an AuD program, as it can take at least upwards of six months to set up a private practice.

The time an audiologist spends organizing a business plan is one of the most important investments made towards the success of his or her practice.

Experts say 80 percent of new businesses fail because the owners overlooked the appropriate steps needed to develop a successful business strategy and goals. There are also many steps outside of the control of an audiologist that can take time to complete. For example, audiologists planning to accept insurance as a form of payment from third party payers must sign up with companies and local insurance panels by filling out the appropriate paperwork and undergoing the credentialing (or enrollment) process. This can last many months and varies with each company.

Devoting at least six months to the start of a healthcare practice is essential to avoid falling into a “position of urgency.” The waiting period alone for the time-consuming credentialing process can take up to six months for a company to verify the legitimacy and experience of the audiologist.

States and insurance providers must determine if an audiologist and their private practice meets their requirements. During the credentialing period, an audiologist’s state license and other qualifications are confirmed.

Overall, a private practice does not blossom overnight, and the process involves taking financial risks and making cost-effective decisions in the beginning stages. It often takes at least two years before an established private practice starts to see increasing profits. It is not uncommon for some audiologists to lose money until a client base and steady referral network are established.
Obstacles Associated With Opening A Private Practice
Audiologists opening a private practice do not have the luxury of concentrating solely on the clinical side of health care but must also create a sustainable balance between caring for patients and running a business. Audiologists seeking self-employment must comprehend and execute standard business practices.

Along the path of establishing, managing, financing and growing a private practice, an audiologist typically encounters the following obstacles:
  1. A Higher Level of Responsibility: As a salaried employer, audiologists are not responsible for the accounts receivable; maintaining IT equipment; the inventory of supplies; business taxes; record-keeping; and administrative duties, such as staff hiring and termination. Owners of a private practice often deal with collecting past-due payments, billing patients, mediating staffing conflicts, upholding patient safety, and managing the overall business. Their level of responsibility goes beyond assuming the role of a clinician.
  2. Must Build from Scratch: Hospital or ENT-based audiologists gain instant access to patients as a perk for being an employee, while owners of a private practice must start from the ground up establishing their own business and building a patient base.
  3. Hiring an Appropriate Staff (Team): Audiologists face the challenge of recruiting and hiring staff members that fall in line with the mission, values and vision of their private practice. Employees are an investment, and hiring the wrong fit can become costly. And, in the early stages of the business, to save money, you might have to go it alone for a while, by swallowing your pride, answering your own phone, and booking appointments.
  4. Choosing the Right Technology: Technological advancements in healthcare, such as the electronic health record (EHR), provide self-employed audiologists with many options for improving the overall quality and efficiency of patient care. The key is to select business solutions prevalent to a practice’s area, which also require the least amount of transition or upgrades in the future.
  5. Healthcare Reform: Large changes will center in third party reimbursement focus on exploring a “value-based reimbursement” approach with various methods being tested out, such as shared savings, bundled payments, per member per month payments, and pay-for-performance models. Audiologists in private practice must carefully each new insurance contract and weigh their involvement in each contract.
  6. Unexpected Expenses and Financial Losses: Revenue for a private practice takes a hit whenever unintended expenses arise, such as a piece of equipment needing to be replaced, burst water pipes causing damage to the office, computer system shut downs, or an overall economic downturn in the community. Increases in local competition and the emergence of a nearby multi-specialty practice or big-box retailer can also threaten the income stream of a private practice.
  7. Threat of Being Sued: Although rare, audiologists must prepare themselves for the possibility of a malpractice suit. Not only does the process of legal action translate into the threat of financial repercussions but can also create ‘bad press’ that damages the reputation and patient confidence of any medical professional.
  8. No Guarantees with Income: As a salaried employee, audiologists know exactly when and how much money they will be paid, while a self-employed audiologist earns varying levels of income on a monthly basis – which is dependent on a multitude of factors, such as the number of clients seen, payroll demands, fluctuating expenses, unforeseen expenditures, and the timeliness of reimbursements. Audiologists in private practice also lose income when they take vacations or sick leave, unlike their salaried counterparts.
  9. Managing ebbs and flows in the business cycle: Like any business, private practices also experience ebbs and flows in office traffic that can affect revenue. For example, if you live in Minnesota, your practice may experience a slow time when many older folks head south. And, just about every practice experiences the lowest number of referrals and fewest patient appointments every December when patients are less likely to visit a practitioner close to the holidays.
  10. Managing slow time: If you’ve spent time in an ENT practice, it is likely you struggled to find the time to fit hearing aids. When you step into a private practice, the rhythm and flow of patients can be must different. Inevitably there will be slow times in your daily schedule. These are good times to network with other medical professionals and strength your brand within your community.
Rewards And Benefits Of A Medical Private Practice
Without question, the autonomy that private practice owners have is one of the largest rewards associated with establishing an independent business. This plays a role in making the following benefits possible for self-employed audiologists.

  1. Be Your Own Boss: Holding the top position, private practice owners do not answer to administration, office managers or other executives that often affect the work environment and role of an audiologist in a salaried position. There is no one pushing them to increase the number of patients seen per day, or how to run their daily operations. Private practice owners are able to exercise a higher level of creativity. They set their own hours, designate their own vacation time, and determine the next steps for furthering their business goals.
  2. Build a Respected and Trusted Business: The ability to run a practice as an audiologist sees fit allows them to create the atmosphere and quality of services they’d like to provide patients, such as offering a more relaxed, laid-back, family-oriented environment.
  3. Control Who You Work With: Audiologists typically review the applications of office staff for their private practice, which means they have better control in outfitting the office with suitable, highly motivated workplace personalities. When conflicts arise with office staff, private practice owners have the power to discipline or dismiss, when necessary.
  4. Greater Ability to Increase Revenue: Unlike working for an employer, audiologists in private practice are able to increase revenue by accepting more patients, extending hours, as well as offering weekend and evening appointments. Solo practitioners can also increase their income by providing ancillary services, such as the audiologists who conducts tests for a local ENT practice.
  5. Decision-Making Freedom: From choosing to accept a particular insurance carrier to ordering a new piece of cutting-edge equipment, audiologists running their own practice have the power to make important decisions regarding office dynamics and the quality of patient care they provide. Self-employed audiologists can also swiftly respond to new treatments, emerging medical trends, and the need to make office-wide changes.
  6. Help Patients in Need: Solo practitioners are also in a position to make decisions that affect the affordability of care without having to answer to higher management, such as avoiding unnecessary procedures or making an effort to better understand the cost differences of various treatment options and prescriptions which can lower out-of-pocket expenses for patients.
Things You May Not Have Thought About
In addition to start up costs, on-going expenses and various pros and cons, there are a few other considerations for those thinking about plunging into self-employment.

  1. Determine a Practice Strategy: According to Heather Hill-Spaine, of Real Psych Practice LLC, medical professionals should narrow the focus of their practice, as she says it’s been her observation that a lack of practice specification increases the chances of a practice not surviving its first 18 to 36 months. Hill-Spaine says that identifying the types of patients a heath care professional wishes to serve and the kinds of services they’d like to offer can make shaping and building a private practice much easier to achieve. Specifically, Hill-Spaine suggests assessing population(s) and communities to serve; drawing from special training and experiences regarding disorders and conditions; acknowledging unique or personal connections to the community; and amplifying the things that set a health care provider apart from those who provide the same or similar services.
  2. Obtain Adequate Business Training: A common misconception regarding the establishment of a private practice is that expert health care knowledge and skills translates into a health care business that will automatically thrive. However, audiologists who lack sufficient training and entrepreneurial knowledge face an increased risk of failure. An audiologist must learn business strategies, design, and implementation as it relates to running a private practice. In addition to buying groups, those interested in pursuing private practice can network with Academy of Doctors of Audiology members or professors at their local AuD program who might have experience in this area.
  3. Work with a Business Advisor or Consultant: Healthcare business experts are trained to guide audiologists through the process of launching and running a private practice. Although the average cost for their services is in the $5,000 to $7,000 range, advisors and consultants assist self-employed practitioners with:
    1. The accounting and legal aspects of a private practice
    2. Obtaining the proper insurance for practicing and running a business
    3. Recruitment and training of employees
    4. Billing, coding and other reimbursement issues
    5. Implementing office essentials, from phone lines to digital record systems
    6. Addressing government regulations and compliance issues
  4. Create A Solid Financial Plan: One of the most important steps an audiologist must take before starting a practice is to establish a well-planned financial strategy with business projections. For example, it is suggested to create estimated statements that demonstrate financial scenarios for the best-, worst-, and most likely outcome for a private practice. An audiologist must draw from their specific circumstances, such as location, office size, staff size, intended fee schedule and specialty, to arrive at these approximations.

    Strategic financial plans not only provide audiologists with a blueprint for starting their business, but the information and projections help secure business loans and funding from banks and lenders. Banks and investors also review net income (profit and loss) statements; balance sheets; and estimated cash flow statements for monthly, quarterly and yearly expenses and revenue.
Cost Vs Reward Of Private Practice
A private practice owner encounters a great deal of decision-making which plays a significant role in the success and future of the business. For starters, audiologists must assess whether launching a private practice is economical and financially feasible according to their personal circumstances, including geographic location and level of local competition for medical clinic or retail stores. Then, audiologists must figure out how they will cover start-up and ongoing expenses until their business starts to turn a profit. While some dig into their savings, others take out a loan from a lender. It is also not uncommon to see an audiologist hold a ‘day job’ to help fuel their own business.

Having an understanding of all the costs involved in running a private practice is essential, including how much it costs to see a patient per visit and the cost per diagnosis, as well as establishing a fee schedule that not only covers these costs but is also profitable in the long run.

Another way to create a balance between the start-up costs and rewards for a private practice owner is to make business decisions that reap benefits in the long-term. Audiologist who desire to own a private practice must create a healthy balance between patient care and thinking like a ‘businessperson.’

In conclusion, opening a private practice is a significant investment an audiologist makes in their future. The opportunity is ideal for a medical professional wishing to reap the benefits of owning a business and treating patients as they best see fit. In addition to the high level of financial risk and responsibility, the process of launching a private practice also involves a substantial commitment of time and money. Those who succeed in their respective fields enjoy a high level of autonomy and a potentially rewarding, not to mention lucrative career.

“You will need to wear multiple hats – one being a physician (what you were trained to do in medical school) and the second being a business manager (which is not taught in medical school),” says Debs. “Embracing both roles is critical in order to succeed in private practice.”