Since all of our recent articles have been focused on what you “should do” when starting your ABA health care company, we thought it would be a good idea to cover some of the major mistakes made by new practices.
This is obviously not intended to be a comprehensive list, as there are countless mistakes you can make when starting a new company or even running your existing business, this is simply a list of some common mistakes we’ve witnessed over the course of starting numerous practices.
Not allocating enough time to complete the credentialing and contracting phase.
This is the first thing we want to mention as it is by far the most common mistake among new healthcare practices. Regardless of the reason or rationale, the fact is, about 65% of new practices open their doors without accepting all or even the majority of the insurance companies they want to contract with. We see this most often when a BCBA leaves another clinic where they were billing services and assumes that because they’ve already worked with these payers, that the process for their new practice will be quick and painless. While this used to be true (10 years ago), it is in no way the case today. The fact is, the credentialing AND contracting phase of any startup takes roughly 4-6 months. Even with this much time allocated to the process, the odds are that you will still have a few payers that are lagging behind and still not effective by the time you open. In our market of ABA providers where everyone is trying to hang a shingle and run an ABA company, and at the same time, our funders are getting more regulated, tightening the rates and regulating everything from how we report progress to how we and what we can bill. This is not a time to play in the gray areas.
I experienced some of these same issues when I took our original ABA company across state lines and into new markets. I grossly underestimated the time to credential in a new state and with new insurance companies. Trying to open in a new market haphazardly and too quickly is one of the worst things you could do to your fragile new business. Once credentialing with the payers has been completed, you then move on to EDI/ERA/EFT enrollment (often completed by your billing company or department) which takes another 2-3 weeks depending on the payer. Give yourself more than enough time to complete the credentialing and set your practice up for success. The last thing you want to do is turn clients away because you’re not participating with their insurer. Or stress out parents because they don’t really know how much of their child's therapy is covered.
Failing to incorporate or set up your company as an actual company.
This doesn’t happen often anymore but we still see a few clinicians operating as sole proprietorships under their SSN. This has so many severe tax and liability implications that it doesn’t even really deserve my time elaborating. Just don’t do it! You need to either form an LLC or s-corp (PLLC or PC in some states) and obtain a tax-id from the IRS. From a tax standpoint, forming an LLC but filing form 2553 to be taxed as an S-corp will save you thousands of dollars each year and protect your business. Also, please don’t commingle your funds- business expenses come out of business and personal out of personal. Failure to do so is another way to invite trouble into your life. I wish someone would have told me that when I first got into business. Cheating the tax man is never worth it and usually has more a negative impact on your business as you grow.
Using a personal cell phone as a business phone.
This happens in about 30% of the practices we work with (against our advice) and is such a pain in the ass to correct. Once a phone number is provided to the insurance carriers, it eventually makes its way online where it lives for years to come. I promise you, I still get calls on my personal cell from payers and I have not dabbled in that arena for the last 7 years. Even if your intention is to update the phone prior to opening, if you start the credentialing process with a private number, that number WILL get into the hands of the client's families, insurance companies, the department of labor and the list goes on. It is also extremely difficult to update the phone number mid-credentialing so you’ll typically need to wait until complete and submit a demographic info update request which takes 30-90 days to complete. If you cannot reserve a phone number for your business with the carrier you plan to use, purchase a digital (VOIP) phone/fax number and have it forwarded to your cell until your office line is established. You can then forward it to your office until the number has been purged from online and updated with the payers.
Over & understaffing during the first 6 months.
This is probably one of the more difficult parts of opening a clinic. Clinics typically err on the side of understaffing which is certainly the safe choice. Where you go wrong in this decision is when understaffing leads to phones going unanswered or client families feeling neglected. When starting out, it’s best to try to hire staff that feels comfortable and competent in all areas of the practice. You also want to create a shortlist of potential hires so you’re not scrambling when you do need to hire additional staff. Your office manager, receptionist, center coordinator or whatever you call that person, should be able and willing to complete the client intake process, schedule appointments and anything else you may need.
In our world, our BCBA’s in a new clinic also need to wear many hats during the initial startups. Phones going unanswered leads to lost revenue and it’s impossible for one person to be assessing a client, meeting with a family and simultaneously scheduling the consultation that just came in. One solution for this, which we recommend, is to have an overflow answering service in place. If your internal staff is unable to answer the phone, the phone would rollover to your answering service. The answering service needs to be friendly and not feel like an answering service to the patient. If possible, you can even have an answering service that is trained on client intake has access to your scheduling system.
Failure in bookkeeping & accounting.
Most practices wait until after their first year or until tax season to find a bookkeeper and accountant. You really need to have this in place before you open your doors. If it is a new clinic to your already existing company, consider making it it’s own profit center to ensure you know how it is performing. After all, it will come with its own revenue and its own expenses. It’s not unusual for the owner to invest in the business, whether with cash or by forgoing a salary for the first 6 months, the sad part is that this investment often doesn’t make its way to your balance sheet at the end of the year. The tax code is too complicated and changes too often for you to risk simply winging it. By the time tax season rolls around, the fiscal year is over and any moves you should have made before 12/31 are long gone. You also need to remember that you’re required to make quarterly tax installments, which is difficult to do correctly without an accountant. In addition to all of the tax implications, without monthly or at least quarterly accounting/bookkeeping, you are essentially running your business blind.
Signing long term contracts.
Regardless of the line service or how amazing a partner seems, you do not want to sign any long term contracts if you can help it. Even with your lease, you want to try to keep the term around 3 years if you can and limit the amount of Tenant Improvements required which drives the price and contract length higher. The last thing you want to do is marry a bunch of vendors when you haven’t even started dating. Ask for probationary periods and make sure you have out-clauses that protect you.
Selecting an inefficient EHR.
This is an area where spending extra time evaluating really pays dividends in the future. Selecting the cheapest EHR out there will likely lead you to just converting to a more efficient system in the future. Transitioning EHRs once opened is 1000 times harder than making a decision you can live with for years on the front end. Remember to measure the cost of an EHR against how many patients you can see in one program vs another. Also, be sure to factor in referral letters, training/support, eRX, clearinghouse enrollment, lab interfaces, coding, and authorizations, as these are all areas that cheap EHRs typically underperform. Sending out referral/thank you letters is essential when starting, so you want a system that makes this easy.
Overspending on nonessentials.
We’ve seen it countless times, a new practice is enamored by the latest and greatest technology and simply has to have it. Most don’t even bother calculating the ROI on this must-have piece of equipment, so they have absolutely no clue how long it will take to recover their investment. They simply have to have it to differentiate themselves or emulate their competition. The same is true when hiring staff, a lot of practices hire their first few employees without a ton of due diligence. Even worse is when a practice hires a friend or family but overpays by 20-30%. Hire your friends, but perhaps do so when you are in a better position to pay a premium for their services. It’s true that you get what you pay for but this doesn’t apply when you overpay someone that is a friend or colleague because you’re desperate for them or don’t want to insult them. Build a compensation schedule for your new hires that will show them in $$$ how you plan to increase their pay as the practice grows. This also goes for our highly coveted BCBA’s. You always want to have room for raises and starting someone too high will just leave them feeling underpaid when you can’t give them a raise at their annual evaluation.
Underspending on essentials.
This is another issue we see in nearly every new practice. It’s tough because you often don’t know how to categorize expenses as essential vs nonessential. This is where having someone who has been in your shoes lend a helping hand. Vendor selection such as EHR selection, billing/credentialing, payroll, etc would all be considered essentials. If you’re not sure, ask yourself what the worst-case scenario is in each situation to determine if it’s one of those decisions that should require a little more thought and investment on your part. Selecting table paper is an obvious nonessential, but purchasing cheap desk or therapy tables is better than buying a cheap laptop. This cheap laptop will likely cost you thousands of dollars in lost productivity and you’ll inevitably have to replace the laptop within six months.
No budget- No business.
If your new practice is more than a hobby, please do yourself a favor and prepare a budget.