"Pitfalls to Avoid by a Medical Practice Startup"
Long-Term Lease Contracts
Nowadays, most businesses will try to lure you into long term agreements by dangling huge discounts or some real eye-catching deals just to lock you into some long-term contracts. There can be some agreements that may feel so compelling that you are willing to get locked into multiple year contracts.
Examples of these are strategically located offices that have a potential for high foot traffic. Many of these offices understand how valuable their locations are thus they require no less than 5 years of lease agreement to consider your offer to lease the property. Now there can be a dozen reasons why you may want to consider a shorter lease agreement. And this could very well mean saving thousands of dollars once some unexpected things happen. This is especially true if you are starting with a limited capital.
Now what are some of the unexpected things that may happen even to you? Run out of operating capital with no revenue generated to cover the fixed expenses. We must understand that most if not all businesses will have negative revenue in the first few months of operation. Even the most successful practices endured months if not years of being in the red before their practice started to pick up. Thus if you are operating with limited funds, then chances are you will be in a very tight situation for much of your operation if the practice does not pick up in revenue right before you run out of funds.
Another thing that you must be very careful not to fall into is starting your practice without even getting credentialed with most if not all of the insurance companies/payors. Imagine signing a five year lease for an office only to realize that you will not get approved by your payors for at least 3 to 6 months to see their members. If all your patients are self-pay then you are
good to go but if you rely heavily on patients with health insurance coverage, then you are looking at a minimum of 3 months of zero revenue, unless most of your patients areMedicare.
This is because, with a good credentialing specialist, Medicare can approve your credentialing application within two weeks. Plus the fact that the average turn-around time for you to get paid on each visit is about 30 to 45 days. Bottomline, unless you are willing to risk to be on the hook for a 5 year lease, do not sign a multi-year lease agreement for an office or with any vendor for that matter.
We, My RCM Group, are here to help you.Book an appointmentwith us orcall usto learn more!