Top Five Reasons Why New Medical Practices Fail: Real-Life Examples

Starting a new medical practice is a challenging endeavor. Many new practices fail due to a variety of reasons. Here are the top five reasons why new practices fail, accompanied by real-life examples:

1. Doctor’s Underestimate the Work Involved

A primary care practice in Savannah, GA underestimated the amount of work it takes to customize any EMR so that it functions well for the practice. One year after the opening, the provider was still only seeing 10-12 patients per day because he could not efficiently document a progress note due to lack of customization of the EHR from the very start.

2. Low Client Satisfaction is a Rampant Problem

A provider in Provost, Utah opened her new Dermatology Office. She made several mistakes at the beginning. She did not set up the patient portal correctly, and she did not hire any employees for the opening. This resulted in patient complaints about wait times in the office and the lack of quick responses from the provider. Because of word of mouth in the community, the practice never even achieved a quarter of its expected patient population and closed its doors 1 year and 3 months after opening.

3. Lack of Uniqueness or Unique Value Proposition

A provider in Clearwater, FL decided to open a new primary practice without doing a feasibility study. She chose a location that was not only less than a mile from the hospital and their PCP clinics, but also within 1 mile of 8 other PCP offices. She was not able to build a patient population because the market was already saturated.

4. Lack of Planning for Future Growth

A provider in Arkansas wanted to open a new practice. He had a feasibility study and a proforma executed for him. He decided he didn’t need to request the initial capital suggested from the proforma. He opened his doors successfully with one staff member. By the sixth month of being open, the provider found that patients were interested in his practice, but he could not continue to accept new patients; he and his one staff member could not handle a full schedule on their own. The problem was, there wasn’t enough revenue coming in to hire an additional staff member yet, and there wasn’t any of the loan left to float the wages of the position. The provider found he was turning patients away for the next 6 months while trying to increase his reserves so he could bring on another staff member. In month 8, another new practice opened near him. He found that patients were no longer calling to establish with him. At the 18 month mark, the practice was stagnant, not a full schedule on any day, hardly any new patient interest, and just enough revenue coming in to keep from going bankrupt. The provider closed his doors at month 20.

5. Not Being Flexible or Adaptive

A new doctor in PA wanted to open his own practice right out of residency. He had a clear idea of all aspects of the office building, the number of staff, and the patient population he would accept. He found he needed to take out a loan for far more than he expected. The construction of his office was more costly than he first thought but he would not waiver on his plans for what it needed to look like. He wanted all staff in place from the start so he needed to hire more than he needed to perform the tasks during the initial growth; he also wanted them to be in matching scrubs with his logo, he purchased 2 sets for each of the staff. When his doors opened, he had very little capital left over. Once he had the doors open, he began to screen patients and only accepting a certain type of patients. This stagnated his growth. Within 6 months, he found he did not have the revenue coming into the practice that he had expected and his initial cash flow was depleted. By month 9, he had to close the practice and file for bankruptcy.

These examples highlight the importance of careful planning, flexibility, and customer satisfaction when starting a new medical practice. It’s crucial to learn from these mistakes to ensure the success of your own practice.

I am Medical Billing and Coding Clinical Operations Consultant at Svast Healthcare Technologies. With over thirty years of experience in the healthcare field, I’ve worn many hats and gathered insights into various aspects of clinical operations. I’m excited to share my knowledge and expertise with you through this blog.

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