Avoid new practice pitfalls.(Guest Editorial)

Before accepting that first job in medicine or buying into a practice, it's important for young physicians to do their research. Too often, a physician fresh out of residency will sign a contract without knowing the details about the practice, its financial situation, or reputation, or without understanding the nuances of the contract.

The root of the problem is that physicians get trained very well in the clinical aspects of medicine, but not in the business aspects of medicine. As a result, they tend to overlook these types of things.

To avoid these pitfalls, residents need to know what kinds of business questions to ask of practices they are considering joining. The applicant should ask about its overhead and rate of growth, the number of staff members, and the average charges and collections rates.

They should also be looking at payer mixes--the percentages of the practice's patients who are on Medicare, Medicaid, or are private payers. In particular, they should consider the extent to which the practice participates in managed care plans.

The reason for gathering this information is to assess the reimbursement situation. For example, physicians stood the potential of taking a 4.5% reduction in Medicare payments in 2004. Although legislative interventions prevented the cut from taking place, in a practice with a high Medicare population this could have caused serious financial problems.

They should also find out who's running the practice. For day-to-day decisions, it's important to have one CEO, manager, or administrator leading the way, since it's cumbersome to have several physicians involved in the day-today process. But in terms of governance of practice, the process should be ...