Considerations for adding new revenue streams for your independent practice

The entrepreneurial spirit leads most independent physicians to the path toward establishing their own practices. The autonomy of an independent practices means the physician does not have to answer to an employer such as a hospital or other healthcare facility. It also means that the independent physician is the sole means of income for the practice, which may be struggling financially during the pandemic. Adding new revenue streams could help improve the practice’s bottom line but there are some considerations to keep in mind.

In 2019, a McKinsey survey reported that:

  • 79% of small independent practitioners and 67% of large independent practitioners cited autonomy as a top factor in selecting their practice model.
  • 84% of all independent physicians who did not proceed with an employment opportunity in previous years, and 59% who had returned to independent practice after employment, indicated autonomy was a primary influencer in their decision.

While maintaining that autonomy, the independent physician does have some options for adding new revenue streams, such as additional services that can be offered by the practice itself or an entrepreneurial venture completely outside the scope of the practice. There are some considerations to be aware of first, though.

Ensuring that the new revenue stream does not create a conflict of interest with the independent practice is one of the main considerations. Physicians should verify the legalities and the ethical aspects of their intended side business or addition to the practice offerings before proceeding.

Elation Health has developed a resource guide that provides an overview of financial assistance available to independent practices during and after the COVID-19 pandemic. Check it out here.

Other considerations include the practicality of financing, establishing, and maintaining the new revenue stream. Many independent physicians will need working capital to be able to launch the new entrepreneurial idea. Analyzing financing options will help ensure the success of the launch process as well as the venture itself. Whether the need is to add equipment, personnel, or marketing efforts, considerations can include:

  • Details as to how the loan will be repaid. For example, if having ready access to cash is important to the new venture, a loan with longer terms can help by offering a lower monthly payment. When starting a new business, having access to cash is critical.
  • How quickly the loan can be funded. During these challenging times, that new revenue stream may mean the difference in the financial viability of an independent practice. When the physician is ready to launch an additional service or a completely separate venture, time could be a critical factor. A long application process or a lengthy decision and funding process could delay implementation.
  • What impact the loan will have on the physician’s credit. A loan inquiry may be hard, which stays on the credit report for up to two years, or soft, which will have no impact on the credit report. Before signing the loan application papers, the independent physician should be clear about all the terms of the loan, including the credit inquiry process.

The idea of taking the loan is to launch a new venture, generating a new revenue stream to improve the physician’s and the practice’s financial position. Being clear on all the financial options upfront will help ensure success on this front.