Ten reasons to fail in private practice
A successful private practice is key to ensuring that your hard efforts and precious time are rewarded. But there are a number of key aspects that can make or break the success of your business.
In no particular order, Ian Tongue highlights the following key areas that can be a sure-fire way to experience difficulties and possible failure of your practice – such as putting all your eggs in one basket.
1 Choosing the wrong secretary
Having spoken at many events about private practice best practice, a common theme emerges from consultants who have a successful independent practice: their choice of secretary.
A secretary needs to be efficient throughout the process, which starts with initial patient contact, but, for many, involves taking things right through to receiving payment.
With patients’ first contact being with the secretary, ensure that the secretary has the right manner with patients – and being available is extremely important, otherwise work can be lost.
With such control over the billing process, if this is not working efficiently, you could end up not getting paid, which is akin to working for free. In extreme circumstances, a lack of financial ability can cause significant financial loss for the practice.
2 Not having a medical accountant
Having the right team is not limited to your secretary. A specialist medical accountant cannot only advise you on tax and accountancy matters but can provide practical guidance in running a private practice.
They should also have excellent knowledge of the NHS Pension Scheme and how annual allowances charges arise and can be managed. Bad advice can lead to significant financial loss.
A good example of this are the forthcoming pension changes known as the McCloud remedy (see ‘Pension remedy rules explained’), which few non-specialist accountants will understand and be able to advise on – possibly resulting in unnecessary tax being paid.
3 Not seeing private practice as a business
Medics do not usually have any financial training, and embarking on running a private practice can be daunting. It often can be a challenge to overcome the barriers for charging patients for your time, which is an alien concept.
It is essential that you treat your private practice as a business from day one and a medical accountant is best placed to offer practical guidance on how to do this.
Without doing this, it is likely that you will end up with problems such as fees written off due to money not being collected or not understanding how the insurers pay you and how patients can often have an excess payment which can be deducted from your fees.
4 Operating your private practice with a tax-inefficient trading structure
Choosing a trading structure that is most appropriate to your circumstances is really important. While it will not necessarily cause the failure of your private practice, it can often be an indirect factor when deciding whether it is worthwhile financially to carrying out private work.
In certain earnings zones, you can be paying extremely high tax rates, which can make you decide to cease private work when some tax planning could have mitigated this and allow you to have a financially viable private practice.
5 Investing in the wrong equipment
In certain specialties, particularly cosmetic, the pace of technological change can be fast and the next ‘wonder’ treatment is always round the corner. Some of these may well be viable, but the equipment itself to carry out such work can often be very expensive.
As doctors, you are almost always a good credit risk, so there will be no shortage of available finance to obtain equipment.
But that does not mean that the longevity of the treatment is sound and, in some cases, the treatments do not turn out to be the next wonder treatment – leaving you with equipment that cannot be used but you are still paying for. This can be a very expensive mistake.
6 Not saving enough for tax
Not saving for tax can be a sure-fire way to feel that it’s not worth carrying out private practice and it can lead to significant distress.
The tax system can be complex, but there are some basic things which can alleviate most surprises when it comes to your tax liability.
It would surprise many that if you commenced your private practice in, say, May of 2021 you would pay no income tax on the earnings as a sole trader or dividends from a company until January 2023.
As you would expect, the first tax bill can be a bit of a shocker, so it is best to get into the habit of saving monthly and providing your tax and accounting records to your accountant soon after the financial or tax year-end.
7 Having all eggs in one basket
One thing that Covid has laid bare is the fragile capacity of the NHS and how the Government used powers to take over many of the key private hospitals.
No one would have anticipated that before Covid, but it highlights how having admitting rights in more than one private hospital can spread risk, as certain hospitals had significantly more capacity to offer private work than others.
This situation is a driver for many looking for their own facilities that can help manage the impact on the private medical sector for any future pandemics.
8 Lack of marketing and having a poor website
In the digital age that we live in, one of the first things that a patient is likely to do when looking for private medical treatment is to search for you on the internet.
Ask yourself whether a patient would have a positive result from doing this or would they see an outdated website that could give the impression of disinterest.
For certain specialties, having an excellent website and marketing strategy is essential and not embracing this can lead to the private practice not being viable,
irrespective of how good a surgeon or physician you are.
Private hospitals usually have liaison teams for their consultants to help you promote yourself, so take on board their assistance. At the end of the day, you have a common objective and they will have a team dedicated to your success.
9 Medico-legal exposure
Medico-legal work has, for many, been a lifeline through the Covid crisis, but it does come with its own set of pitfalls that need to be understood.
The first is the long delay between carrying out the work and getting paid and it can be difficult to understand that many consultants have to pay the tax on this income before they receive it. This can cause significant financial pressure and cash flow issues.
Another important factor is exposure to a particular source of income, as there have been high-profile cases in the past where agencies went out of business leaving many out of pocket and facing financial hardship.
10 Joining the wrong group
Joining with colleagues can be a very good way of supporting each other and financial gains can often be achieved.
However, you must choose wisely when it comes to deciding who you are going into business with, as a group that is not successful can result in significant financial loss and often tarnished friendships with colleagues whom you may work with in the NHS.
Avoiding the pitfalls that could lead to difficulties or even failure of your private practice is a key part of running a successful business. Try not to fall into these traps and by following sound advice you should ensure that you enjoy a successful private practice.
Ian Tongue (right) is a partner with Sandison Easson accountants