Page Title

Startup
Costs

Principles: 1. Grow the office to meet the size of the practice. Overstaffing and overbuilding are wasteful
and do not help you meet the financial goals of the practice. 2. Determine the type of practice you will
have (see the first section of "Starting a Practice". If you are to initially have a single physician office and
perform injections at a hospital or ASC and not engage in any medical treatment, then you need a very
minimal office. The office space may be conservative in size with a small waiting room, a part time
receptionist area, and an exam room . Time share facilities would work well for this scenerio in that the
office space is rented for a block of time, and may include the use of secretarial services that can be used
for scheduling.   If you do not wish to employ a secretary and have only an answering machine for
physician referrals, then you will save significant $$ but will have to do much of the secretarial work
yourself. If you do anything other than a block practice, then you need a real office at least part time and
a real secretary. 3. Do not use the top of the line anything when starting a small practice. Instead of a
$5,000 telephone system, you can manage initially with an off the shelf 2 or 4 line system from Best Buy
for a few hundred dollars.   Often the features you need can be added by the telephone company or can
be programmed into the less expensive telephones.   You do not need a $1,000 paper shredder to meet
HIPPA compliance when a $50 shredder will meet that need.   As the practice grows and more secretarial,
nurse practitioner, and physician staff are added, you may wish to purchase more expensive equipment,
but this can be done within your own time frame. Also remember the obsolescence factor in certain
equipment such as computers. Within 2 -3 years the software or hardware in a computer are obsolete.
Therefore purchasing a overly expensive computer with too much memory and too high a processor speed
or packed with features you will never use can double or triple the computer cost with no discernible gain.

Startup Costs:
Office: Rental for minimal office space runs $10-25 per square foot per year.
Therefore a 300 SF office (the minimum practical size with a small waiting room,
receptionist desk and one office) would cost about $3,000-$7,000 a year. If you are
in an upscale office building, the costs escalate substantially up to $40 a square foot
per year. Many pain physician offices are about 1,000-1,500 SF for a physician,
secretary, and modest waiting room with 2 exam/procedure rooms.   A more
expansive office for 2 physicians, a NP, a receptionist, a billing/scheduling secretary,
an office secretary, and an office manager with 3 individual physician/NP offices plus
2 exam/procedure rooms, and 2 rooms for PT would occupy around 3,500 SF.
Physician offices that incorporate several physical therapists, several MDs, and a full
complement of support staff may be as expansive as 7,000 SF.   If it is under a
single construction shell and has an ASC of 3-7,000 SF, the overall building size for
the ASC plus office practice can be as high as 15,000-20,000 SF.
Rental rates for time share offices are usually created in blocks of 4-8 hours. Some
facilities will ask for a flat fee per month to include the use of the waiting room, 1-2
exam rooms, and some minimal secretarial services. More expansive secretarial
services can be contracted separately.
If you are a well established pain physician in the area you will be practicing and
have substantial accounts receivable you will receive from an old practice, you may
want to consider purchase of a building or construction of a building.

Secretarial Services may cost anywhere from minimum wage to $20/hr depending
on the skills, expectations, full time vs part time, and whether benefits if any are
included.

Office Equipment:
Typical cost ranges for the following purchased equipment:
Telephone system $200-$5000. The upper end systems permit multiline arrays
of up to 24 incoming lines, triage systems, and some have call back and fax
server capabilities. For a small office start up, a Panasonic 4 line system with
portable phones with headsets are quite sufficient.
Fax: Whereas stand alone fax machines ($40-200) frequently breakdown and have
high costs for ink cartridges, they may initially be more economical than fax servers
which typically cost minimum $400 for analog models to $10,000 for mass fax
capabilities on multiple lines. Microsoft Home and Professional XP have built in fax
generators that can be used for both incoming and outgoing faxes, thereby avoiding
many printed pages. The medical record or letter to the referring physician can
quickly be faxed via this system through a telephone line to the appropriate location
with the caveat that HIPPA disclaimers and regulations must be followed. Some of
the Dell Servers have built in fax servers that permit everyone in the office to shunt
their faxes through a central pipeline at the server level and subsequently out to the
receiving locations. Fax servers also have the capability to triage incoming faxes
and send to the appropriate computer in the office. The more advanced fax servers
also have optical character recognition software permitting faxes to be saved in a
word or pdf file that is much smaller (7-20kbytes) than the raw fax converted to a
picture or gif file (70-150kbytes). Therefore with a fax server, the documents can
be converted to a digital mode and attached as a letter to the patient's electronic
medical record. Fax servers can also be used as internet faxing where the fax is
received or transmitted as an email. I find this to be cumbersome for a small pain
physician office. Finally there are fax services which charge by the document faxed:
such systems permit transfer of your information over the internet to a central
location and the faxes are routed through their telephone lines instead of yours.
Typically these services cost about $0.10-$1.00 per document. More information on
fax servers may be found here.
Computer A computer system in the office is mandatory except for a practice that
uses dictations only and a paper medical record. The computer system can be a
single computer for your secretary's use, a small office network that can connect up
to 5 Microsoft XP computers together without a server, or a server network that can
have literally hundreds of computers operating off a relatively inexpensive server.
The computer in many offices is becoming the workhorse of the office. It is used to
schedule patients, to run electronic medical records programs, to create printed
letters and advertisements, communicate via email, send files to other physicians
and insurers via email, as a portal for a home laptop computer or laptop computer
used at other offices to communicate with patient files, as a fax server, to develop
educational material for patients, as a method to check insurance coverage and
benefits in real time, as a means to determine at the time of patient checkout any
co-pays or unpaid balances, to create powerpoint slides for presentations, etc.
Before purchasing a computer system and server, deference must be given to the
type of electronic medical record to be used. Each EMR has their own hardware and
software application minimum standards. If you are not yet purchasing a EMR, then
you may do well without a server and simply purchase individual computers as need
be.
Desktop computers are meant to stay in one location and not be moved frequently.
Therefore if you have an office that permits placement of a computer and monitor in
a fixed location, the desktops may be less expensive and more useful. However the
laptop computer prices have fallen significantly and therefore may be used in many
situations where desktops were previously used. A laptop is an excellent computer
if there are satellite offices since the laptop can use the internet to access patient
files on the home computer.
Because computers have become so fast and have an astonishing amount of storage
and memory, an inexpensive computer will work nicely in an office. The largest
computer manufacturers are Dell, Gateway/Emachines, HP/Compac and each have
adequate computer systems (computer, keyboard, mouse, monitor, and sometimes
printer) for $400-$800. Dell is forever having sales and special offers and tends to
be approximately $100-200 less expensive for the same computer by the other
manufacturers, although the others are becoming more competitive. Suggested
individual computer features: Pentium 4 or higher (Celeron works fine for one-two
computer offices), 256MB memory, 40GB or more hard drive, fax modem
internal,network card, Windows XP Home or Professional (Professional will make it
possible to add upgrades to all the computers on a server at one time rather than
installing software on each individual computer).
Servers can be the central storage databank for several computers that share data
such as an electronic medical record. The servers also permit significant security
levels to be attached to avoid unauthorized patient file access. Once more than 2-3
computers are networked, it makes sense to purchase a server since data access
speed is markedly enhanced with a server. Each of the above three companies has
server sales. Inexpensive servers and the Windows 2003 Server operating system
can be purchased for approximately $900 and up. Although the server must have a
keyboard and monitor attached, it is recommended by most computer specialists
that the server station not be used for routine data entry or access since this slows
down all the other computers on the network.
Simple home networks or small office networks can be set up using the Windows XP
software, however Server 2003 software is not for amateurs. When setting up a
network using this operating system, it is prudent to hire a network engineer to
come into your office and set up the network. These services charge $80-120 per
hour to set up networks and configure your computers.
Internet access is almost an imperative in this day and age. If an EMR is to be used
with satellite off-site computers, it is strongly suggested either DSL or cable be used
to access the internet. Dial up is too slow for these programs and may cause the
network to crash.   If there are different internet service providers for the satellite
office and the home office, it is better to avoid setting up a VPN network and instead
use an external service at about $20 a month to permit communications between
the satellite computer and the home office computer or server. One such program
is www.gotomypc.com
EMR (Electronic Medical Records)   Due to the complexity of the EMR/scheduler
programs, these will be discussed in a separate area under "Starting a Pain
Practice". EMR is a great idea if you can afford it, and the time to implement such is
best immediately at or immediately after the starting of a new practice. Data, esp.
demographics, insurance info, and the initial history and physical exam can all be
entered at the time of the initial visit. The most economical EMR is Amazing Charts.
That EMR/scheduler combination program costs around $1,000 which is only a small
fraction of all other programs. For those who cannot type or template, the use of
Dragon Medical is recommended. EMR can cost up to $100,000 for 2 physicians so it
is prudent to shop around. See the section on EMR.
Shredders are a necessary part of patient privacy protection. The strip shredders
may be obtained for $40 while the cross-cut shredders (confetti) are about
$100-200. Obviously the latter is more secure, but it is rare to find anyone with the
patience to reconstruct strip shredded documents. Office Max is an excellent source.
Office Supplies and Medical Office Supplies are usually relatively inexpensive.
Secretarial desks and chairs may be purchased for $200-600, wrist protectors for
use of the computer keyboard and mouse (do not forget these...they are
important!) cost around $20 for a set, storage file cabinets 5 drawers high (metal)
can be acquired for $100 each, expandable physician office linear file system can
cost $500 or more. If you use an EMR, then your file contents in file cabinets can be
minimal. However, if you use a hybrid paper/EMR system (eg. no reports or labs
are scanned into the EMR and are instead saved in a paper format), then the storage
space requirements will expand at a rapid rate. Paper file only offices will note an
explosive rate of file storage needed. A spine model can be purchased outright from
the internet or may be acquired via a drug company purchase budget. Neurological
reflex hammers, tuning forks, safety pins, and stethescopes cost sum total
approximately $200.

Purchased Services
Cleaning Services Usually these are not included with rent unless you are leasing
a time share facility or sharing an office with another physician. A busy office will
need cleaning twice a week, but once a week is more usual. The cost varies widely
depending on the square footage, the exact duties expected, etc. Typically the cost
is anywhere from about $70 to 170 a week.
Dictation Transcription Depending on the EMR system selected, much dictation
can be avoided. Also, using a Dragon Medical Naturally Speaking system voice
recognition software for $869, one may avoid all transcription costs and speed up
data entry into EMR by 300% over typing. The Dragon system has a 35,000 word
medical vocabulary. Also letters to referring physicians may be quickly generated
using Word coupled with the Dragon system.
However, if one must dictate, there are now several options:   a. local
transcriptionist...the dictations may be placed on analog tape from a microcassette
recorder   b. local transcriptionist where the dictation is recorded or placed on digital
memory cards (eg. Smartmedia) and given to the local transcriptionist for
transcription to paper.   c. non-local transcriptionist (may be US, India, or other
country. ) Either a digital dictation system such as a Sony digital recorder is used
and data transmitted electronically over the telephone or the physician dictates
directly into a remote recorder via toll free dictation line. One US company is
located here. The foreign (esp. from India) services are less expensive than the US
services, but their accuracy is not as good as the domestic services. Also making
corrections with foreign services is difficult.
d. In-house transcriptionist- for an office practice with at least 3 people with
significant dictation, it becomes cost effective to have a transcriptionist in-house. If
the transcriptionist can also perform some filing and intermittent secretarial duties,
then it is cost effective with less than three physicians/NP/PA dictating.
Typically dictation transcription costs for one physician are about $12,000-18,000
per year however an EMR system or Dragon system will help reduce the
transcription costs. The cost of a digital dictation recorder is about $300 and may be
seen by clicking here.
Transcription typically costs 6-15 cents per line using transcription services. For
physicians seeing primarily patients in their office, the transcription costs can be
significant- $12,000-18,000 per year. Surgery centers provide their own
transcription service, so the transcription costs to the physician will be much less for
physicians performing a significant number of procedures in a surgery center or
hospital....typically around $6,000-9,000 per year. By templating the redundant
and verbose sections of the H&P using an EMR, the majority of transcription costs
can be eliminated. Also, Dragon will eliminate transcription costs altogether.
BILLING SERVICES If you are not planning to imminently perform the entire
billing function in-house (wise to wait until the practice is established), then
commercial billing services are available for 4.5-10% of collections. See the section
on billing under the Coding/Billing subsection of "Starting a Pain Practice".
MANUALS/CPT/OSHA/Etc. CPT coding manuals are a must for an office practice unless
your EMR offers a full text CPT coder (unlikely..most are abbreviated version). The CPT manual
is one of the main moneymaking ventures of the AMA and may be purchased here for $80 for the
professional version (recommended) or the standard version for $60. ICD-9 physicians
diagnosis coding books may also be purchased from the same source above under the title
"MM ICD9" for $60. It is very useful to have the office manager attend an OSHA/HIPPA
combined seminar for about $250 and these provide you with the OSHA manual forms, the
OSHA manual itself, training information for your staff, HIPPA training for your staff, and some
provide templated HIPPA disclosure statements. Alternatively, a modifiable HIPPA statement is
included on this website under OSHA/HIPPA. An excellent HIPPA book for physicians offices for
$99 is available here. OSHA manuals are mandatory...if not acquired through a seminar, OSHA
manuals may be purchased here. One useful organization for OSHA compliance issues is found
here, and this organization offers seminars.

Medical Supplies
NEEDLES/TRAYS A list of suppliers may be found here. Typically block trays
range in price from $3.50 to around $15.00 depending on included drugs and
needles. We buy our trays for $7.00 and add the needles/medications as needed to
a mayo stand (purchased for about $50). Quincke tip 22 ga spinal needles cost
about $1.85-3.00 depending on the supplier and quality. Whitacre needles (we use
them for stellate ganglion blocks) cost about $5.50. Cook bone biopsy needles used
for vertebroplasty cost about $36 each. Discography manometric syringes range
from $60-110 each. Epidural trays cost around $10. Epimed coude tip needles cost
about $12.00 each.
MEDICATIONS vary by supplier. 2005 prices. Single dose depomedrol 80mg costs
$12 each, 40mg single dose cost $6, 5cc 40mg/cc depomedrol multidose cost $25,
5cc 80mg/cc multidose depomedrol costs $42, 0.25% bupivicaine 30cc $2.67, 1%
lidocaine 50cc $0.63, hyaluronidase 1500U cost $75, MS intrathecal up to 20cc cost
$20, hydromorphone intrathecal up to 20cc $35. Addition of clonidine escalates the
cost significantly. Propofol 20ml costs $11, Versed 2mg costs $0.70, Fentanyl 2cc
vial costs $1.00.   These prices are based on a small office practice not involved in a
large buying group.

TAXES
EMPLOYMENT TAXES Payment of withheld taxes (Medicare, social security,
federal income, state income, county or city income) and employer taxes (FUTA,
employer portion of medicare, social security) generally must be paid at defined
intervals. DO NOT WAIT TO ESTABLISH TAX ID OR BEGIN PAYING TAXES!!! Not
only are the penalties steep, but the quagmire created by missing a single tax
deadline can cause problems with the IRS for years. An excellent tax resource for
federal taxes is found here. Typically for a physician's office, taxes are due to one
entity or another monthly, especially form 941 which is a combined federal income
tax withholding, medicare, and social security tax form. Taxes may be filed
electronically on a monthly basis with direct withdrawal from a checking account.
Typically the taxes due from the employer are the employer portion of FICA and
Medicare which are effectively 7.6% of each salary paid to employees, including the
physician. This amount is due from the employer separate from the taxes withheld
from the employees paycheck which ranges from 15% to 30% depending on the
number of deductions claimed on the W9 form, marriage status, local and state
variations in taxation levels, etc.
NON EMPLOYMENT TAXES AND FEES Property taxes on equipment owned by the
corporation is due as a state tax in some locations. This is usually paid yearly.
Corporate income taxes are due at the end of the tax year, but most physician
corporations simply pay themselves and their employees a bonus at the end of the
tax year, thereby emptying their corporate accounts in order to avoid double
taxation. Fees such as radiation licenses, commercial licenses, etc. must be paid on
a state basis yearly but are not usually too expensive ranging up to $500 a year.

RECURRING COSTS
TELEPHONE Depending on the number of lines (usually relative inexpensive once
you have 3-4 lines...each additional line only costs $5-10 a month on some
telephone plans), the overall cost for a busy physicians practice with 8 business lines
is about $500 per month with an 800 number line.
MALPRACTICE INSURANCE This commonly comes due immediately on starting a
new practice. Some insurers prorate the amount to the end of their insurance year
while some demand the entire amount up front. Some insurers will permit quarterly
or semiannual payments. Currently malpractice insurance for pain management
ranges from $14,000-$90,000 per year depending on the state and malpractice
carrier.   Nurse practitioners may be piggybacked onto your policy or may have
separate insurance, generally $2,000-$5,000 per year.
PROPERTY INSURANCE Is mandatory to protect you from clutzy patients falling in
your waiting room and claiming there was a one inch square water spot on the floor
that you should have personally known about. This insurance generally ranges from
$200 to 500 per year and is often a requirement when you lease an office.
CABLE/DSL Because of the necessity of internet access for billing, education,
medical records access, and communication, either cable or DSL internet access is
mandatory. Dial up is far too slow for a busy office practice. The overall costs of
DSL range from $20 per month to $50 per month while cable costs $50-100 per
month for internet access only. Cable is many times faster than DSL, but if there
are no remote offices using centralized medical records databanks (EMR) or no large
files to be transferred electronically (billing), then DSL will work just fine.

Evaluation of Initial Expenses

1. Office Rental

2. Secretarial Staff

3. Office Equipment
a. Telephone
b. Fax
c. Computer system
d. EMR/Scheduling
f. Shredder
g. Office supplies

4. Purchased
Services
a. Cleaning
b. Dictation
c. Billing
d. Startup manuals for
OSHA, HIPPA, CPT
coding, etc.

5. Medical supplies
a. Needles/trays
b. Medications

6. Taxes-remember to
calculate at least 8% of
the secretarial and
support staff salaries
and set aside this
much from the practice
income to pay for the
employers contribution
to taxes.

7. Recurring costs:
a. telephone
b. electricity
c. gas
d. malpractice
insurance
e. property insurance
f. cable or DSL