Making Business Decisions

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​Making Business Decisions

When making a decision to establish a new private practice, there are some key questions one needs to ask in order to make the best business decisions.​

Health Insurance Plans/Payer Mix Questions You Need to Ask and Answer 

​What payer mix might you expect in the community? If the area has a high percentage of children on Medicaid, are the state’s rates reasonable and profitable? Similarly, are the State Children’s Health Insurance Program (SCHIP) payments acceptable? What are the major private insurers, and how well do they pay? Ask other pediatricians if they have had particular difficulties dealing with certain programs or insurers. The AAP Section on Administration and Practice Management​ (SOAPM) can be superb sources for information and feedback. If considering a cash-only or concierge practice, are there enough families to support this venture? Are there many military families in the community, and will there be any issues contracting with Tricare? (Tricare will usually not allow private pediatricians to be primary care physicians if there is a military base nearby.) Contact the state medical society for information on payer mix and the business climate within the area. 

Working Near State Borders

Communities near borders with other states deserve special consideration. It is important to research Medicaid, SCHIP, and private insurers for the nearby states; in addition, some state Medicaid programs may not cross state lines, making it ​​challenging to participate. Will privileges in another state’s hospital be desired or necessary? Will another state license and state-controlled substance privileges be needed? 

Working with a Hospital System

If contracting with a local hospital for financial assistance, how much control will they have in the decision of where to locate the office? How much input will they have on practice style or hospital admissions? What kind of reputation does the hospital have in the community—will patients avoid the practice if associated with that hospital? Are there local pediatricians who do not have privileges at the hospital—and if so, why? If the community is served by more than one hospital, do the other hospitals have expansion plans of their own? Do the hospitals have different payer mixes and birth rates that might affect growth and patient demographics? Will the hospital’s emergency department be a source of desirable referrals? Do contractual or distance issues preclude the potential of obtaining privileges at another hospital? Will the practice be required to take unassigned patient calls, inpatient coverage, or delivery or newborn coverage?​​​​​​

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