FELLOWS COLUMN

Planning Your Nursing Business

Thomas A. Mackey, PhD, NP-C, FAAN, FAANP Second, entrepreneurs pursue opportunities with enormous discipline. For example, they habitually act on possible opportunities, maintain inventories of unexploited opportunities, and revisit lost opportunities again and again. In effect, they seize the day when it comes to opportunities. Third, entrepreneurs pursue only the best opportunities. They avoid chasing every opportunity that comes along that can potentially distract them from their mission and goals at hand. Because they pursue only the best opportunities, they limit the number pursued and tenaciously go after the ones that focus on their mission. Fourth, they focus on execution. Just do it becomes their motto and they are able to adapt to change and best ways to exploit situations. The question always in their mind is What do I need to do to make this happen? Finally, entrepreneurs engage the energies of everyone in their domain. They gain the collaboration of those inside and outside their immediate environment (hospital, office, school), they create and sustain networks to achieve their goals, and they use the talents of others to achieve their goals. In effect, they are leaders whose followers do not know that they are being led. While the above represents characteristics of an entrepreneur, Parinello and Gottfried (2004) discuss several hard-nosed approaches, which also are appropriate for nurse leaders who aspire to be entrepreneurs.           Think big Show the competition no mercy Defend yourself aggressively Remember, consensus is overrated Identify all possible resources and use them strategically Cut your losses Go face to face with key decision makers Step up: take intelligent chances and then take responsibility Advance the most profitable deal Be a good negotiator

Author Thomas A. Mackey, PhD, NP-C, FAAN, FAANP, is a Family Nurse Practitioner, Associate Dean for Practice, Professor of Clinical Nursing, Director of Occupational Health for Nurses Program, and the Director of University of Texas Health Services, The University of Texas Health Science Center at Houston, Texas. Contact Dr. Mackey by e-mail at thomas.a.mackey@uth.tmc.edu

The two words nursing and business linked together in the same sentence is a relatively new phenomenon. Prior to the 1980s, there were nursing directors, managers, supervisors, and leaders of healthcare organizations, but few actually considered what they did as a business venture. Now, all that is changed. As nurse practitioners (NPs), we increasingly see ourselves not only as care givers but also as business owners, leaders, and managers. Many of us, while aspiring to go into business for ourselves, may not possess all of the knowledge and skills to operate in a successful business-like and profitable manner. Despite this, we need to begin to think like entrepreneurs. Through the years, we have seen many barriers to NPs owning and operating our own businesses. In addition, we often lack a sense of entrepreneurship, limited skills, and adequate knowledge to actually operate a business. The following will help clarify some of the issues needed to either own your own business or become more practical in working within your current organization or community.

ENTREPRENEURIAL MINDSET According to McGrath and MacMillan (2000), there are five characteristics that describe entrepreneurs. First, they passionately seek new opportunities for business. Change, to the entrepreneur, means opportunity. Our healthcare system is rapidly changing, and the opportunities for business ventures are becoming endless. Entrepreneurs seek these opportunities to create new models of business and new revenue streams, reduce expenses, and reorganize the infrastructure (Hammer, 1993).

KNOWLEDGE For most of us, our training has been clinical and not business oriented. So what makes you think that just because you have the desire and clinical skills to start your own business that you also have the business knowledge? Probably you do not. You may have the best clinical skills in town, but you may lack the managerial and administerial know-how that is so necessary to start and operate a successful company. Some of the knowledge areas that you will need for a successful nursing business are listed in Table 1. Accounting knowledge is important for keeping financial records of your business on a year-round basis but most importantly for tax purposes at the end of the year. What do you really know
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Table 1 Knowledge Set Needed to Operate a Business Accounting Marketing Managing Insurance Legal issues Planning Budgeting Funding Negotiating Billing/collecting Clinical skills Nursing

you actually do it. Following the steps in creating a plan will force you to think about the hard issues ahead and will guide you in making decisions about services, finances, clientele, and space.  If you intend to secure a loan from a bank or other type of lender, you will be required to offer some type of written plan that reflects the what, how, and where it takes you to run your business. Lenders want a secure feeling that you can repay the money they are lending you within a reasonable amount of time and with worthwhile interest. It is important to remember that this column should be treated as a guide or a starting point if you are considering starting your own businessnot as a rigid all-encompassing format set in concrete. Each business is unique. Apply the material presented below only as applicable to the nature, size, structure, and goals of your particular practice. Ignore those items that are not really essential for you to construct an easily understood, helpful plan. Your plan should be updated frequently to reflect scenarios such as changes in healthcare market conditions, economic factors, revisions in practice strategies, investigation into why and what to do when projections for patient utilization are not reached or are achieved. Quantity does not equal quality. The well-written plan is succinct and to the point. The typical plan should be able to say it all in 2030 pages, or fewer if at all feasible. A plan prepared for a lender will contain much more detail than one meant solely for an owners guidance. Attempt to find out ahead of time from the lender how much detail he/she expects about your depth, collateral, financial projections, etc. If you are writing the plan primarily for your own guidance, then make sure you include enough detail to make you thoroughly cover and understand the processes you will be putting into place. Nondisclosure Statement (as applicable) The nondisclosure statement lets the reader know that this plan is your property and is not to be shared with anyone without your permission. This can be a verbal or signed agreement but should be addressed at the beginning. Introduction Identify yourself in this section and include the name of the business, address, phone number, Web page, fax, e-mail address, owner(s) of the business, and date. Table of Contents Clearly identify the sections of your plan, and indicate page numbers where they can be found. Executive Summary This may be the only part of the plan that investors actually read. Thus, it is very important to make a good first impression. Make this section short (23 pages), concise, and enticing so
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about budgeting, costing out of contracts, and funding of projects in which your business may become involved? Have you ever negotiated a managed care contract? How do you do it? Who is the right person with whom to negotiate? What are the negotiating points? What are the market trends related to pricing and reimbursement? How should you set your fee structure, bill and collect from insurance companies, or even private pay patients, enter into legal contracts for services, or even hire/fire employees? How do you go about getting clients? How do you market your company? How do you figure your breakeven point? Even a stellar NP with an advanced degree can find these fundamentals overwhelming! If you are not knowledgeable in these areas, then consider outsourcing or purchasing the knowledge and skills involved from outside (Mackey, McNiel, & Klingensmith, 2003). Hire an accountant, financial planner, practice manager, or billing agent on either a part-time or full-time basis. While the upfront costs may seem large, the savings and return on the investment will pay multiple dividends. These are professionals who have the knowledge you lack in specific areas of running a healthcare business. Use their knowledge to your business advantage and success while you use knowledge and skills in nursing to produce income and build other aspects of the practice. Go with your strengths; outsource the rest. You may profit immeasurably by working for a period of time for another nursing entrepreneur, closely observing the administrative and managerial procedures used there, and then decide when or if you have the know-how and the personal qualities so necessary to start out on your own.

BUSINESS PLAN Starting your own business is a process and not an event. One of the first steps in formalizing the process is to write a business plan. The values of writing such a plan include the following:  Clarification and self-guidance: Regardless of whether you want to start your own business or even provide a new service in your hospital, community, or corporation, working through the steps of creating a business plan will provide you with tremendous insight into how
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that they will want to read more. Briefly outline details of what you are going to reveal in the body of your plan and what you are going to treat in depth throughout the remainder of the document. For example, you might want to include an outline of when you are starting the practice, what types of patients you will be treating, anticipated size of the practice, how you plan to grow the practice, how it will be managed, your current financial status, where you will get start-up funds, how much you have as equity, how much you may have to borrow, how you will pay back, how you will use the funds, 3- to 5-year financial projections, breakeven points, and whether or not you will operate on a credit or cash basis. This summary should actually be written after you have completed your other sections of the business plan. Operations Plan Clearly, identify your practice vision in this section. Indicate what types of services you will be providing, the uniqueness of these services, geographical area from which you will draw patients, target market (i.e., age, gender, ethnicity, economic status, insurance coverage, employment status), and a clear description of how you will operate this practice (i.e., hours of operation, walk-in versus appointments, cash or insurance). Describe the practice space, location, size, equipment needs (rent, lease, own), accessibility, and any other special identifiers that will give a good picture of your practice facility. Market Performing a good market analysis and presenting this in the business plan is often underrated by nurse entrepreneurs going into business. In this section, provide an in-depth analysis of your market. Describe the demographics of the target population on which you can draw for your practice: who is using services such as the one(s) you propose, economic trends within this population, where they currently go for care, why they will or will not continue to go elsewhere or come to see you, what factors will persuade them to utilize your services, and your growth prospects in the community served. Marketing Strategy/Implementation This section is also an in-depth description of how you plan to get in touch with your potential patients and what strategies you will use. Identify the specific market niche you will go after, talk about why they are currently neglected, what will convince them to use your services, and why they will use you for their health care and not your competitor. Go into detail about the pros and cons of your competitors: pricing, quality (or lack thereof), location, hours of operation, and types of services. Address your competition: who they are, their strengths and weaknesses, prices, services offered, reputation, and how you are different from them. Detail a strategy of how you will attract patients to your practice with bold and innovative marketing ideas. Study your competitors. The better you know them the better you will be able to plan around them.
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Products/Services Provide a detailed description of your nursing services and plans for the future expansion of your practice. For example, discuss the following:  Services to be provided  What you will offer that another established practice is not already providing and how you are going to get patients away from them  Prices for your services and how and why you chose them  Costs of services (note: costs and prices are distinctly different).

Management Use this section to describe your management strategy and philosophy. Will you use an office manager, management company, billing service, or even have a community/patient board of directors/advisors? Do you intend to be a sole proprietorship, corporation, or partnership? Whom will you get for advisors and mentors (attorney, insurance, banker, accountant, physician backup, or other NPs)? Goals and Milestones Indicate in this section what you envision your practice being in terms of growth. Explain the steps (milestones) you will take to reach your ultimate goals, and assign a date for meeting them. Presenting a well-plotted scenario will give the reader, and you, a comfort level that you know where you want to go with your practice and how you are going to get there. Include comments on such items as numbers of clients by a certain time, numbers of staff you will add along the way, equipment you will purchase, marketing strategies, and when to be phased in, with the name of the responsible person. Financial Data Without a doubt, this section will be scrutinized by your lenders. Even if you are not requesting a loan, this section will be extremely important for you to understand how much you can/should invest, a total financial picture of your practice from the standpoint of forecasting or even a breakeven standpoint. Forecasts. Cash flow projections and profitloss statements are essential tools for the owner to be readily aware of his/her financial health. Consult with your accountant on how to create these statements. For future planning purposes consider 3- to 5-year projections monthly for at least the first one or two years and quarterly or annually for remaining years. Breakeven point. This is the point at which income equals expenses. Beyond this point, you begin to make a profit, which is an elusive target you must plan from day 1. You might want to use a chart that will show how many patients you will need paying you a stipulated fee before your expenses are covered. Your cash flow statement will help you to keep close track of progress toward or digression from that cherished date. Monitor closely your actual collections versus the weekly/monthly
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billings. In particular, pay attention to your collections and aging accounts receivable (AR). An AR that significantly deviates from Table 2 demands immediate attention and intervention. Control of fixed and overhead items. Control of fixed and overhead items (e.g., rent, insurance, utilities, etc., which predictably remain with you whether or not you are making or losing money) is vital. Discuss your strategy of what controls you will have in place and how you will monitor these controls on a regular basis. Again, you might want to discuss this strategy with your accountant. Other variable costs of doing business, of course, need close scrutiny. Your services should provide some margin for costs and profit. Request for Financing Describe the purpose and line items such as start-up expenses, working capital, and capital expenses. You might also want to discuss your plan and method of repayment. Appendix Finally, add sufficient data and documents to your business plan that will support any claims that you have made earlier. For example, include letters of support from potential patients, hospitals, other healthcare providers in the area who will refer patients to you, leases or contracts mentioned in the document, or even reference letters from reputable sources likely to be esteemed by the lender.

Table 3 Nursing Clinic Start-Up and Infrastructure Issues to Consider State boards of nursing Medicine and pharmacy Rules and regulations Collaborating MD/NP Develop job descriptions Office supplies Billing/collection system Lab services Personnel Equipment/supplies Partnerships Hours of operation Start-up capitol Occupational Safety and Health Administration regulations/rules Referral system Telephone/fax systems QA program Tax ID number IT system/support Transportation Scope of services Hospital privileges Collaborating contracts Negotiate space/lease Managed care credentialing Medicare/Medicaid provider numbers Charting system Radiology services Furniture Medications Policies/procedures Fee structure Laundry services Marketing

Answering/on-call systems Legal support Consultants/mentors Business structure Location

START-UP AND INFRASTRUCTURE Having assured yourself (and potentially any involved lender or partner) that you have a workable business plan and are prepared to take the plunge, you are now faced with start-up and everyday maintenance issues (Table 3). Many of these issues may seem routine, but they must not be overlooked. What about the amount of office space you will need? How many parking spaces are required per exam room? How many office staff do you need per provider? What mix of office personnel do you need? Many of the answers to these questions are available through annual survey data results from Medical Group Management Association (MGMA), which provides information specifically tailored to geography and size of various type of practices. On the other hand, you may decide that rather than go with an MGMA national average of 3.5 support staff per 1 FTE physician that you only need 1.5 FTE support staff. When setting up your infrastructure, seek assis-

tance from sources such as MGMA, seasoned practice managers who manage other practitioner offices in your area, drug representatives, medical supply representatives, and others. For example, I often rely on my medical supplier for information related to supplies needed in clinic or to purchase used medical equipment such as exam tables, oto/ophthalmoscopes, etc. I have written in detail about these infrastructure issues in the past (Mackey & McNiel, 2002). Furthermore, Buppert (1999) has addressed these issues in her book titled Nurse Practitioners Business Practice & Legal Guide . However, a few of these infrastructure issues deserve special attention and updating. Contracts and Agreements (Hospitals, NPs, Physicians, Schools) There are several situations, which may require you to enter into contracts or agreements with persons or other organizations (physicians, schools, NPs, managed care companies, vendors, employers). For some, you will want formal contracts, and for others, a simple letter of agreement will suffice. For example, if you plan to have a collaborative practice with a physician, NP, pharmacist, hospital, or other healthcare professional or organization, you are well advised to formalize the relationship via a partnership agreement or other formal legal contract. This will provide a clear outline of roles, responsibilities, remuneration, deliverables, and limitations. Again, Buppert (1999) has several examples of agreements and contracts for
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Table 2 Percent of Outstanding AR by Days (source: MGMA cost survey 2000) Days % Outstanding 030 41 3060 17 6090 9 90120 6 >120 27

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Figure 1 Revenue process.

REVENUE PROCESS
Scheduling Patient Appointment Registration Claim Preparation and Billing EOB Processing Third Party Recovery Statement Processing ACCOUNT RECEIVABLES MANAGEMENT

Pre-Registration

Receiving payment for services can occur via simple fee for service between you and the patient; contracted amount for your services with individuals, companies, or organizations; or a contracted amount with insurance or managed care companies including a capitated amount. In each case, the billing process includes multiple steps as outlined in Figure 1. With the sophistication of todays market, the average NP setting up a practice is well advised to use a consultant or billing company specializing in NP reimbursement issues that can provide a service to maximize income and minimize headaches involved. Again, Health Associates is a company, which provides this service specifically geared toward NP practices. Other There are multiple other infrastructure issues as outlined in Table 2, and all of them need consideration before beginning your practice. Some issues (determining your business entity type [sole proprietorship, corporation, limited partnership, etc.], credentialing and contracting with managed care organizations, marketing, and setting a fee structure) are important enough to seek help from a practice management specialist.

Date of Service

BATCHING

you to use as templates for your particular situation. In days gone by, a handshake and a persons word was solid as a rock. However, today it is wise to remember that only a written contract or other type of formal agreement will cement a relationship. Personnel You will have many challenges in your new business, and personnel issues will (guaranteed) be one of the most significant. When you are hiring and managing people, you need to think about functions, skills, quality, and quantity. What are the functions you need employees to perform in your practice? What various skills will they need and do they have multiple skills? For example, can a staff member run the front desk and help with patient care duties? What quality of service will your employees be able to deliver? Select and train them well. How costly it is to discover too late that you have tried to put a square peg into a round hole. Furnish clearly written and understandable job descriptions, policies, and procedures, and perform periodic performance appraisals on everyone. If you do not have policies and procedures, contact sources such as Nursing Business (713-662-3897) or Health Associates (281-419-0225) to purchase them. Billing Processes Getting paid for what you do is not as simple as it may seem. The revenue process (Figure 1) starts the moment your patients call to make an appointment and does not end until you receive the maximum allowable dollars for a particular service. In todays market, that process is extremely complicated.

SUMMARY While these and other issues may seem overwhelming they are part of the reality of doing business in todays healthcare environment. It is not easy, but it is doable. My advice is to seek out a practice manager who can assist you in these and other areas of establishing your business. Because you must manage and oversee all facets of your operation, you may need big help in some areas with which you are not familiar (e.g., finances, marketing, etc.). Where you do not possess the necessary skills, employ someone who does, or get an outside source to assist you (e.g., consultant, billing service). Stick to what you know bestnursing. REFERENCES
Buppert, C. (1999). Nurse practitioners business practice & legal guide . Gaithersburg, MD: Aspen Publishers. Hammer, M. (1993). Reengineering the corporation: A manifesto for business revolution . New York: Harper Business. Mackey, T., & McNiel, N. (2002). Quality indicators for academic nursing centers. Nursing Economics , 20 (2), 6262, 73. Mackey, T., McNiel, N., & Klingensmith, K. (2003). Outsourcing issues for nurse practitioner practices. Nursing Economics , 22 (1), 2126. McGrath, R., & MacMillan, I. (2000). The entrepreneurial mindset . Boston: Harvard Business School Press. Parinello, A., & Gottfried, B. (2004). 10 Secrets I learned from the apprentice . New York: Chamberlain Bros.

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