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Practice Management
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Practice Management
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Written by Peter Fernandez, D.C.
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Sunday, 04 March 2007 09:34 |
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If you you are considering starting your own practice or purchasing an existing practice, ponder these points before you plunge in.
Independent Contractor
In the business world, the term Independent Contractor usually refers to a person who contracts himself out (receives money for services), i.e., an independent fill-in doctor. However, in the chiropractic profession, the usual definition of an Independent Contractor is when one DC leases space from another DC, each DC having a totally independent practice, thus the title Independent Contractor.
When a start-up doctor leases space from an established doctor, the lease is usually for the use of the entire office, including telephones, adjusting tables, exam equipment, X-ray, and the staff that files his insurance, applies therapy, makes appointments, etc.
In some cases, the Independent Contractor may elect to pay for specialized adjusting equipment, etc., everything being negotiable.
The Advantages of an Independent Contractor Arrangement for a Start-Up Doctor
• Lower start-up costs compared to starting a solo practice.
• Little or no investment, unless the start-up doctor chooses to purchase equipment.
• Net profit is attained faster because of a fixed, and lower overhead.
• The start-up doctor is practicing in a known proven location that is already recognized as a good chiropractic office by the community.
• The established doctor has no control over how or when the start-up doctor practices.
• The start-up doctor has an affiliation with a successful DC, which provides psychological and clinical support.
• If he’s smart, the start-up doctor will seek the advice of the established doctor and allow himself to learn from someone else’s experience.
This is the least expensive way to start a practice but it is also a very risky undertaking. Please read the following disadvantages section carefully.
The Disadvantages of an Independent Contractor Arrangement for a Start-Up Doctor
• The start-up doctor is in competition with the established DC, which will cause stress between the two doctors.
• Practice growth will eventually come to a halt because of space restraints. As both doctors build their practices, something has to give. The new practitioner is usually evicted.
• There is a loss of independence because the start-up doctor has no say regarding the management of the staff or how the practice is run, etc.
• The start-up doctor is always considered second to the established doctor by the staff. This is natural, considering who pays their wages.
• The start-up doctor will not be able to resolve staff problems or alter office procedures without the consent of the established doctor. Remember, the staff is loyal to the established doctor, not you.
• There is always the threat to the start-up doctor that he will be thrown out. And, while the start-up doctor tries to acquire and remodel a new location, his patients will stay and be lost to the established practitioner.
• If the start-up doctor practices with a less than successful established doctor, he will pick up bad practice habits that will plague him for the remainder of his life.
Special Independent Contractor Benefits for the Established Doctor
• His office should be open longer hours and, therefore, be able to attract and see more patients.
• He will enjoy a somewhat passive income. The more successful the start-up doctor, the more money the established doctor receives.
• He’s collecting rent for his office and equipment while he’s not there.
• If he has a lot of extra space, the established doctor can place multiple start-up doctors into his office, thereby multiplying his income.
• He has a built-in buyer if he can no longer practice, passes away, or retires.
• He has a built-in vacation doctor. Patients will be treated by someone they know, and not a stranger, who comes in once a year.
Rules to Follow
The start-up doctor is not to sign a non-competition agreement for several reasons. One is that, if he is ever evicted, he will be forced to practice so far away that he will lose all of his existing patients. Another important reason is that the IRS will probably deny the start-up doctor independent contractor status and declare him an employee.
The start-up doctor needs a clause in his contract that states he cannot be thrown out without at least ninety days notice. There should be a severe penalty for the established doctor in the event he violates this provision.
Both doctors should sign a non-solicitation clause, which prohibits them from soliciting the patients of the other doctor.
The start-up doctor must be allowed to put up his own office sign, the same size as the established doctor’s. Also, when the start-up doctor leaves, he can take the sign with him.
The start-up doctor should ask for a clause that states, "In the event the established doctor becomes ill or passes away, the start-up doctor has the right of first refusal to buy the practice." The established doctor should want a similar clause unless he has children or heirs that could take over the practice.
Any new patients that are not direct referrals will be allotted to each doctor on a rotation basis.
Make sure the contract states the start-up doctor owns his patient files. If not, the IRS will classify the start-up doctor as an employee.
And, when the leasing-of-space agreement is drawn up, I recommend the term Independent Contractor not be used because of a possible confusion on the part of the IRS between the business world’s and the chiropractic profession’s definitions of Independent Contractor, as stated in the first paragraph of this article.
Pay Scale for an Independent Contractor
If the start-up doctor states in his contract that he is paying a percentage of his practice to another doctor, this is a direct violation of the Federal Kick-back Statutes, and the IRS will probably classify the start-up doctor as an "employee" rather than Independent Contractor.
The contract should state the agreement is an escalating leasing-of-space agreement. Example: $500 a month lease for the first three months; months four through six would be at a $1,000 lease rate; the next three months would be at a $1,500 a month lease rate, etc.
The start-up doctor is responsible for his expenses pertaining to conventions, post-graduate seminars, licensing fees, advertising, and malpractice insurance.
Does the Independent Contractor relationship seem complicated?
Yes, it is. No one should enter into an Independent Contractor agreement without having a consultant represent him so he can get the most benefits possible out of the relationship.
Do these relationships work?
Yes!
Long time?
No! Partnerships don’t work and an Independent Contractor is a pseudo-partnership.
My advice to the start-up doctor, who signs such an agreement, is to immediately start saving money to open your own practice. Odds are you will be out on your own within twenty-four months.
Think about it. Do you want to suffer through the work and expense of opening two different practices within a 24-month period of time? That should be motivation enough to start your new practice from scratch and not as an Independent Contractor.
Dr. Peter G. Fernandez is a world authority on starting a practice. He has thirty years’ experience in starting new practices, has written four books and numerous articles on the subject and has consulted in the opening of over 3,000 new practices and the purchasing of hundreds of practices.
Please contact Dr. Fernandez at 10733 57th Avenue North, Seminole, Florida, 33772; Phone 727-392-0822, 1-800-882-4476 or Fax 727-392-0489, or visit www.drfernandez.com.
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Practice Management
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Written by Eric Kaplan, D.C.,N.D.
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Sunday, 04 March 2007 09:32 |
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To succeed in Life, in Practice you must have purpose. Being a chiropractor is not a purpose, it is a job. Your purpose is your reason for being, doing. Your office should have a written statement of purpose. Everyone needs to be on the same page. An office on purpose is an office that will succeed. The purpose of these written policies and procedures is to provide a foundation for the organized and orderly functioning of the office to insure that each patient receives appropriate and thorough care.
To this end, all of my clients’ clinics’ subscribe to the Guidelines for Chiropractic Quality Assurance and Standards of Practice as detailed in the documents generally accepted by the chiropractic profession. These are readily available from your state association.
Practitioners accept the responsibility of reviewing and familiarizing themselves with the guidelines on an ongoing basis.
Ethical Principles
In my offices, of which I had six, all my staff members had to adhere to the generally accepted ethical standards that relate to interactions with patients, organizations and other practitioners. The standards focus on three main principles:
1. Beneficence: Doctor’s duty to do no harm, to heal, to serve.
2. Justice: Doctor adheres to standards of quality care and practice procedures.
3. Respect for Persons: Patients have the right to know, to privacy and to choice regarding treatment. We now call this HIPPA (Health Insurance Portability and Accountability Act).
To stay on Purpose you must overcome problems. Below is my system.
First, approach the problem with the expectant attitude that there is a logical practical solution just waiting to be found. Be relaxed, calm, confident and clear in your mind.
Second, change your language from negative to positive. Instead of the word "problem," use the word "situation." Problem is a negative word, while situation is a neutral word. "We have an interesting situation," is better than, "We have a problem." To stay on purpose is to stay focused.
The next step in Problem-Solving is to define the situation clearly.
"Exactly what is the situation?"
Then ask, "How would I like to be treated?" Sometimes stating the problem in different words makes it much easier to solve.
Next ask yourself, "What are all the possible causes of this situation?" Failure to identify the causes or reasons for the situation often causes you to have to solve it again and again. In life, like in practice, fix the cause; do not just TREAT THE SYMPTOMS.
A successful office understands the needs and the rights of the patient and respects the patient. This is why we must have Purpose of mind and policies to govern us. Let me share some of mine.
Policies govern your office and help your staff maintain purpose. Policies are the laws of the land, the mechanism that creates sanity in your office. Policies define professionalism. These should be given to each staff member and posted in an area of your office. Like in any game, it is important that your team play by the rules. Vince Lombardi once said, "The essence of the game is to WIN. Fairly, squarely, by the rules, but to WIN"
I want you to win; just do it by the rules of the game we are in: the game of Healthcare. Here are my polices.
General Policies
• Communicable Disease Reporting. Communicable disease reporting will be in accordance with individual state laws.
• Dispensing of Medications. While chiropractors do not dispense medications, some clinics may employ allopaths or osteopaths who may dispense medication and, in these cases, all dispensations will be in accordance with individual state laws and Class 4 addictive drug laws. Many DC/DC clinics do not follow all the rules. Here you must.
• Emergency Transport Policy. In cases of emergency, 911 will be dialed. In areas not serviced by 911 service, each office will develop a relationship with the local emergency service to handle emergencies.
• Independent Contractors. Only those people who can meet the requirements of being an independent contractor will be hired. Licensed massage therapists may or may not qualify for independent contractor status. Speak to your accountant; make sure they pass the government test to be an independent contractor.
• Infection Control Measures. All products used in a clinic must have prior approval, including products for massage therapy, all accepted physiotherapy units, X-rays, nutrition, etc. No clinic office is approved to use products other than those approved.
• Medical Necessity. All clinical decisions will be in accordance with accepted medical necessity underlying the specific symptoms. (Don’t be a sales person!)
• Patient Complaints. All patient complaints are to be directed to the doctor in charge of the clinic. The doctor in charge may elect to hear the complaint personally or designate another staff member to deal with the complaint.
• Practice Patterns. Files in each practice will be regularly evaluated to insure practice patterns are within the accepted guidelines of chiropractic care. The form, entitled "PRACTICE PATTERNS," will be completed periodically on random patient files to determine practice patterns in that individual clinic.
• Protection of People against Equipment, Supplies, Blood, Etc. All clinics will adhere to the universal precautions and the statement of the Center of Disease Control and OSHA regarding safety precautions with equipment, supplies, blood draws, needles, etc. Depending on state law, some clinics will be allowed to draw blood, while other clinics will refer all blood work to an outside agency. (Optional) Do your homework, know all the laws.
• Release of Patient Records. The release of patient records requires the completion of the Patient Request for Records and signed by the patient before records can be released. Records can be released only to those people or organizations approved by the patient.
• Records Retention and Storage. Medical records will be retained and stored in accordance with state and federal laws.
• Referral of Patients. Doctors may refer patients to doctors holding specialty training, if that training is deemed to be in the best interest of the needs of the patient. In no case, may a doctor accept a referral fee, a kickback fee or payment of any kind for referring patients to another doctor.
• Research. Scientific research based on acceptable research methodology is not a specific mission. Research studies will be maintained within the organization to reveal certain information and procedures regarding the effectiveness of patient care.
• Safety Practices. Safety practices will be in accordance with assessments by underwriting insurance companies.
• Scope of Treatment. The scope of chiropractic treatment in clinics will be governed by the scope of the chiropractic law in each individual state.
• Use of Machines in Clinics. The physician(s) in each clinic will determine which personnel use specific equipment and shall be responsible for the education of the personnel and the proper use of the equipment. Handouts explaining each modality should be presented to the patient and explained during the first visit. Know state and federal laws.
• Regional Problems. All regional problems should be brought directly to the regional office in writing.
Now that you have Purpose, Principals and Policies you are on your way to winning.
Sometimes being in practice is like being at war. The concepts of military strategy have been studied and written about for more than 4,000 years, going back to the early works of General Sun-Tzu in China more than 2,000 years BC. These principles of strategy that have been developed and perfected over the centuries have direct applications and implications for strategic thinking, both personally and corporately.
These philosophies will work in your practice. The most important military principle is the Principle of the Objective. This principle requires that you decide, in advance, exactly what it is that you are trying to accomplish. What exactly is your objective? In my experience, fully 80 percent of all problems in personal and corporate life come from a lack of clarity with regard to objectives and goals.
Define your goals while maintaining your principles. The New Year is upon us. Let us go out and conquer our dreams. The starting point of career success is for you to select your Goals carefully and refuse to work with difficult or negative people.
Much of your happiness and job satisfaction depends upon your relationship with your staff and patients. If you don’t get along, make every effort to resolve that situation. If it is a patient—transfer him or her; if an employee—tell them to move on.
Choosing the right goals, the right marketing, and the right people to do it with is laying the foundation for your business success. Happy patients refer; happy staff makes for happy patients; and, thus, they REFER.
Many people ask me how they can make more money at their practices. When they tell me their goals and their visions, the problem is usually clear. Do you have ethics, principles, policies? You need to maintain sanity amidst the chaos of the healthcare system. The leaders of our profession are working in areas of the practice that others felt to be of lesser importance. EVERYTHING IN YOUR OFFICE IS IMPORTANT.
First, identify the positions in your office that are the most important for cash flow and company success: billing, front desk, collections, marketing. Find out the key skills possessed by the most respected and highest paid people in other offices. Don’t underpay your employees or they will work for your competitor who pays more. Pay fairly, squarely by the rules; but let us "win". Let us win with Purpose and Principles and Policies; but let us "win."
Lastly, and most importantly, never quit until you succeed.
Dr. Eric S. Kaplan, is CEO of Multidisciplinary Business Applications, Inc. (MBA), a comprehensive coaching firm with a successful, documented history of creating profitable multidisciplinary practices nationwide. For more information, call 561-626-3004.
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Practice Management
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Written by Brent Detelich, D.C.
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Thursday, 01 February 2007 16:25 |
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There are lots of ways to succeed in a chiropractic practice. As they say, there is “more than one way to skin a cat.” Family practices, high volume practices, wellness practices, sports performance, DC/PT practices—any of them can be highly successful.
But, in all my dealings with hundreds and hundreds of chiropractors, there is one area that must be straight or the practice is doomed to be a stress-filled, difficult practice: having your head on straight.
It never fails. If a doctor is not focused on the right things, performing with purpose and with intention, the practice will struggle. It is a cumulative effect. Without a focus on your purpose and intention, you can find yourself in a downward spiral, catch-22 cycle. But here is the good news: you can break out of it!
You can make the decision—today—to make the changes you need in order to truly pursue and discover how you can really achieve your full potential. (NOTE: This isn’t a “rah, rah” message, like the kind of thing you get at a seminar and then lose your enthusiasm a week later.)
Your full potential is limitless if you get “on purpose.” Take yourself back to what made you want to become a chiropractor in the first place: you wanted to heal people and make a difference. That was your goal. Take yourself back there. If you get re-focused and get back to being “on purpose,” then it’s the start of everything falling into order. Warning signs you are off track
Here are some responses I get from doctors that illustrate that they have fallen off the path. I know they are not on purpose when I hear them say:
“I just need more new patients.” Maybe. And there are definite steps to address that area. But don’t assume that is all you need to address. Getting new patients to walk through your door is only one third of your critical area. If you are messing up one or two of the other areas, no amount of “new patients” will make your practice run smoothly or successful.
“I’ve just got to get more money in the door.” Perhaps. But making that your focus instead of being “on purpose” will prevent the very thing you need (i.e., more money).
“Today’s conditions (insurance, etc.) make it impossible to thrive as a chiropractor these days.” There are new challenges, granted. But there are thousands of chiropractic practices thriving today, operating in the very same conditions you are.
“My location prevents me from succeeding. I don’t have money to advertise. I’m not going to ‘sell’ anyone on anything. I am not a salesman. I have too much debt. No one wants chiropractic care….”
No, no, no, no, and no. Those are all excuses. Each and every one of those trap doors is no real reason for not thriving. If you get “on purpose” and back it up with goals, systems and keep stats, you can laugh at all the above excuses. Start somewhere and go from there.
What are you good at? Anything? I am sure you are proud of an aspect of your practice. Good. Now, focus on that. We are what we think. There is no escaping it. Clear your mind of all stress. You have a purpose. Seek it. Decide you will achieve it.
See those areas that speak most powerfully to your heart. Find the top three things you need to improve; conquer those and then seek the next three things to address. Been there, done that?
If you think you are beyond momentous growth at this point, YOU ARE WRONG. I’ve witnessed doctors who were burnt out for years apply proven techniques and systems and their practices became vibrant. “Stalled” practices can revitalize and become “on purpose,” cash-strong, pre-pay active, high-energy practices. We’ve seen this countless times. Getting started
On to specifics: set goals. Start anywhere. For instance, set a goal to give a sincere compliment to every person who comes through your door. But actually set the goal. Don’t just say, “I’ll do the best I can.”
“Step one, two, three, four.”
You need movement. “Paralysis by analysis” can stunt all advancement. MOVE. If your practice is not where you want it, then you must do something different than you have been doing. Albert Einstein said, “Insanity is doing the same thing over and over again and expecting different results.”
Once you get some momentum going, keep it accelerating. End excuses. I can find chiropractors who had it bad but overcame worse situations than yours to excel—ONCE they got “on purpose” and applied proven systems to their practices. Obstacles are just part of the process
As you build momentum and seek positive changes and expect obstacles. Just welcome them. They will be there. It’s part of the process. If you aren’t bumping into obstacles, you aren’t trying hard enough. Don’t hyper focus on them; just keep moving forward. Enjoy the ride. Obstacles are nothing to stress over. They are just part of the journey. You know how to avoid obstacles? Never get out of bed. Does that sound like a good plan? You will make mistakes. Learn from them. But do not fear them. We are what we think.
Dr. Brent J. Detelich, as a second-generation chiropractor, was raised with the practice and principles of chiropractic. He attended Parker College and graduated at the top of his class. He built his first practice to more than 500 patient visits per week and then opened five additional clinics, totaling 2000 patient visits per week in all.
He has delivered hundreds of seminars and in-office consultations to help chiropractors and their businesses. Dr. Detelich’s purpose is to make chiropractic the nation’s primary healthcare choice. He has dedicated his life to his purpose of making holistic medicine the nation’s number one wellness delivery system and works diligently to forward this goal. Call 800-908-8895 or visit www.quantumleapllc.info or email
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Practice Management
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Written by Dwight C. Whynot, D.C.
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Thursday, 01 February 2007 16:19 |
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Your practice philosophy can influence how you present chiropractic to your patients, regardless of whether you went to a more philosophical chiropractic school or you went to school that did not emphasize the chiropractic philosophy, as much can influence the way in which you manage your chiropractic practice and the way in which you manage the care you provide your patients. In teaching around the country and the world, I have discovered that there are three main types of practice management philosophies and each one has its pros and cons.
The three types of practice management philosophies that I have discovered are: 1) Pain Approach 2) Philosophical Approach and the 3) Functional Approach.
In the pain approach to practice management the patient will be under care for about 6-8 visits. This practice management approach only takes 6-8 visits because this is generally how long it takes for a patient to get out of pain with chiropractic care. Chiropractors can get a patient out of pain relatively quickly; we are very good at doing that—it's keeping them out of pain that’s the harder job. Patients do not have pain without a reason. Pain will be the last thing to show up and the first thing to go away. But, if the underlying cause is not cared for, then the pain will come back. This is what I term the medical model of healthcare.
The goal of the medical profession, for the most part, is to get the patient out of pain and, hopefully, address the cause of the problem from a physiological approach. This is not an effective chiropractic approach, and the patient doesn’t receive the true value of chiropractic care under this approach. A chiropractic practice needs lots of new patients each month under this approach, as well, because the retention—6-8 visits, is very low. Clearly, this is not the most practical approach to deliver chiropractic care from a clinical viewpoint.
In the philosophical approach to chiropractic practice management, the patient receives the true value of chiropractic healthcare, but are we expecting too much from our patients? The chiropractic philosophy of healthcare necessitates a huge paradigm shift to most, because they have been inundated with the medical model of healthcare. It is very difficult to teach a patient what a subluxation is, and how that impacts their health. Even further, it is difficult to demonstrate how the chiropractic lifestyle approach will benefit them, and do so within their first few visits. With this in mind, it is possible to teach a patient over time. This includes what it is to have a chiropractic lifestyle and how this lifestyle fits into the current healthcare model. In order to be successful at this sort of re-education,the office must have a large retention statistic.
The functional approach, on the other hand, is an approach that is able to SHOW the patient how they are doing functionally. In this approach, the patient moves from an “I BELIEVE” that chiropractic works mode of thinking to an “I KNOW” that chiropractic works mode of thinking. Chiropractic is not a religion, but many people believe that it works similar to a religion. This is partly due to the fact that the chiropractic profession doesn’t have a plethora of scientific evidence beyond neck pain, back pain, whiplash and headaches to PROVE what chiropractors tell their patients that chiropractic does beyond those neuromusculoskeletal entities. The functional approach relies on objective functional testing to provide evidence on whether or not the patient is getting better, staying the same, or getting worse. The patients are able to SEE for themselves whether or not they are getting better from a functional standpoint. When we look at Figure A, we can see that, if a patient is functioning normally, he/she should have no pain. If the patient is not functioning normally, then there must be a malfunction and the result of abnormal function or malfunction is pain. This paradigm also indicates that acute malfunction brings intermittent pain. As the acute malfunction persists and becomes chronic, the pain will worsen until it is constant and more severe. It is in this way that patients can become pain-free over the course of care and still have a malfunction. Because the patient still has a malfunction, the pain will inevitably return.
Clearly, the functional approach to chiropractic care makes it more likely to be able to demonstrate and administer the true value of chiropractic healthcare to patients. The functional approach to practice management and treating patients is also able to prove whether or not the patient has subluxations. If chiropractors treat subluxations and this is what separates us from other healthcare professionals, then why are chiropractors not evaluating patients to see if they have subluxations? How can a doctor of chiropractic show patients that they have subluxations? We can answer those questions by simply breaking the subluxation down into its components. (See Table 1)
Table 1 shows the subluxation broken down into its five different components and they are: 1) Kinesiopathology 2) Myopathology 3) Neuropathology 4) Pathophysiology 5) Histopathology
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Table 1: Objective Tests to Evaluate for Subluxation
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Subluxation Component
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Objective Test
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Kinesiopathology
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Computerized ROM Testing
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Myopathology
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Computerized Muscle Testing
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Neuropathology
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NCV, EMG, DSEP
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Pathophysiology
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Radiographs, Computerized ROM Testing
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Histopathology
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Diagnostic Ultrasound
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As chiropractors, if we are evaluating patients for subluxations, then we should be evaluating patients to see if they have some or all of these components. Table 1 also shows the corresponding diagnostic tests to OBJECTIVELY determine whether or not the patient has that component.
Kinesiopathology refers to the abnormal position or abnormal movement of the vertebrae. In order to objectively test to see if the patient has this component, the chiropractor should use computerized ROM testing and radiographs. To objectively evaluate the myopathology component or the abnormal muscle function, the chiropractic physician should utilize computerized muscle testing. Neuropathology refers to abnormal nerve function. To objectively test for abnormal nerve function, the doctor utilizes tests such as nerve conduction velocity (NCV), electromyography (EMG) or dermatomal somatosensory-evoked potentials (DSEP). Pathophysiology is abnormal function of the spine and body and can be evaluated by using radiographs and computerized ROM. Histopathology is the abnormal tissue function and can be evaluated objectively by using diagnostic ultrasound.
By utilizing diagnostic tests to evaluate the patient for subluxations, the doctor of chiropractic is able to gather a baseline of data at the beginning of the care plan, as well as to periodically reevaluate the care plan with all the data collected. This will help assess the progress of the patient and relate that to the care plan. This is the manner in which the patient moves from an “I Believe” that chiropractic works to an “I know” that chiropractic works form of thinking. The patient becomes focused on the functioning normal rather than just getting out of pain. This is the true value of chiropractic care.
Dr. Dwight C. Whynot is in fulltime practice in Johnson City, Tennessee. Dr. Whynot gives license-renewal lectures on Evidence-Based Chiropractic Practices which are promoted by the International Chiropractors Association and sponsored by Myologic and Spinal-logic Diagnostics. For questions regarding evidence-based practice procedures, email questions to
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For 12-hours CCE license renewal lecture dates and places call the ICA at 1-800-423-4690. For more information on Myologic or Spinal-logic, go to www.myologic.com or www.spinallogic.com.
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Practice Management
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Written by Peter Fernandez, D.C.
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Thursday, 01 February 2007 16:09 |
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If you are considering starting your own practice or purchasing an existing practice, ponder these points before you plunge in.
The Advantages of Starting a Practice from Scratch
You work for yourself, set your own rules and office hours, see as many patients as you want, make as much money as you want, practice your own techniques, have a floor plan that’s custom designed for you, equipment you want, and have CA’s that are loyal to you. The Disadvantages of Starting a Practice from Scratch
Time management is difficult. You never seem to have enough time to see patients, promote your practice and be with your family. You are tied to your practice, because when you’re not in the office, your income stops, but your overhead doesn’t. This makes it difficult to take vacations, educational seminars, etc., and you spend extra hours doing record keeping and administrative duties.
While there is a tremendous amount of joy being your own boss, it will cost you a lot more than you think. Depending on the economic area you choose, starting a new practice can cost anywhere from $40,000-$70,000 (this includes living expenses until you open, remodeling the office, first and last payments on everything, utility down payments, and enough money to pay for six months practice and personal overhead, etc.).
Expect a minimum office overhead of $5,725 per month. (Breakdown averages are: $1,000 rent, $1,000 staff salary [good luck if you can get someone to work this cheap], $75 taxes, $200 telephone, $250 utilities, $200 insurance, $100 accountant, $300 supplies, $1,000 practice start-up loan repayment, $1,000 equipment lease payment, and $600 for student loan repayment). Then add to this, a minimum of $2,500 per month for personal living expenses.
You can reduce this monthly overhead if your office doesn’t need to be remodeled or built out (a very rare occurrence) and can start your practice without an X-ray machine or physical therapy equipment. Buying a Practice
An often-heard chiropractic myth states it’s better to buy a practice than to start one. By doing so, you reduce your financial risk and achieve your goals quicker. The fact is it’s far riskier to buy a practice than it is to start one.
However, under certain circumstances, buying a practice may be a good idea. Today, most practices are experiencing an income decline, while their overheads are increasing; therefore, the net profits of these practices are significantly reduced or totally eliminated. Rule of Thumb: Don’t buy a practice that is declining!
How do you know if a practice is a good buy?
Inexperienced buyers are at the mercy of the seller or the seller’s representative. My advice to the reader is to hire your own buyer’s representative or an experienced consultant to represent you. I wrote the book on How To Buy And Sell A Practice, and I’ve guided hundreds of clients in their purchasing of good practices. An experienced buyer’s representative will not only help you determine if a practice should be purchased or not, he could also save you many thousands of dollars.
The advantages of buying a good practice are you have an instant practice, with instant income, and a trained staff.
The usual disadvantages of buying any practice are you inherit undesirable financial deals made by the previous doctor, CA’s that are loyal to another doctor, equipment you don’t want, patients who don’t want you, and adjusting techniques you don’t care to practice. Why is the Practice for Sale?
Acceptable reasons for selling a practice are: the departing doctor is leaving for specialty training, or is retiring after a successful career.
Poor reasons for a practice sale are: low or decreasing volume, high overhead, low or no net, or the bad reputation of the doctor. If any of these situations exists, don’t buy the practice. What Type of Practice Are You Considering Buying?
Personal Injury (PI) Practice: A PI practice is strongly built on the loyalty developed between the departing doctor and certain attorneys. Loyalty is not a transferable asset. Because the previous doctor has developed attorney loyalty, doesn’t mean you will be able to do the same.
An HMO/Managed Care Practice: HMO and Managed Care contracts are not passed from one doctor to another when a practice is bought or sold. There are no assurances that those carriers for which the previous doctor was credentialed—will accept you. You also need to consider that most HMO’s require you to have been in practice at least three years before they’ll contract with you.
A Nutrition Practice: If you’re not as equally well versed in nutrition as the departing doctor, the patients will not stay. Practice Purchasing Rules
All office records, including new patient volume, regular patient volume, collections, and services, must be made available to you. The selling doctor must also provide you with the income tax returns and profit and loss statements (P&L’s) for the prior two years. If these items are not readily made available to you—don’t buy this practice.
When computing the goodwill (blue sky) of a practice, only use the collections, services, new patients, patient visits, net profit and overhead figures produced in the three months prior to the closing date. To compute the purchase price based on a year’s performance, multiply the total of the three months’ figures prior to the closing date by four. Ignore the prior year’s income and future potential, as you’re buying what is, not what was or might be.
Patient backlog is the essential element in determining the “goodwill (blue sky)” figure of a practice sale. A practice less than five years old doesn’t have a sufficient patient backlog; therefore, it has no or little goodwill.
Check all insurance procedures. Make sure they are non-questionable and ethical. Make sure the departing doctor is charging only for those services rendered.
You must use chiropractic techniques that are compatible with the previous doctor’s techniques; otherwise the departing doctor’s patients will depart with him.
To accommodate a smooth and effective patient turnover, the departing doctor must agree to stay with you for ninety days.
Will the departing doctor’s CA’s stay with you and, if so, will they understand, respect and support you as their new boss? If they don’t, they will hinder your practice turnover efforts and jeopardize future growth. When buying a practice:
Only buy a growing practice, and only if you can get an excellent deal.
Never buy a practice with declining income, patient visits, etc.
If you find an honest, high net profit practice at a good price, buy it. In this case, you’ll make net profit your first month in practice.
Caution: My research as a consultant reveals that 98.7 percent of practices purchased do not grow. Don’t let this happen to you. Ask your consultant to help you eliminate this practice- building barrier.
by Peter Fernandez, D.C.
Dr. Peter G. Fernandez is the world’s authority on starting a practice. He has thirty years’ experience in starting new practices, has written four books and numerous articles on the subject and has consulted in the opening of over 3,000 new practices and the purchasing of hundreds of practices.
Please contact Dr. Fernandez at 10733 57th Avenue North, Seminole, Florida, 33772; Phone 727-392-0822, 1-800-882-4476 or Fax 727-392-0489, or visit www.drfernandez.com.
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