The old real estate adage “location, location, location” should be well heeded by the plastic surgeon embarking on a new career, because it applies to both the physical address of the practice as well as to the greater metropolitan or suburban landscape that surrounds that site. The first task is selection of a city or town that can support the practice of a new plastic surgeon. Research should endeavor to determine two key factors: the characteristics of the population and the present market penetration. No substantive documentation exists to answer the question of how large a population is required to support the practice of a plastic surgeon who is interested in building an aesthetic practice, but an estimate falls in the order of 200,000 to 250,000. Other features of the population that should carry weight are the relative age of the population, affluence, and local acceptance of cosmetic surgery. The age of the population serves as a more important factor for a plastic surgeon who endeavors to only practice facial cosmetic surgery, because a large part of the practice often may be dedicated to rejuvenative procedures for the more mature individual (unless the practice is geared more toward rhinoplasty, which has a broader age appeal). Likewise, if the facial plastic surgeon pursues reconstructive aspects of the face (excluding trauma) for both skin and soft-tissue tumors of the head-and-neck region, then an older patient profile is more likely to receive these services. The plastic surgeon who performs body surgery may have a younger patient base, particularly because of the demand for augmentation mammoplasty that is currently in vogue. The existing market penetration of plastic surgeons may be more difficult to assess. Often the number of plastic surgeons in an area may not be the single most important factor to dissuade a prospective surgeon from entering that market. If the surgeon should elect to perform facial surgery alone, then he or she should ascertain how many other plastic surgeons in the area have really dedicated themselves to promotion of facial cosmetic surgery. In addition, a well-established group of plastic surgeons with a sizable, collective budget may pose a more tangible threat to the junior plastic surgeon, who may be restricted in financial and marketing options.

After the city has been selected, the surgeon must decide on the particular part of town that will best suit his or her new practice. The location of the office need not be in the most upscale area, in which real estate prices may come at an unreachable premium; instead, a compromise should be struck between an expensive site and a more affordable location so that some finances can be reserved to outfit a capacious and well-decorated interior space. If a partnership is arranged with a sponsoring hospital or physician group, the office location may be partially or wholly dictated by that organization. They may require rental of office space within their building as part of the financial arrangement. Selecting an office location nearby the surgical suite affords an easier commute between the two locales when shuttling between office visits and operative cases. Although the office need not be in a high traffic area, visibility from passing commuters provides increased recognition and recall of the practice as well as the surgeon’s name. Another key feature of a good office location is accessibility: a convenient location (short travel time), easy parking, and a relatively straightforward path from the outside lot to the interior office space. Any of these physical encumbrances could unfavorably detract from return patient visits or future physician referrals.

As part of a location search, the new surgeon should seek local health care institutions regarding their willingness to aid in the acquisition of capital. Specifically, marketing or medical directors may be in a position to assist in the capital outlay for a new office with the understanding that the new physician will generate revenue for that institution through operative cases and hospital admissions. Open dialog with a hospital director about his or her interest in this type of reciprocity also may reveal insight into the need for a plastic surgeon in that area, and thereby guide the decision about a suitable practice location. Having another institution carry some of the financial burden of initial setup costs distributes part of the substantial risk to which a starting physician is subjected. In general, financial institutions as sources of capital should be avoided if possible. Bank loans require personal guarantees and immediate monthly repayment, which can add to an already negative cash flow. Even if immediate payments are not required, interest begins to accrue, being capitalized, and thereby adds to the principle balance of the loan as well as the overall debt and eventual cash outflow.

The federal government outlines very specific rules and regulations regarding the appropriate relationship between hospitals, communities, or health care delivery organizations and physicians. These rules prohibit the use of certain types of loans, income guarantees, and other financial incentive agreements between the institution and physician unless certain criteria are met; these usually are related to an underserved population by a particular specialty. Contracts can be written to fulfill these criteria, and hospitals should be familiar with what is deemed acceptable. As mentioned, hospitals or similar health care institutions enter into an arrangement with a physician only if that physician’s presence will serve the financial interest of that institution. Therefore, special favors are not to be expected: Only a mutual financial benefit for the institution and physician alike determines the likelihood that a workable contract can be attained. The physician should be ready to draft a business plan that projects the budgeted income and expenses for anywhere from a 3- to 12-month period. Accordingly, the physician should approach the institution with the amount of financial assistance he or she requires. The projected figure is often a challenging proposition, because it depends on the estimated payer mix of Medicaid, Medicare, private insurance, and cosmetic fee-for-service. The starting surgeon should expect that the majority of his or her practice will be derived from insurance-based income until a cosmetic referral basis arises. Insurance referral patterns can also be quite entrenched and established ties, difficult to break. Three to six months of operating capital is required before any significant receivables begin to be collected, and this time allotment needs to be built into the budget. Even if income generated from insurance payments begin to accrue from the first day of practice, a delay of 3 to 4 months should be expected from the time of billing to actual receipt of payment.

Once a potential source of capital has been identified—preferably a hospital or physician group rather than a financial institution—the newly established physician should try to rely on that institution’s accounting services. Hiring an accountant may be an expensive option; also, that individual may not have the extensive medical experience of his or her counterpart in the hospital’s employ. Besides a detailed pro forma that estimates the long-term income and expenses, the physician and institution should arrange a method of repayment, including an interest-free loan period (18 months is a reasonable time frame), graduated repayment, and periods of free rent. These concessions should be recouped easily by the interest that the institutions are levying as well as the income that the new physician will generate in terms of hospital admissions and operative cases.

The tendency to acquire too little space is a common mistake but must be balanced against the cost of the space. In most communities, around 2,500 sq ft is sufficient as long as that space is properly allocated. In general, storage and closet space usually are underestimated and should be accounted for when proportioning space. The physician’s private office should not assume an unreasonable size because it is a non-revenue-generating room. Instead, office space should be outfitted to impress the patient who is seeking services for the first time: Space and resources should be allocated primarily to the reception area and consultation rooms. Generally speaking, the office requires a reception
area, a front desk, consultation rooms, examination rooms, physician-and-nursing charting areas, and a procedure room. A discrete rear entrance should be designed to permit inconspicuous entry and exits for the physician and staff as well as for bandaged and swollen postoperative patients, who may alarm prospective patients and deserve added privacy. The entrance should be designed to fit a standard-size stretcher if an emergency should arise. Two-to-three examination rooms should be adequate in number, and each room should measure approximately 8 10 feet as a guideline. A medical (or dental) chair should be situated in each room with the capacity for electrically controlled elevation but without an external light source, automated recline, or other advanced features that can add to the cost unnecessarily. An attractive cost-saving option is the use of a vinyl-covered recliner for one postoperative examination room rather than a formal medical-grade chair. Frugality in all aspects of office design is imperative for the starting physician but should be tempered with judicious taste to maintain the proper image befitting a plastic surgical practice. “Perception is reality” should be the modus operandi. A patient often judges the potential quality of surgical services based on the overall appearance of the office suite.

Each examination room should be equipped with ample cabinet space to house all necessary patient care items. The physician and staff can then manage all postoperative care without having to leave the room. A countertop with a sink should be installed in each examination room and ideally should accommodate a hidden trash receptacle that can be concealed from view and minimize use of valuable floor space. One examination room can be designed slightly larger, at 10 12 feet, to permit a photography lane, thereby eliminating a dedicated photography room when space is at a premium. A minimum of one consultation room that is styled with decorum adds considerably to the ambiance and should provide a nonmedical, intimate feel. Accordingly, the size requirement for this room can be less than a standard examination room: approximately 8 8 feet or 8 10 feet generally is sufficient to foster a more personal but still maneuverable environment.

A larger procedure room measuring a minimum of 14 18 feet is a necessity. Many procedures can be undertaken in an office setting with local anesthesia, intravenous medication, or conscious sedation at a substantial cost savings to the practice and patient. The limits of office surgery are determined by the willingness of the surgeon to perform the procedure and the patient to tolerate it. Keep the patient’s comfort ultimately in mind, because most referrals are derived from prior patients who have been satisfied with both the surgical result and the treatment they received before and after surgery. The procedure room should be fitted with an adjustable chair, overhead operative lighting, and a countertop and cabinet storage space for all necessary equipment, including a small autoclave. At this time, office-based surgery does not require any accreditation by a governing agency, but future legal restrictions on office surgery are an imminent prospect. Several legitimate agencies offer accreditation, including the Joint Commission on Accreditation of Healthcare Organizations (JCAHO) and the Accreditation Association for Ambulatory Health Care (AAAHC)^*. Medicare approval for the surgical facility is both cost prohibitive and unnecessary unless the surgeon desires to obtain a facility fee for operative cases and is often only profitable if the individual is considering running a multisurgeon, dedicated, outpatient surgical facility. The surgeon is advised to consider the benefits of accreditation (e.g., prestige, safety, and future compliance) and at least review the guidelines so that basic compliance can be assured to avoid expensive retrofitting if accreditation is sought at a later date.

When leasing office space, the cost often includes only the amount for basic “fit-up” or “white-box finish out.” Therefore, the physician has to expend an additional amount to complete the interior space to his or her desired specifications. Because all of these leasehold improvements are fixed entities (ceiling-mounted lighting, window blinds, carpeting, etc.), it is imperative that the contract outlines whether the added value that the physician inputs ultimately belongs to the building owner or tenant. In addition to these fixed properties, capital should be outlaid for movable furniture and equipment. Often additional costs for leasehold improvements can be included in the lease, for example, by increasing the payment from $18/sq ft to $22/sq ft. This arrangement avoids payment for additional improvements at the outset. Most contracts request a 5-year lease. When negotiating this contract, one should consider the option for an additional 5- to 10-year term following execution of the original lease. Often, the cost for this additional time may be less than the original if cost of leasehold improvements were already included. However, if they were not, then costs may be higher depending on the market value of the property. The option does not bind the lessee to remain in the space after the expiration of the original lease period but gives him or her the first right of refusal. If the option to extend cannot be arranged with the original lease, then the physician should proceed with lease renewal at least 1 year in advance to allow sufficient time to relocate if the new terms are deemed unfavorable.

Physicians often place an undue emphasis on the importance of the office manager in the success of a fledgling practice. The physician may function effectively as the manager until this duty encroaches on his or her time and effort. The first employee for hire should be an individual who is flexible
in his or her capacity in that he or she is willing to play many roles, including answering phones, removing sutures, and disposing of waste. That individual should express sincere interest in the success of the practice and be motivated to support its growth rather than assume merely a mechanical role of carrying out assigned responsibilities. Incidentally, the physician also must be willing to assist in even the most menial tasks, because a full complement of office personnel may be lacking at first. Operating-room technicians are an excellent source of potential hires. The specifics of how to find and retain employees is discussed in a later section.

The second person to hire is a front-desk receptionist: This staff member should be present only on a part-time basis when the physician or assistant is occupied with other affairs, for example, during an operative case or with a busy office visit schedule. Part-time assistance eliminates the need to offer health benefits, vacation time, and so on. Nevertheless, the quality of every staff member cannot be overemphasized. The individual who answers the phone may have the most significant impact on whether a patient ultimately decides to book a consultation visit based on that staff member’s knowledge, attitude, and salesmanship. Training the staff is a fundamental responsibility of the principal physician if success is to be achieved. Personnel who have been accustomed to working in a non-elective care environment may not be service-oriented and should be reeducated on the value of patient rapport (e.g., answering phone calls promptly, not permitting long hold times, etc.). Ideally, the physician should instruct by example and serve as the model of proper etiquette with patients. With regard to employee salaries and benefits, the county medical society is an excellent resource for this information and the new physician is encouraged to become a member. The local medical society is able to provide details about normative values for salaries, expected benefits, and allotted vacation time. Additionally, often employee health insurance can be obtained for a reasonable rate through the county or state medical society.

The options for legal organization of a practice vary from state to state. A business attorney should be consulted to learn about the rules in a particular area. Additionally, the state medical society is a valuable resource. In general, the types of business organizations include sole proprietorship, partnerships, and corporations. The advantage of a corporation is that it offers some protection for the shareholders; that is, the physician, from personal general liability. Unfortunately, it does not shield one from financial liability because any source of capital requires the physician’s personal guarantee. However, it protects the physician from personal financial crisis if an unforeseen catastrophe should occur in which the physician has not played a direct role in the adverse event; for example, if a patient elects to commit suicide on the premises by leaping out of a window. If one is a sole practitioner, it may be unnecessary to form a more elaborate business organization than simple registration with the county. However, if one takes a partner into the practice, then a formal partnership or limited liability corporation may help establish guidelines for this arrangement. Again, consultation with an attorney can ensure that the correct avenue is pursued. Alternatively, an accountant can offer valuable advice and provide a different perspective than an attorney.

If a physician is targeting his or her practice toward cosmetic surgery, then most of the surgical procedures may be performed in an ambulatory surgical facility. Developing an office with a self-contained fully accredited surgical facility is a lofty but attainable goal. However, initially this ambition may prove to be a taxing emotional and financial liability. This objective is better set aside as a long-term goal after a busy practice has been established. Many procedures can be performed in the office setting at a reduced cost to the practice and patient. Smaller procedures (e.g., eyelid surgery) can be undertaken without an exorbitant setup cost; however, lengthier procedures (e.g., facelift and browlift) mandate a higher expense to outfit the office properly for safety and sedation. Accordingly, shorter procedures can be undertaken in the office setting, and longer surgeries may be reserved for an ambulatory surgery center until it becomes financially affordable to build one’s own facility. However, facility fees extracted from an ambulatory surgery center can prove to constitute a significant portion of the total cost to the patient and thereby motivate a physician to construct his or her own surgical facility when the volume of cases justifies this action.

Hospital privileges should be obtained for multiple facilities and surgery performed in those facilities for reasons that are explained in the following. Albeit not currently legally mandated, laws eventually may require a physician to maintain hospital privileges for procedures in order to be authorized to perform those procedures in an office-based setting. Once hospital privileges have been acquired in one facility, gaining privileges elsewhere is facilitated. Occasionally, a patient may require an overnight hospital stay, and maintaining privileges at a nearby facility with an overnight capacity is vital. A comorbid patient may be better serviced regarding anesthesia in a hospital setting, where emergency care is readily available. Also, patients may request that surgery be performed in a certain facility for personal preference.

Once hospital privileges are secured, the physician should approach the emergency room, which can serve as a valuable base for patient referrals, to offer his or her services for any trauma that might enter. Assuming trauma call at
the hospital can be an important way to build a practice. Each laceration that is repaired may provide several patients for referral. Name recognition stands as the most important reason to acquire privileges at multiple facilities and frequent those facilities on a regular basis. Being on the operating-room schedule, the surgeon can be afforded one opportunity to disseminate his or her name to the medical community. Proper attire and behavior should always be observed in the hospital setting, as the medical staff can serve as an invaluable referral basis.

The decision whether to purchase or lease office equipment must be based on the particular article and the budgetary constraints of the practice. An accountant can offer sound advice as to which avenue is most suited to a physician’s needs. Different accounting rules apply to leasing expense versus depreciation expense and vary based on the anticipated life of the equipment. Therefore, not only does the initial cost of the equipment and its potential revenue play into the decision but also how the accounting will affect the bottom line of the income statement and taxable income. A general rule of thumb to consider is that any piece of durable equipment with a serviceable life greater than 5 years should be purchased, whereas equipment with a shorter life span should be leased. Of course this rule is not universally applicable, and other factors should be taken into consideration.

Some specific items will be discussed to clarify the preceding recommendations. Desktop computer hardware and software should be purchased. Although the computer industry continues to evolve rapidly, computers have become very reasonably priced and usually survive in excess of 5 years with proper maintenance and software upgrades. In addition, some manufacturers offer hardware upgrade options to keep a computer system current. Lasers for the practice are very expensive acquisitions and need to be justified before purchase. A laser device is never as productive per unit time financially as a scalpel in a surgeon’s hand, unless the staff has been trained to operate the laser. However, this latter option may expose a surgeon to excessive liability, especially if the staff is inexperienced with laser use. Therefore, do not consider a laser as a substitute for surgery. If a laser is purchased, it is advisable to calculate the number of procedures that need to be performed to pay it off, preferably within 2 to 3 years. If this goal cannot be accomplished, then the transaction is a questionable profit-making endeavor. Laser technology is rapidly evolving; therefore, one should beware of the life span of a particular laser and its projected future utility. Additionally, many lasers require frequent maintenance that can add considerably to their cost and that should be budgeted. It takes a creative surgeon to make a laser profitable; a portion of the practice needs to be structured and marketed to support its use. Regarding software purchases, combined software for office management, including scheduling, billing, accounting, marketing analysis, and so on is very expensive and is not required initially, if ever. Billing is discussed later, but other cash outlays are more important at the outset. For example, imaging software is a recommended early purchase. Patients often need to be convinced that a particular surgical endeavor is a worthwhile venture, and digital morphing software affords the surgeon a more precise method of communication.^** As the practice develops, preoperative and postoperative images of former patients become available to inform prospective patients of envisioned surgical results, but initially this option may not be available.

A trip to the local bookstore to inquire about resources for managing a business will yield scores of results but only few that are fruitful or cogent. Every decade new ideas and concepts emerge describing the recent trends for successful management strategies. Although the practice of tyrannical management has thankfully passed, the latest quick-fix methodologies may not offer the best solution to effective managerial supervision. In fact, the dynamics of a medical practice differ markedly from the typical business or corporate model. In very few business settings is the Chief Executive Officer or President of the Board the sole revenue generator, as the physician is in a medical practice. Although an omnipotent mantle may be easily assumed, the physician should exhibit restraint in this regard because of the devastating consequences on employee morale and motivation. It has been wisely stated that one joins a company but leaves a manager. At the helm of the ship, the physician must exercise judicious leadership skills to help shape the work of his or her employees through example and instructive remarks. The hallmark of good leadership is “emotional intelligence,” in which the captain senses the emotional disposition of the team at a given moment and responds to that situation accordingly. Some concrete examples of this leadership skill are elaborated to illustrate this concept more fully.

In an ideal practice, the surgeon should be busy operating on surgical cases with delegation of other duties to his or her staff. Because operative cases are the prime source of income, all staff efforts should be channeled to this ultimate goal. Proper physician-staff rapport facilitates the attainment of this objective, and the following recommendations can help ensure that a physician achieves this aim. It is imperative that the physician treats his or her staff in a manner that encourages them to desire excellence and to contribute in a material way to the practice rather than mechanically
biding their time as hourly employees. An employee must share in the excitement for growth potential and be rewarded accordingly. Financial incentives may be the most direct method to stimulate employee motivation, but the caliber of the staff should be such that they seek opportunities to build the practice through desire derived from within rather than from a quid pro quo monetary exchange. One can inspire another person to excel, but rarely can one motivate another to act. If someone is work adverse, then no amount of training will change that inert character. Choosing the right person (then treating that person well) may be the most fundamental aspect to success.