Must read tax planning advice

http://www.wickenslaw.com/Format_2005/Dental_Practice/Dental_%20Law.htm

It's geared towards dentists but this is a definite MUST read!!

How to credential with insurances.. the easy way.

CAQH is a consortium of health associations that aim to streamline the credentialing process. Here's how it works. Providers (you) fill out one application online, and submit them to as many insurance panels as needed.

The tricky part? You have to first be given a CAQH ID, by an insurance company. I chose Humana, and was able to get a CAQH ID in 2 days. Look around, I believe Blue Cross also provides these ID's in a short amount of time. Once you've recieved a CAQH ID, you'll be able to log on and fill out everything about yourself, where you practice, etc.

You'll have to fax all of your supporting documents (DEA, Malpractice, etc) for them to review it. Presto! You're done.

Filling out Medicare's application

If anyone has done this in the past, you already know how tedious this process is. I'll try to simplify the process and go through each section that you need to fill.

Firstly, if you are a sole owner of a company (PLLC, LLC, PA, PC) then you will only need to fill out the 855R form.

Section 1A: Check the box that says you are a new enrollee in Medicare.
Section 1B: Check the box that says identifying information, and practice location
Section 2A: Fairly simple, fill out your personal information.
Section 2B: I used my home mailing address for correspondence. You can use your practice address also.
Section 2D: I selected Optometrist. Write Primary beside it.
Section 4A: Use the business name and its Type 2 (Group NPI). Where it says Medicare ID number, write pending.
Section 4B: Write the business name, pending where it says Medicare ID number, and use the Type 2 (Group NPI).
Section 4C: Fairly simple here. In the NPI box, use your Type 1 (Individual NPI). Write pending where it says Medicare ID number.
Section 4E: If you want your payments sent to your house, or your practice select the appropriate check box.
Section 4F: Not necessary
Section 8: If you are not using a billing agency (likely NOT, if you are a startup). Check the box that says it does not apply.
Section 15: SIGN and done!

VOILA!!

Ordering office and clinic supplies

Over the past few months, I've created list of where to buy RX pads, light bulbs, cautery kits, sundry jars, recall cards, etc.

1. OOGP
2. Wilson Ophthalmic/Hilco
3. Moore Medical
4. Medical Arts Press
5. Bernell
6. E-Sharper.com
7. Sigma Pharmaceuticals
8. Brown & Bigelow (corporate identity)
9. Amcon Labs 
10. Eye Supply USA
    

Feel free to suggest more.

Updating DEA number

https://www.deadiversion.usdoj.gov/webforms/jsp/regapps/common/updateLogin.jsp

If you've changed locations there are several other things that you must do to stay current. Change your DEA number, and update your address with your State's controlled substances department.

Practice incorporated!

Today, I officially incorporated our practice online. Each state has their own procedure on how to form a company. Cost $300. When a company is formed, you get what's called a Certificate of Formation. Hang onto this, because it serves as a "birth certificate" of your company.

I advise all optometrists (and other professionals) to form a PLLC. My corporate name is "[Last Name] Family Eye Care, PLLC." I will likely take the S-corp election when I file my taxes. BUT, remember to consult your CPA and attorney regarding tax implications and record keeping rules. In some cases it is advantageous to start off as a sole proprietor, but a pain-in-the-ass to switch to a corporation down the road when you are established. I don't want to go into explicit detail of piercing the corporate veil, etc.. but Google should also help.

This is a good primer on the differences between companies: http://www.themoneyalert.com/Corp-Entity-Table.html

Next, I am applying for an EIN. Think of this as a social security number for your business. It's how the IRS keeps track of you. Luckily, you can apply for this online:
http://www.irs.gov/businesses/small/article/0,,id=102767,00.html

Once you've got the above two steps complete, you're good to go! Congratulations, you have completed the first step to the American dream... you own your own business.

Medicare numbers

I am currently registered with Medicare as a provider, however, since leaving the last practice.. there are rules with how this transfers. Call Provider Enrollment to verify.

You get what's called a PTAN number (individual, and group) anytime you are employed at a practice. These numbers are no longer valid when you: start a different job, start your own office, etc... think of them as one time use numbers that never carry over.

Applying the second time around is easier, according to Medicare, since you're already in their system. What form to use depends on your situation:

• If you are going to be employed again, you just need to fill out Form 855R
• If you are going to start your own practice (where you are 100% owner), fill out form 855I
• If you are starting your own practice with a partner (50, 50 owners), fill out form 855B. Make sure to also apply for a Group NPI number

Since I'll be doing both. Working and starting my own practice I will have to fill out form 855R and 855B with my wife.

Blessing in disguise

It seems like every time I post, there's a new development. This one is big:

My boss terminated my employment contract (to be quite frank.. she was a terrible boss, and not a nice person; perhaps you gleaned that from previous posts) last week, I don't want to get into details, oh well. Luckily we have something to fall back on!!

At this point, we are amidst a relocation (200 miles away). We'll now be living within 25 minutes from our practice. HELL YEAH!!

I did receive another $5000.00 rent check from my tenants for the month of October. I also called up my contractor now that things have been kicked into high gear, and was told I could have my practice ready in 90 days. Tick-tock!

Hardware costs

Little did I know, or figure into expenses that hardware would become expensive, some of these items are overkill and not necessary for a startup:

1. TalkSwitch Phone System. This is a biggie!! If your patient calls, and say line 1 is busy.. it will roll over to line 2, etc. A phone system does this for you automatically. When you call your cable company for your startup, ask for 3 dialtones (one fax, two phone lines).
   
2. HP LaserJet P2035N printer (my favorite is the Xerox Phaser 3300 MFP, too expensive for a startup)
   
3. ScanShell 800N card scanner
4. Acroprint timeQplus V2 biometric. Employee time clock, overkill at the start.. you can do manual payroll instead.
5. If you are in optometry school, or working for someone else at this stage... I urge you to learn basic bookkeeping/accounting, and familiarize yourself with Quickbooks.

Updates

We met with our contractor on Friday to start the architectural plans, and throw in our ideas. Everything from the paint color, stone and tile down to the last electrical socket. We had to tell them exactly what we wanted. Once the new drawings come in, I'll post them. Our projected buildout for 2700 sq.ft. will be an astounding $97,000.

I received September's $5000.00 check for rent today.

I also negotiated a deal 2 weeks ago by searching in the local optometric newsletter for used equipment. I have purchased a used Topcon KR-8800 autorefractor, Marco 101 manual lensometer, Topcon AIT-350W equipment table, and Brewer stool for $6600. The doctor appeared to be 'closing out' her practice and the equipment was all new and purchased in 2006. I figure it's all worth roughly $15,000 new. I'll be picking it up within the next month and leave it in climate-controlled storage until July when we're ready for it.

In the meantime, here is a basic optical glossary for those looking to have an edging lab. I should've paid more attention in optics lab, but simply put, your optical is a money maker if you know what you're doing. Having a great optician will make or break that 'department' and I will post as much as I know. It's 11:42, I should crash now..

• Semi-Finished: doesn't have power ground in yet. No good to you if all you are using is an edger!!
  
• Stock Finished: a manufacturer has created a ready-made lens with the power in it (good to go in an edger)
  
• Finished Uncut: a full service lab has surfaced lens with power in it, can customize it
  
• Finished: edged and put into frame

Optical supplies

I'm trying to keep a running tally of how much everything will cost in each 'department' of the practice. Here is my current list for what the optical will need:

1. Pupilometer
2. Job Trays
3. Hot Air Frame Warmer
4. Tool Rack
5. Quick Fix Pro/Smart System Pro (nosepads, screws, etc) for repairs
   
6. Optical Tags (from ArchCrown) to label frame prices
7. PAL Identifier
   
8. ErgoPro plier kit
   

This is far from comprehensive, so I'll keep adding to it.

Accountants

Well I promised a while ago that I would post my accountants fees. Here they are for you to dissect:

Individual Tax Return - $225-375
LLC Return - $350-425
Sales Tax - $50/quarter
Quickbooks Initial Setup - $300 estimated
Quickbooks Support - $50/hour. Mid year trip and year end trip for 2-3 hours, each.

So, I can estimate to spend about $800-1200 yearly on accounting.

Vendors

Perhaps the most important aspect of your office, is what you'll be equipping it with. This is what enables you to see patients. Rightly so, we have decided to invest in high quality equipment and start with one lane.

If I can find these pieces used (or their equivalents).. then I'll get that instead of purchasing new. Grand Total: $97,000

1. Exam Lane: Marco Deluxe Stand, Marco 1280 Encore Exam Chair, Marco G2 Slit Lamp ($10,500)
2. Acuity Panel: 20" iMac ($2900)
3. Autorefractor: Topcon KR-8900 ($10,500)
4. NCT: Reichert AT550. I may decide not to get one, and stick with just GAT. ($2,500 used)
5. Lensmeter: Topcon CL-200 (still considering a manual lensmeter). ($3,000)
6. Retinal Camera: Canon CR-1 ($23,000)
7. Visual Field: Humphrey 750 or Octopus 3 series ($14,000)
8. Edger: National Optronics 7E Edger & tracer. If we decide to purchase one, it will be new. All the older OD's have cautioned me on purchasing a used model. This is a risky tactical move; however, my competition does not offer same day service, and second I also want to keep my cost of goods low, although for a startup you wont be busy enough for this to matter much. ($27,500)
9. EMR: OfficeMate ($2,200) They are running a deferred license fee promotion.
10. Anterior Segment Camera: Canon Point/Shoot camera + adapter + EyeFi card ($900)

Vendor Choices:

1. VSI a good source for used equipment
   
2. Lombart
   
3. Cal Coast
4. Universal Ophthalmic
   
5. There are more, so I will continue to add to the list
   

Blueprints

As promised, here is a rough sketch of our remodeled interior. We had to work within the confines of the existing structure. If you are looking for design ideas, contractors, or planners:

Eyedesigns Ask for Dave Pursel. They have great frame boards. They will design your floorplan and also sell optical cabinetry/furniture. Admittedly, expensive. Somewhere in the neighborhood of $60 square foot.
Magic Designs Speak with Cy Furman!
Fashion Optical Good ideas
Barbara Wright She is a planner/designer. I highly recommend her book, which I managed to read and take notes on while in OD school.

In the end, we ended up going with a local general contractor. We met him during a tradeshow (our annual state optometric convention) and had seen the work/projects he had done for several OD's we knew.

Look at SeeMyPractice for pictures of other doctors offices.

To do list

I've decided to create a basic laundry list of what we'll need to do over the next 11 months to get this show on the road, I'll add more as I go along:

1. Decide which equipment to purchase and vendors to use
   
2. Develop a marketing plan, so we can get in the black fast!!
   
3. Decide which frames to use in the optical. We are targeting roughly 600 frames
   
4. Create office forms

If you're reading this blog and wondering where you can "borrow" money from to start your practice. We asked for $330,000 and got it (remember: it never hurts to ask for more money. We likely wont use all of it and are trying to stay lean with our startup). Here are some options:

• http://www.matsco.com (0% down, based off your credit, and will usually need 2 years of experience). Read the fine print for a pre-payment penalty.
  
• A local bank. I went into a local bank and asked to speak to the Vice President of Commercial lending.. I introduced myself, had a business plan and tried to win him over. He was all for it! This is the way I went.
  
• A good introductory article
  

Oh, stay tuned for photos of the building and blueprints that we sent to the contractor!

WE OWN IT!!!

Woohoo!! I drove up July 15, 2009 to the title company's office and officially closed on our first building!! What a tremendous adrenaline rush it was. Seeing as how it was my first deal, I would say everything went pretty smoothly. The truism in commercial real estate is that you make your money when you buy the property for as cheap as possible & also at the closing table.

Deal Highlights:

• Total purchase price: $290,007.50 on our HUD settlement statement. $286,000 was the building price + $4007.50 for settlement charges. An HUD statement is a formal document which shows where money changes hands. I also received the appraisal report back from the bank shortly a week after the purchase, which valued the property at $295,000. Which means, I have built in equity right off the bat.
• Amount I was responsible for: $50,076.69
• Capitalization Rate: 8.03%
• Cash on Cash Return: 15.3%
  

I also made my first payment to the bank today ($1367 is the monthly note/payment, for the next 30 years). I also received my first rent check from our tenant that occupies the building for $5000.00.. they are set to leave at the end of October. So this rental income is an added bonus. The building however, will be vacant until our finish-out starts in March 2010.

Which brings me to the next subject: Buildout!!

• Our contractor has given us an estimate of the remodelling job. It was priced at $90,000 for a high quality finish out. I sent him blue prints of the property, they came and looked at it last month, and last week I also sent them pictures of my favorite offices/with comments that I would like to incorporate in our own.

In the meantime, after getting my feet wet with real estate, I purchased a few books on commercial/residential property investing because I've really enjoyed this experience. Things have been busy.

Closing date, and HVAC!

Good news: The bank also informed us this week that we can shoot for July 13 as a closing date!

The only major flaw with the building as discovered by the inspection was the HVAC system. Well, I'm an optometrist.. not a handyman. So I had to figure out roughly what this would cost me. I called one A/C company and really played dumb and had him come out to the property and give me a bid. He quoted me $9500 to replace my split system units.

Well I used this information to help leverage my position. I then sent this bid over to the seller/broker and said that this added expense would be tough for us. To make this a win-win situation, I asked for a credit-at-closing in exchange for closing on the building quickly. Suprisingly, the seller agreed.

So when I close on the building for 286,000.. I will also recieve a credit for $7000.

1st attorney bill

I also received my attorney bill yesterday. Guess how much? $2116.50!!! That was for reviewing the purchase contract (10 pages), email correspondence, changes to the contract, etc. He billed me for a total of 8 hours--okay, whatever. I spent a total of 45 minutes on the phone with him.

Well today, my attorney emailed me and asked me whether he wanted me to also let him review the title commitment. I'm a little gun shy of running to him with questions, expecting another stiff bill. Luckily, I had a patient of mine (title/escrow officer) look over everything for me and tell me it was clean.

I have nothing against my real estate attorney, he is good at what he does.. but I really don't see how he spent 8 hours of work on this. I'm not in the best mood right now.

Loan comitment!

Woohoo!! Good news. We've got a commitment letter from both banks: the local bank to fund our building purchase, and an optometric lender for the practice.

Our practice (PLLC) will lease from our building corporation (LLC).. there are several advantages to keeping the two separate, I'll go over those another day.

Timeline of events so far:

• May 30-we found our building
  
• June 4-incorporated LLC with the State
• June 12-executed contract on the building with attorney
  
• June 12-local bank gives us commitment letter for building
• June 17-hired inspector to evaluate property
  
• June 25-practice lender gives us commitment
  

Our loan

We intend on purchasing the building now and holding it, simply because the location is GREAT! The building was actually owned by an ophthalmologist 10 years ago, so remodelling it will be easier (hopefully). We dont plan on occupying the space until we've finished our contract with the seniordoc, set to expire next July. BUT, this gives us plenty of time to get everything in order.

1. I actually applied with two different SBA lenders (7a loan) to finance us for the building purchase and the practice loan. I made them compete with each other to get the best possible rate. They agreed to finance us over 25 years with Prime+2.25% as our rate. Total size of loan: $588,000
2. Then I applied with a local bank (for the building), and an optometric lending company (for the practice loan). This would be the best option for us, and would keep our business local. Total size of loan: $660,000

Favorite Optometry pertinent websites

These resources have helped me tremendously over the last several years..

www.odwire.org The holy grail of optometry websites
www.proactod.org (exclusive version of ODwire, great for discounts!)
www.optiboard.com (Join the ProForum, and learn how to make money with your optical)

There are countless individuals on both boards that share their experiences in our profession. Being an optometrist isn't easy, so I'll take as much help as I can get.

Critical updates

1. About two weeks ago we formed our first ever corporation, an LLC to "own" real estate. It Cost: $750 on mycorporation.com, pretty easy to fill out, and we also got a Tax ID with it. It should be arriving today in the mail, which includes our certificate of formation, articles of incorporation, and Federal TaxID (FEIN).
2. We executed the contract on the building we found last Friday!! There was a 3 day time limit on when we had to get the "earnest money" to the title company. Cost: $3,000. I FedEx'd it to them the same day ($21).
3. Then the same day, we got a committment letter from the local bank. They requested an $800.00 check to start the appraisal process. I FedEx'd that on Sunday night ($21)
4. I ordered an inspection of our potential building today ($480 for inspection, $120 for termite evaluation). I've gotta be comfortable knowing this property before I sink my life into it. The inspector will have our report this week.

Jeez, we're spending money like its going out of style!!

We also managed to find an attorney to represent us ($1000 retainer fee, and billing us $255 an hour. OUCH!!!). He is very quick at getting to us and always a phone call away, but to be honest.. I asked him way too many basic questions, stuff that I should've used a real estate broker for. I would reserve using the attorney ONLY for reviewing contracts. During the negotiation process attorneys should make you understand the language in your contract in plain english.

Also, we found a local CPA to use. I'll post his prices later.

Major updates

Its been a few weeks since I've posted. It seems as though every time I post, major changes have occured. Well we've decided NOT to stay here for 2 years.

Here's the kicker.. do we want to stay the entire 1 year, or leave sooner????

Well we've been scouting properties in our future town, and even got a realtor working for us. We've come to the realization she's not very good, because we were able to find out more about buildings and properties by calling ourselves and doing our own research. One building used to be an OMD's office (who left town), then converted into an attorney's office. We were pleasantly suprised when we looked at it today, discovering the optical, front desk, the exam lanes in virtually the same condition. Our realtor couldn't even get us in touch with the owner of the place, or with his broker. I managed to find out their information on my own, and met them today.

Looks like we're going to need more money. Matsco approved my loan for 330K, but.... it was intended for a "lease, buildout" not a building!!

How to start a business 101

I'm going to squeeze in a quick post before I forget, and my next patient.

Its basically a 4 step process:

• file with your state to form a business,
• apply for a tax ID,
• get sales tax permits,
• and learn labor laws. Great.

Next, I'm in the middle of making a "timeline" style reminder list to organize everything that needs to be done before we open our doors. Doc Softy stressed that she really wanted to be on the same page, and figure out which tasks needed to be delegated. No prob!

Conundrums & Dilemmas.. What to do?

Well the last two days have been interesting. Doc Softy and I have been planning out our options so that we can get the ball rolling on our first private practice. We knew we were going to extend our contract for one more year with the seniordoc we currently work for. I actually asked her for a raise. I was expecting a counteroffer but to my suprise, thats not what I got.

Well here's whats changed. They accepted my raise but proposed a counter offer. If we extend our contract for two years, it would effectively be giving us a $40,000 raise annually!! Damn! I wasn't expecting that. For them, its a smart move because it keeps their practice stable and they dont have to go through the energy of finding new doctors.

So we quickly had to decide what we were going to do:

• Extend our contract for one year and try to startup cold next year in "Smalltown"
• or Extend our contract for two years, save more money.. but possibly lose our opportunity in Smalltown if another doctor opens up before us

Thinking we had to make this decision quick, we decided to visit Smalltown this weekend. When we got here we toured the location's main streets, spoke to a few locals, walked into the Wal-Mart to get a feel of the community mix, and met up with a realtor.

Heres our next problem... we calculated that we could open up in Smalltown and do well our first year BUT (theres always a but right?) we cant find a good location!! We want to be open close to Doc Competition and on the main drag, but after our recent search there seems to be nothing available for sale, or lease :(

What to do...

Current situation

On an average day at this practice, I see anywhere from 18-24 patients depending on the schedule. The seniordoc purchased this practice from a retiring doctor when it had yearly sales of about 650K. About 5 years later plus some elbow grease, the doc brought it up to 1.6 million!! Amazing.

On average an optometric practice will net about 30%. I wouldnt be suprised if the seniordoc took home about 500K. This is by far the exception and not the rule.

Ever since I joined this practice, I've helped boost the practice gross in several ways: fee increases, properly billing/coding, optical recommendations.

So why did I take this job? Well, the pay is great! More importantly, we actually had the opportunity to work a few days together at a second office. We wanted to try it so Doc Softy and I could see if we could handle owning a business together someday. 10 months later, we've realized that we work together well and that we can do this on our own. Its definitely scary, and risky.. considering we've got a mountain of loans (300K owed) and we've got one extra mouth to feed. The other reason we've decided to get out of here is because our boss is simply ungrateful, and mean. Doc Softy gets along with everyone, and even she agrees that our boss is difficult to work for. Another reason to start your own practice folks!!

During my downtime at this practice, I've been looking at getting a practice loan, "window shopping" for my practice, and researching towns to open in.

As Borat would say.. "grrreat succccess", I've found a town that I think would work.

Woowee! First post

What's up readers? I'm excited about this blog for several reasons:

• one.. because, its going to give me something extra to do because I'm a chronic self-actualizer,
• two.. maybe someone might find this blog useful enough to help themselves

Background: Im in my late-twenties and have been married to my college sweetheart since. I graduated from optometry school and have been practicing for another doctor since then..

My wife is also an optometrist and she is the love of my life. My dream has always been to own a private practice for as long as I can remember... I love the business aspects of optometry and love to be a clinician.

For obvious reasons, our personal details have been omitted.