Editor's note: Do you own an independent practice or are you considering one? Please share your experiences by posting to our online community. Visit www.advanceweb.com, click on "Nurse Practitioners," and then click on "NP Online Community."
One of nurse practitioners' biggest fears when contemplating independent practice is the potential profitability of a dream practice. Although no one can guarantee financial success, there are ways to predict the viability of a proposed practice. Simply estimate the potential monthly revenue and potential monthly expenses. Once you have those estimates, you can see whether a practice has the ability to make money.
First, define your practice. Do this by identifying the four Ws (who, what, where and when): Who is the target market (age and sex of the main patient population)? What services and products will you offer? Where will you base your practice? And, when will you launch your practice? For example, "I will start a practice for women throughout their reproductive years and provide women's health care in northeast Fort Lauderdale, Fla., in October 2004."
Now that you have a basic description of your proposed practice, draft a billing form. You can modify billing forms from existing practices and alter them specifically for your practice. Estimate what you will charge for all types of visits, procedures, injections, supplies, products, etc. Then, create a fictitious schedule for a week of patient visits (try to keep the schedule as realistic as possible, perhaps using an actual schedule from your current practice), and assign charges to each visit. Total the charges for each day, then total the week's charges and, finally, total the estimated revenue for 1 month.
Or, figure an average patient charge per visit, and multiply that by the number of visits per month to come up with the total estimated revenue (Table 1). To estimate monthly expenses, add the monthly cost of everything from rent to payroll (Table 2). Subtract the total monthly expenses from the total monthly revenue to arrive at your potential monthly income.
Hopefully, the potential income is what you are hoping for. Unless you buy an established practice (and that's not a bad idea), keep in mind that your income should increase over time. Always look for ways to reduce monthly expenses, which increases revenue.
While this exercise may not guarantee that your practice will be profitable, it will help you think about potential income and potential expenses you may not have considered. Remember that these are just estimates and the actual numbers may be higher or lower.
Carolyn Zaumeyer is a women's health nurse practitioner, author and former independent practice owner. Information from this column is adapted from her newest book on independent practice, How to Start an Independent Practice: The Nurse Practitioner's Guide to Success (F.A. Davis, 2003). Reach her at email@example.com.