Is It Financially Viable to Open a Solo Practice?

This could be you.

The short answer is yes. The longer answer is yes, but you have to balance your revenue and expenses. 

How Much Will I Get Paid?

When researching whether or not to go solo, I made some fairly extensive spreadsheets as part of my pro forma that allowed me to calculate my expected average reimbursement per patient encounter. If you are currently in practice in the region in which you will go solo, I recommend calculating your personal reimbursement per patient encounter. To do this, simply divide your monthly reimbursement by total patients seen that month for the past 3-6 months and then take the average. If you are not currently in practice (i.e. you are a resident/fellow/etc), you can either take my word for it that several consulting firms use $165-185/encounter for comprehensive ophthalmologists and $175-195/encounter for retina specialists or calculate it based on the data from the physician fee schedule lookup tool and patients you have seen in your clinic over the last 3-6 months. 

If you decide to make your own reimbursement projection based on Medicare rates, it’s important to remember that commercial insurance will reimburse at a high rate (1.4X-2.6X of Medicare). Your calculated average $/encounter for Medicare alone will likely be around $145-165/encounter and you’ll have to adjust this rate up a little to account for contracting with commercial insurance companies. Reimbursement will be higher in the South, Midwest/Great Lakes, and Mountain West and a little less on the coasts. 

Regardless of the method you use to determine the $/encounter, you can then plug those numbers into a spreadsheet like the one available for download below to determine your monthly and annual revenue. Please note that this spreadsheet is not a complete pro forma and requires a fair amount of modification to personalize it to your practice. However, it’s a good starting place to get you thinking about whether or not you can do this. 

What About Overhead? 

The key to running a financially viable practice is managing your overhead. After all, your take home pay is the money left over after you pay all your expenses. If you decide that you cannot possibly do your job without 10 support staff, you’ll have a hard time making money. However, if you can run a lean practice with few employees, your (substantially higher) net profit will reflect that. Payroll is invariably the largest recurring expense, so the longer you can hold off on hiring support staff, the better for the longevity of your practice. 

The downloadable spreadsheet contains a good approximation of fixed expenses you can expect in your first year of solo practice. If you pay yourself $60,000 annually, hire a front desk worker, and hire a technician you can expect to pay around $25,000/month in expenses. If you can do without a technician, you’ll save about $4700/month (extra money in your pocket). In order to survive the initial slow growth period, try to negotiate at least 3 months of free rent and some sort of delayed loan payment if possible. The combination of the two will net you another $8000/ in savings. This means that your initial monthly expenses will be $7481 without your salary ($12,481 with your salary included). At a reimbursement rate of $170/patient encounter, that means you have to see 2.2 patients per day to meet your overhead (3.7 patients per day with your salary included). With all expenses included, you should be profitable on your 7th daily patient. 

Even assuming very slow growth you should have no trouble seeing at least 4 patients per day within 6 months or so. 

The Bottom Line

If you are capable of seeing 10 patients per day with 4 weeks of vacation per year, you should make at least $225,000 gross per year. I estimate full capacity without a technician to be 20 patients per day, which becomes about $500,000 gross per year without taking into account any cash pay/elective procedures. 

A fun/disheartening exercise to do as a trainee is to calculate approximately how much money you’re making for your current employer compared to your salary when you start operating (hint: you make your program a lot of money if there’s a resident clinic; even more if you generate your own surgeries). Calculating this in my final year of residency while evaluating job offers was one of the driving factors behind my eventual transition to solo practice. 

Download the sample pro forma here.

Notes about the sample pro forma: 

There are a number of assumptions the model makes: 

1. The growth rate is based on conversations with other solo practice ophthalmologists throughout the country and cannot be taken as gospel. It assumes a slow start and then more rapid growth after the first 4-6 months as referrals start to build up. 

2. A $60,000 gross personal salary is also built into the expenses tab. 

3. No taxes of any kind are in the model, so take that into account when looking at the take home pay. 

4. There is no consideration of elective or cash pay procedures of any kind (e.g. Botox, LASIK, FLACS, etc) built into the model. 

5. 90% collections rate and a $170/encounter reimbursement rate are built in. 

6. The no show rate is 0%.