Plan is to open this clinic with a family member who recently sold another mental health business. He's got the business know how, whereas I would operate as the medical director.
Unless this is someone you think is talented enough to create an exit in 5 years with an 8 figure number, I don’t think I would do this.
Without significant legal expenses and know-how (loopholes), it is illegal in my state to own a practice with a non-physician. You are already in the hole. Next, someone needs to provide the capital. If this is an equal partnership, loans to get this capital put you further in the hole.
What can this person provide? Hiring staff isn’t hard. It is just a nuisance for most physicians. Marketing just involves hiring a good firm. How much $$ do you want to spend here to ramp up? Who is providing the funds? How is the partner sacrificing to make this work? What will this partner actually do?
There isn’t enough patients at the beginning to hire any other physician. How long will you work for free while your revenue goes to overhead? How many new patients will you be willing to see per day? Most psychiatrists I know want to stop after 2-4 new/day. A partner that only earns a living from growth would prefer you to see 7-12 new/day.
Growth is much slower cash-only. Insurance requires contracts, negotiations, and time. Expect to pay staff and rent for 6+ months before insurance contracts are figured out. Expect to lose $10k/month at the beginning with such a venture. Then each new hire takes time to credential. This further delays possible rewards.
What happens if this partner finds a new lucrative venture or convinces other clinicians to partner? What happens if this doesn’t expand enough? Will the partner take home 50% of net from a 1-4 clinician practice working 5 hours/week while you are putting in 40 hours?
Non-physicians love to try to partner with physicians. We are essentially guaranteed revenue. If your partner is terrible, eventually you can still fill an insurance practice where net is 6 figures to the partner that does nothing. The partner can push downsizing, minimizing expenses, and push you to see more patients. No need to hire more psychiatrists and build them up at a temporary loss. Let’s wait until you are seeing a patient load of 2 physicians. Forget 90833. If you can see 5 99214’s per hour for 8 hours with 0 new patients per day then we can add a psychiatrist in 3-5 years without losing any money. You can do it. Just 5 years. Now that you’ve added 1 physician and moved half your caseload, let’s do it again with multiple new ones/day to add another in a couple years. This is in the partner’s best interests.
Each FT psychiatrist you add could net the practice $300k when full. That’s either 1+ years of losing money then breaking even to eventually build from scratch or with your sweat. That’s $150k to you in a partnership once full.
It could easily take 5 years pushing yourself hard to reach $300k net in year 5. After all, you’ll have loans, high expenses, and partner distributions to cover.
All the while, you can easily make $300k/year employed with no risk year 1. Invest passively well and maybe have saved + appreciation your first $1 million by year 5.
I’m not saying that it isn’t a lucrative goal to build a big practice eventually. I just wouldn’t do this with a non-physician where I’m seeing patients. I’d want to already be making good money and meet this talented non-physician in which I’m essentially helping to maximize billings and oversee clinicians.
Alternatively I’d start small, learn, and do this myself.
The odds that I find the perfect non-physician partner to risk years of minimum income and debt while working incredibly hard (enough to generate $600k/year elsewhere) to exit in 5 years would necessitate a $5 million+ windfall or more. In my state, I haven’t seen or heard of $10+ million practices selling. The highest I’ve seen is a 5 location practice in Austin, TX with 30+ therapists generating $800k/year net asking $6 million. I tried talking to them about $4 million. Owner declined.
