Author: Ian Tongue, Sandison Easson
One of the main factors to consider when you start out in private practice is that you are running a business. It sounds obvious, but with little or no financial training it is easy to fall into the trap of not running your private practice like a business, and this almost always leads to financial loss. The second article in this series looks at the practical steps required to run your private practice as a business.
The first steps
The first thing to consider is where you want to carry out your work. Most private practices are clinical and within your specialty, but many do undertake medicolegal work.
Therefore, knowing your market and how you will go about generating your work is key to understanding where your work will come from.
For clinical work, you will usually need to obtain admitting rights at the private hospital and a substantive consultant position is normally a prerequisite. Often, the private hospitals will have their own teams to look after new and established consultants, and they can be an invaluable source of information, helping you get things off the ground.
You will need to register with insurers, as well as understanding the system of codes for procedures and how tariff rates apply to the insured work. You have limited control over fees charged for procedures. Charging outside of approved rates is common for those on older agreements or who are more established, but new consultants tend to charge at the approved rates for the relevant insurer.
Developing a network around you and getting your name out there is important to ensure that you receive the all-important GP referrals. Working closely with GPs is usually a key part of running a successful private practice.
NHS work in the private sector such as ‘Choose and Book’ is normally easier to obtain, but as they are NHS patients, the rate of pay is usually less. With the large NHS waiting lists resulting from COVID-19, it is likely that more NHS contracts will be awarded to the private sector.
If you are undertaking medicolegal work, developing relationships with solicitors and agencies is extremely important, as they will largely feed your medicolegal practice.
Visibility
In this digital age, it is important you have an online presence that is professional and that promotes you. Working in the NHS and always having a constant stream of patients under your care is very different to private practice, where insured and self-paying patients can choose who they go with.
It is almost inevitable that a patient will check out the consultant they are being referred to, so ensuring you have a good website and social media channels is important to them, as well as to prospective patients.
Choosing a secretary
From speaking to clients and presenting at new consultant events for many years, a common theme to a successful private practice is clear – a strong secretary.
The quality of your secretary can make or break the private practice, so this is not a choice you should make quickly – and don’t just assume you will use your NHS secretary (if they carry out private work) for ease.
An established secretary may work for several consultants and could prefer clinical management software, but the key message is that they will make your life easier. It can be tempting to take on some of this yourself, or involve a family member, but just remember that if you are bogged down in admin, you can’t earn money, so your time is best placed with patients.
Medical defence
When carrying out private practice, you should inform Medical Protection of your change of circumstances. With their experience, they can assess your circumstances based on what types of work you will undertake, together with the expected volume.
The word ‘expected’ is important here as you will be asked for an estimate of income for the coming year, and this can be difficult to judge. At Medical Protection, we understand that you might not have an accurate view of earnings, so just provide your best estimate, and make sure you contact them if the volume or type of work changes.
Choosing an accountant
It would be easy to think that all accountants are the same, but nothing could be further from the truth. Unlike the medical profession, anyone can call themselves an accountant with little or no experience. Choosing an accountant that is regulated by a professional body, such as the Institute of Chartered Accountants in England and Wales (ICAEW), is extremely important to ensure that you are receiving quality advice and have a regulatory body to approach if something goes wrong.
It is important to choose a regulated accountant who is a specialist within the medical profession, as the private medical sector, like the NHS, is dynamic and understanding this is a key part of running a successful and tax efficient private practice.
HM Revenue & Customs (HMRC)
Leading up to carrying out private work, most doctors will not have dealt with HMRC, aside from perhaps receiving a tax coding notice or annual tax calculation where you may get a surprise of some tax to pay, or a refund.
When carrying out private practice, it is inevitable that you will have to register for self-assessment with HMRC, which involves submitting a tax return by 31 January each year. As the name suggests, the process involves telling HMRC what your earnings are, with little or no supporting information, and paying your taxes accordingly.
HMRC police this through the enquiry system, allowing them to open a tax enquiry into a taxpayer’s affairs to query or challenge the figures. Where HMRC are successful in identifying additional taxes they can charge a penalty, surcharges, and interest. Often HMRC can charge all three of these, so it is important that you have a good accountant to assist you with your tax obligations to make sure you don’t get into this position.
Keeping records
As part of your obligations with HMRC, you are required to keep adequate accounting records. They don’t define exactly what this is, but the main thing is that the records should be complete and accurate to disclose the financial position of the business.
This can be as simple as a spreadsheet but may use clinical database systems that have billing functions, and these form part of the accounting records.
If you undertake medicolegal work over the VAT threshold – currently £85,000 per year on a 12-month rolling basis – you must register for VAT, and charge VAT on your medicolegal fees.
Most clinical work is exempt from VAT, but the cosmetic sector can be a grey area, particularly work that HMRC would regard as purely cosmetic. The treatment for that type of work can be the same as medicolegal work, making it VAT sensitive.
VAT can be a complex area for doctors, and a specialist medical accountant can be invaluable in this area.
Taking advice from colleagues
Despite being competitors in the private sector, it is usual for consultants to help each other when establishing private practices, as they were once in that position and were no doubt given some pearls of wisdom from their more established colleagues.
This can provide a wealth of experience to help you establish your practice. Many colleagues work together in groups and sub-specialties, so building these professional private relationships can lead to future opportunities for working together.
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