General practice tool kit

Becoming an owner of a general practice

Other business planning

Last revised: 24 Oct 2019

Insurance

Insurance helps to protect your practice and minimise your business risk.

In addition to the mandatory insurance that you must purchase, there are other forms of insurance that you might decide you need, based on your particular circumstances. Seek professional advice, and make sure you are aware of what each policy does and does not cover.

Some types of insurance you might consider include:

  • Practice Medical Indemnity
  • Individual Professional Indemnity (for all medical and nursing staff)
  • Public Liability
  • Products Liability
  • Business Property
  • Workers Compensation, which is mandatory if you have employees (see further information here)
  • Income protection insurance for each owner
  • Business continuity insurance
  • Buy/Sell insurance, which covers purchase of partnership from the estate of a deceased partner

Owning a business is inherently risky, as you are accepting responsibility for many financial, social, environmental and clinical risk factors. Managing these risks is part of delivering clinical care because if your business fails, you will not be able to deliver clinical care to your practice’s patients.

Managing risk is also in your own interest, if you are to reap the rewards of being a business owner and taking on these risks. While an obvious reward of being the owner of a successful business includes increased income, other rewards include flexibility and autonomy, achievement of personal and professional goals, helping others to do achieve their personal and professional goals, and improving the health outcomes of your patients and the community.

 

How to identify and reduce risks

A risk management process helps you consistently identify, document and manage business risks. A common method of managing business risk is to:

  1. Identify risks for each area of your business (eg clinical, staff, finance, compliance, patients).
  2. Create a risk matrix (or one for each area of your business) showing the likelihood of each identified risk occurring and the severity of the impact it would have.
  3. Listing ways of mitigating your known risks, which can then be incorporated into your action plan.

Risk matrix

Map each risk onto a risk matrix like the one below, according to the likelihood of the event occurring and the severity of its impact if it was to occur. This lets you identify the rating of each risk (low, medium, high or extreme), and therefore identify the risks you most need to address.

Risk mitigation strategies

Categorise and list your business’s risks, and identify how you can reduce the likelihood of that risk.

For example:

Category and Risks

Mitigation Strategies

Staff

Loss of key clinical or admin staff
  • Provide flexible working arrangements
  • Pay for professional development
  • Hold regular meetings to involve them in decisions that affect them.
Inadequate knowledge of latest technologies
  • Engage outside IT expert to provide informal training and keep systems running smoothly
  • Use SMS and website to keep patients informed of developments.

Finance

Loss of income
  • Purchases of more than $500 must be approved by two owners.
Increased costs
  • Build strong relationships with providers of consumables
  • Negotiate for a longer lease with no increase in rent.

Patient

Patient complaints or legal action
  • Build strong relationships with patients
  • Explain procedures and costs to patients
  • Involve patients in decisions that affect their health outcomes
  • Take out adequate professional indemnity insurance.
Loss of patient data
  • Have daily backups of data
  • Have backups stored offsite (or in Cloud).
  • Every three months, have IT specialist check backups are working and can be recovered
  • Review systems annually and upgrade hardware and software if necessary
  • Install generator to maintain electricity supply if power fails.

Regulatory compliance

Non-compliance with regulatory obligations
  • Engage accountant, business advisor, and legal practitioner with experience advising general practices.
  • Meet regularly with each one to confirm ongoing compliance, or to learn about changed or new obligations.

Key resource

Insurance - Australian Government

Tips

  • Seek advice from your MDO about your practice’s particular circumstances and insurance needs.
  • Your personal MDO may be different to the practice’s MDO.

RACGP Standards

Criterion C3.1 – Business operation systems

C3.1C Our practice has a business risk management system that identifies, monitors, and mitigates risks in the practice.

View the standards >

Auditing is an effective way of checking that your business records (particularly of your finances) are accurate and complete.

If you regularly conduct internal audits, you can identify issues and errors before they become significant, and identify ways of improving the efficiency of your business management. Regular audits also discourage fraud.

Your practice will also be subject to external audits. For example, Medicare can conduct an audit of your use of MBS items, and the ATO can conduct an audit of your tax reporting.

Your business plan needs to include measures that you can use to determine if you are achieving your objectives.

Most businesses use financial measures, but it can be equally important to have non-financial measures as well. For example, if your practice is new, one measure of success might be the number of new active patients you see each year for the first three years. And to achieve the desired level of success, you might invest money in marketing your business, or giving your premises a more contemporary look. This might reduce your profit, but give your business long-term viability.

Using a broad range of measures allows you to identify areas of your practice that require more attention, and keeps you focussed on more than just the financial returns of your business.

Key performance indicators

In your business plan, include key performance indicators that you will use to measure your practice’s success, by regularly assessing and documenting your success in each indicator. You could assess some indicators every three months, others every six months, and some annually.

This assessment will give you a detailed picture of where your practice is succeeding and failing and the trends that might be influencing the achievement of your goals.

Possible key performance indicators include:

  • how many patients your practice sees each week, and how many of them are new
  • the percentage of private and bulk billings
  • the revenue received per patient
  • the number of chronic disease management items billed (721, 723)
  • staff turnover
  • your practice’s environmental footprint
  • engagement with the community and special interest groups
  • financial performance.

Most general practices employ staff, such as GPs, practice nurses, practice manager and administrative staff.  The number and type of staff your practice needs will depend on your practice’s circumstances.

As your staff will be one of the largest expenses for your business, your business plan needs to include a thorough workforce plan.

Comparing your practice’s financial position to others can give you valuable insight into how you could improve your practice’s financial performance.

Your accountant may be able to prepare a benchmarking report for you, or you could engage a private company that specialises in benchmarking for medical practices.

Future-proof your business by regularly reviewing and updating your goals, objectives, business plan and action plans for all aspects of your business. This includes business arrangements, your premises, staffing, technology, marketing, and finances.

See also

Your practice finances for more information about income capacity, the cost of providing services and identifying your breakeven point.
Your practice team for more information about recruitment planning and process and performance management.
 

This event attracts CPD points and can be self recorded

Did you know you can now log your CPD with a click of a button?

Create Quick log