Starting a healthcare business can be an exciting opportunity. There are many significant needs for healthcare services, products and support and choosing the right business can be a lucrative career.
As a small business owner, it’s important to consider the type of business, the business structure, the regulatory requirements and the challenges of being a newcomer in the healthcare space. By planning carefully, you can ensure that your healthcare business is successful.
Here are 5 considerations when starting a healthcare business.
1. Research the Types of Healthcare Companies You Could Launch
Do you already have an idea for your healthcare business? If not, consider the types of businesses that are most in demand in your region, where your potential customers are and what products or services you want your healthcare company to offer.
Here are a few emerging healthcare business needs that are strong possibilities for your healthcare company:
- Telemedicine. During the COVID-19 pandemic, telemedicine became increasingly popular and has continued to be a way many doctors and physician practices deliver medical services. Virtual reality and teleconferencing technology have made it easy to provide reliable, secure connections to connect clinicians and patients
- Medical Tourism. Many patients today choose to travel to receive medical treatment in other countries. Facilitating these travel arrangements, including transportation and accommodations, is a way to help patients seeking specialized care while taking the stress out of travel coordination
- Health and Wellness Apps. Many people turn to their smartphones to receive tips, guidance and advice on health and wellness. Creating an app can allow you to charge a fee to access expert advice, insights and information to help with specific illnesses or general wellness
- Medical Transportation. Many patients, including those who are older or facing mobility issues, have trouble getting to medical appointments. Connecting patients with a fleet of drivers who will bring patients to and from appointments can help alleviate the stress and worry of reliably getting to appointments
- Home Healthcare. Increasingly, healthcare is being delivered in the home. Home-based care is less expensive and results in fewer complications than inpatient care. Home healthcare services are common for nursing and physical and occupational therapy. Care in the home is less expensive and convenient for patients
- Genetic Testing. Technology has allowed for people to learn more about their genetic makeup, diagnosis and disease risk with simple at-home test kits. Providing genetic testing and counseling services gives patients more information and helps them make lifestyle changes and better medical decisions
2. Determine Your Business Structure
Any small business owner needs to decide how their company will be legally structured. Determining your business type is a way to formally organize.
Each business structure has advantages and disadvantages, especially related to taxation, liability and operations.
Small businesses can choose to organize as a partnership, corporation or a limited liability company (LLC).
Partnership
Partnerships are companies with two or more owners. Every partner provides skills, funding, property or other assets to the partnership.
In a partnership, the profits and losses are shared among the owners. Each partner’s responsibilities, shares and obligations are spelled out in a partnership agreement, which covers the business structure, roles and dispute resolution processes.
There are two common types of partnerships. In a general partnership, the company is evenly split among the partners with percentages spelled out in the agreement. In a limited partnership, a subset of the partners has control and assumes liability for the business.
From a tax basis, partners report their portions of the income and losses on their own tax returns. However, the business is not a separate legal entity, meaning the owners carry personal risk if there is a court judgment or bankruptcy. Creditors can go after the owners’ personal assets, such as homes, cars and savings.
Corporations
Corporations are unique business structures because the business is a separate legal entity. Certain corporations file their own tax returns and can sue and be sued. The corporation can also sell ownership stakes in the form of stocks.
Corporations are more formal entities and must have their own boards, hold annual meetings and file public documents about their structure and financial performance.
There are two common corporation types:
- C-Corporation. These are separate tax entities and owned by shareholders. They are subject to double taxation because their profits are taxed at a corporate rate and owners pay taxes on dividends
- S-Corporation. The S-Corp is more common with small businesses and while the corporation must file a tax return, its profits and losses are passed through to owners’ individual tax returns
LLC
An LLC is the most popular business structure for small businesses. It has considerable tax, operational and liability advantages.
In an LLC, the company is a separate legal entity. Except in cases of gross negligence, the owner or owners (called “members”) are not individually liable for judgments against the business. That means their personal property is not exposed to creditors.
With an LLC, taxes act the same way as in a sole proprietorship. Profits, losses and expenses pass through to the owners’ individual tax returns.
LLC owners/members have flexibility in how their company is managed. They can manage it themselves or hire a manager to oversee day-to-day operations.
The guidelines and fees for forming an LLC vary from state to state. That’s why many businesses choose to use a third party to file and coordinate the formal filings.
3. Know the Regulatory Requirements
When you own your own healthcare business, you may be subject to various federal, state and industry regulations. For healthcare organizations, the most prominent regulation is the Health Insurance Portability and Accountability Act (HIPAA).
HIPAA is a federal mandate designed to protect patient confidentiality. It has two primary sections, the privacy rule and security rule. Both are designed to protect patient health information, both that information created while providing care or maintained.
The privacy rule focuses on Protected Health Information (PHI), which includes a patient’s name, address and contact information, Social Security number, date of admission/discharge/treatment, photos, voice recordings and even vehicle identifiers.
Providers must limit access to PHI, and the use and disclosure of that information, to the minimum necessary to do their job or achieve a purpose. Providers must also take steps to protect information, such as keeping records closed when not being used, storing information in secured locations, placing discarded information in confidential bins for shredding and preventing others from overhearing your conversations when talking about patients.
Certain disclosures, such as research, marketing, disclosing to another person or psychotherapy notes, require a patient’s permission. The most common cases when permission is not required are for treating a patient or arranging for treatment, for creating bills or coordinating payment with an insurance company, and for certain healthcare operations, such as training.
The security rule focuses on electronic records. It requires entities to ensure confidentiality, integrity and availability when PHI is electronically created, received, transmitted or stored. Providers must also ensure adequate security measures are taken and reasonably anticipated threats are addressed.
As a business owner, there are other regulations that could come into play, including those related to protecting payment card information, using email information for marketing purposes and keeping technologies protected against cyberattacks.
4. Invest in the Right Insurance Coverage
Employers will need to consider which insurance policies they need to run their business. There are many different types of insurance available.
In addition to insurance policies that protect your business, if you have employees, you may want to offer health insurance. Most businesses that offer medical, dental, vision or other health insurance coverage also pay a portion of the insurance premiums. Fortunately, the costs of insurance premiums are deductible business expenses.
Among the types of insurance policies to consider are:
- Errors and Omission. Protects against professional misconduct or mistakes that cause a client to lose business
- General Liability. A broad policy that covers bodily injury, property damage, medical payments and legal costs
- Product Liability. Covers problems with products you sell, including the costs of correcting the problems
- Property. Protects assets, including physical space you own or rent, equipment, tools, inventory, furniture and personal items
- Business Interruption. If your business is affected by a natural disaster, covers the costs of disruptions to your business operations
- Cyber Liability. Protects losses related to a cyberattack, including malware, ransomware or hardware failures that disrupt your company
- Crime and Fidelity. Covers your business against losses due to employee fraud, theft, forgery or property destruction
5. Obtain Proper Permits and Licenses
To operate a healthcare business, you may be subject to various state permits or licenses. If you run a physical business, for example, there are likely local and state health codes that you will need to comply with. In addition, certain businesses may require a license to operate.
Healthcare is a lucrative business for you to consider. By knowing the various types of businesses to pursue, the structure of your company, regulatory needs, insurance, permits and licenses, you’ll be primed to launch a successful venture.