Risk Management Considerations When Starting a New Practice
Allison Funicelli, MPA, CCLA, CPHRM, ARM, FASHRM
Senior Risk Management Consultant, Risk Management Group AWAC Services Company, a member company of Allied World

Starting a new psychiatric office practice can be exciting, scary, stressful and complicated at the same time. Perhaps you are starting out fresh after residency or transitioning from an institutional or other setting to private practice. In either circumstance, there are legally required business practices and risk management strategies to consider when starting a new practice.


Start by creating an office practice checklist to make sure you cover the legal, insurance and business practice considerations needed to operate a new business. List the needed tasks, date when each item is completed and note any relevant information such as key contacts. Consult legal counsel and an accountant to:

  • File your new business with the state and assist with office practice legal issues
  • Create payroll/billing systems
  • Track and file tax information
  • Discuss financing for the office practice (start-up costs)

Create business/vendor relationships (and be sure to obtain a signed Business Associate Agreement) for:

  • Office and medical supplies
  • Buying/leasing office space
  • Purchasing HIPAA compliant software for maintaining billing records, electronic health records, patient portal, email, scheduling and videoconferencing equipment for telepsychiatry services, as applicable
  • IT support
  • Telephone services (landline and/or business cellphone)
  • Medical waste removal
  • Removal/destruction of HIPAA sensitive information (i.e., destruction of medical records)
  • Billing & Collections
  • Cleaning services

Other Considerations:

  • Create a marketing and networking plan to grow your business to acquire new patients
  • Become a member of local, state and national psychiatry-related organizations for networking, consultation, resources and continued education
  • Contact health insurers if you plan to offer in-network services
  • Contact utility companies (electric, heat, trash removal, etc., if separate from the office lease agreement)
  • Create and maintain an office expense budget
  • Hire staff experienced in human resources, medical professional office practice management and if possible, certified in medical billing and coding (i.e., CBCS certification)
  • Create office policies for the practice and staff related to:

– Medical, telephone and billing documentation and recordkeeping
–  HIPAA compliance including workforce confidentiality agreements
– Acceptable/unacceptable use of social media, email, texting
– Record retention plan/log for destroyed records
– Archiving tax, utility and other office practice business records
– Emergency management plan
– Workplace violence prevention plan
– Handling grievances/complaints
– Job descriptions for each category of personnel

  • Create office policies and procedures and related forms for patients including:

– Privacy Notice/HIPAA authorization
– Treatment and medication consent
– Patient termination from practice
– Use of email/texting/social media between the practice/provider and the patient
– Duty to Warn requirements
– Appointment scheduling/cancellations
– Referrals

  • Contact state and federal regulators as required by law
  • Contact the local post office and delivery services
  • Provide practice information to hospital and clinical affiliates
  • Establish a relationship with local law enforcement
  • Obtain medical malpractice, worker’s compensation, cyber, office practice and general liability insurance policies

If you plan to hire other medical professionals in the group, consider:

  • Consulting legal counsel regarding direct employee versus independent contractors
  • Purchasing professional liability insurance for the hired professionals or requiring proof of a valid certificate of insurance purchased directly by the professional with appropriate insurance limits
  • Credentialing the new hires (conduct primary source verification including references, ensuring proof of active medical license and in good standing, research the National Practitioner Data Bank, etc.)
  • Consulting legal counsel regarding an employment contract
  • Implementing requirements in your state for supervising other physicians, nurse practitioners, physician assistants and other mental health professionals
  • Properly training all newly hired staff on the office policies and procedures and requiring them to sign their acknowledgment and understanding (it is a good idea to have all staff review and sign these documents annually)

While the above list is not exhaustive of all considerations related to establishing a new office practice, it is offered as a useful guide. Your insurance broker and insurance carrier, especially through their risk management department, have additional resources to assist you as well. Risk management can provide valuable resources when encountering specific patient and office practice related situations such as terminating a patient from practice, engaging in telepsychiatry services, dealing with difficult patients, responding to records requests, addressing HIPAA related questions and documentation.

Allison Funicelli _insession

About the Author

Allison Funicelli, MPA, CCLA, CPHRM, ARM, FASHRM 
As a Senior Risk Management Consultant of the Risk Management Group, Allison provides risk management consulting services to Allied World’s medical professional liability policyholders and insured psychiatrists, psychologists, psychiatric nurse practitioners and physician assistants. She works directly with policyholders to develop individualized action plans to mitigate potential loss based on their unique exposures and risk management needs. Additionally, Allison assists these clients with ongoing medical educational programs as well as policy and procedure review and development.