Starting a Medical Practice: What to Plan Before the First Patient

Choose the structure and the model

Decide between solo practice, partnership, joining a group, or a cash-pay or membership model. Each affects startup cost, liability and how you get paid.

Your model shapes everything else:

• Solo or small group practice. Full control, full responsibility for overhead and staff.
• Partnership. Shared costs and call coverage, but a need for a clear agreement.
• Insurance-based. Larger patient base but slow, complex billing.
• Direct-pay or membership. Smaller panels and simpler billing, but fewer patients to start.

Talk with a healthcare attorney about entity choice, since many states have rules for professional entities, and about compliance with laws such as HIPAA and state licensing. Our guide to business structures explains the basics.

Licensing, credentialing and enrollment

You need state licensure, a DEA registration if you prescribe controlled substances, NPI numbers, malpractice coverage and enrollment with each payer. Credentialing often takes months.

Credentialing is the step that surprises new owners. Each insurance plan verifies your training and licensing before it will pay you, and the process can take several months. Start early and keep a calendar of follow-ups.

Typical items:

• State medical license and facility or business licenses
• NPI and tax ID
• Malpractice insurance
• Payer enrollment, Medicare and Medicaid enrollment where applicable
• Clinical Laboratory Improvement Amendments certificate if you run in-office tests
• HIPAA policies and staff training

Confirm every requirement with your state board and the payers you plan to join. Rules differ by specialty and state.

Space, equipment and technology

Budget for lease and build-out, exam room equipment, an electronic health record system, billing software and IT security. Specialties vary widely in equipment cost.

Equipment spending ranges from modest for primary care to very high for imaging or surgical specialties. Consider:

• Lease terms and build-out for exam rooms and privacy
• Exam tables, diagnostic tools, sterilization and supplies
• Electronic health records and patient portal
• Practice management and billing software
• Phone, network and cybersecurity
• Signage and website

Buying used equipment, leasing or financing can preserve cash. See equipment leasing and medical practice loans for a comparison of approaches.

The revenue cycle and why cash arrives late

You deliver care today and may be paid 30 to 60 days or more later, after claims are filed, adjudicated and sometimes denied. Collections lag the work.

Revenue cycle management means everything between scheduling a patient and collecting payment: verifying eligibility, coding, submitting claims, posting payments, appealing denials and billing patients for their share.

Illustrative example: you see 20 patients a day at an average collected amount of $120, which is $2,400 a day, or about $48,000 for a 20-day month. If claims are paid 45 days after service and some are denied, the first month of cash may not arrive until the second or third month. Meanwhile, rent, payroll and malpractice premiums are due.

Use a clean claims process, check coverage up front, collect copays at the visit and track denials. See medical practice accounting and medical factoring for how others handle the gap.

Build a realistic startup budget

Add licensing, space, equipment, software, supplies, staff, marketing and six or more months of operating costs. Many practices underestimate the cash needed before breaking even.

List each category with a quote, then add a cushion of at least 20 percent. Do not forget malpractice premiums, payroll taxes, accountant and attorney fees, and your own living costs if you pay yourself late.

Create three scenarios: base, slow and fast. In the slow case, patient volume grows half as fast and claims take longer. If the slow case runs out of cash in month eight, you need a larger cushion or a smaller launch.

Read medical practice financing for startups for startup funding sources, and keep records using bookkeeping basics.

Hiring and running the front desk

Staff the front desk and billing first, because errors there delay cash. Add clinical staff as your schedule fills.

A lean start might have you, one medical assistant and one front-office person who handles scheduling, check-in and insurance verification. Billing can be in-house or outsourced. Outsourcing costs a percentage of collections but reduces errors if you lack experience.

Set clear procedures for intake, consent, documentation and follow-up. Train everyone on privacy rules. Review your numbers weekly: patients seen, claims submitted, claims paid, denials and days in accounts receivable.

Funding the practice after opening

Brand-new practices usually rely on savings, bank or SBA startup options. ROI Funder works with practices that have 6+ months in business and $20,000+ in monthly revenue.

If you are still pre-launch, look first at SBA options, physician loan programs from banks and your own capital. See SBA loans for medical practices.

Once your practice has steady collections, financing can help with gaps. Illustrative example: your practice bills $60,000 a month, collects most of it after about 45 days, and wants to add an exam room and a provider for $50,000. If that adds $15,000 a month in net collections, a financing cost of $6,000 is paid back in months. ROI Funder considers 500+ FICO and matches you to the funders in our network that fit, showing true cost and payback before you sign. Options include working capital, equipment financing and a line of credit.