Starting a medical practice can feel daunting, especially as the healthcare landscape shifts toward consolidation amid the recent acquisitions of many independent practices by larger organizations. However, financial trends (such as insurers’ move toward site-neutral payments) and the known cost savings of smaller, independent practices reinforces their value and the benefit of managing your own facility in today’s economy.
In this guide, we’ll help you learn how to start a medical practice by answering a few common questions and offering some best practices. Paired with our helpful medical practice startup checklist (see below), you’ll be better prepared to overcome the most common challenges when building a new clinic. You’ll also be better equipped to develop a medical service that aligns with your clinical mission while remaining adaptable in a constantly evolving healthcare environment.
How to Start a Medical Practice: Basic Overview
Starting a medical practice is no small feat. It requires a heavy investment of both time and money, with many practitioners forced to work side hustles (such as a home health gig) during non-business hours to increase revenue while the practice is still new, or developing.
Some key steps in a comprehensive medical business startup checklist include the following:
Healthcare Business Registration
Before you can break ground or begin seeing patients, you’ll need to fulfill state and federal business requirements. Some of these include:
- Applying for necessary permits (including building and certificate of need permissions).
- Obtaining an employer identification number (EIN) from the Internal Revenue Service (IRS).
- Ensuring that your services and personnel are licensed appropriately, with a National Provider Identification (NPI), Drug Enforcement Administration (DEA), and through the appropriate medical board(s), for example.
Credentialing and Provider Enrollment
This is often one of the most time-intensive steps when starting a medical practice. It’s always advised to begin these processes as soon as possible. Some of these include:
- Enrolling with federal-based insurers (like using PECOS to enroll with Medicare).
- Applying for commercial insurer enrollment.
- Negotiating payor contracts that optimize reimbursements.
Regulatory Compliance
It’s important to ensure that your policies and protocols fulfill regulatory requirements and that your staff are trained to maintain compliance around issues like patient data privacy and mandatory reporting. Some additional considerations include:
- Creating (and maintaining) policies that uphold state-based and federal requirements, including laws like the Healthcare Insurance Portability and Accountability Act (HIPAA).
- Ensuring that Occupational Health and Safety Administration (OSHA) guidelines are observed.
- Establishing and maintaining an emergency operations plan (EOP).
Medical Facility Human Resources
Human Resources (HR) play a key role in staffing, policy development, and employee management within a medical practice. Their team can also help establish pay structures, benefits programs, and onboarding processes. Additional considerations include:
- Assisting with recruiting and retaining staff.
- Maintaining employee records (including criminal background reports).
- Developing practice-based and policy guidance.
Business and Clinical Operations
These details will determine the effectiveness of your administrative and clinical operations. From selecting the best electronic health record (EHR), payroll method, and compliance monitoring systems, these guide productivity. Additional considerations include:
- Establishing banking, accounting, and legal partnerships.
- Securing the necessary insurance (including malpractice coverage).
- Selecting the required vendors (for office supplies, document shredding/destruction, waste management, medical gas, and laboratory services, etc.).
Healthcare Practice Marketing
This is essential to any business and requires continuous effort. There are physical advertising options (like billboards) and digital methods (such as search engine sponsorships). Some additional considerations include:
- Establishing and maintaining a user-friendly website.
- Engaging the community through social media.
- Maintaining a professional network (through medical society participation and referring partner support, for example).
Clinic Supplies and Materials
Lastly, to be of use to your practitioners and patients, a clinic must offer the necessary supplies and materials. Some of these include:
- Medical equipment, such as vital sign machines, otoscopes, or point of care testing (POCT) options.
- Clinic furnishings, like lobby seating options and desks.
- Healthcare materials, including clinic letterhead, prescription pads, and patient intake (or healthcare) forms.
Starting, Owning, and Buying a Medical Practice: FAQ
Buying a medical practice isn’t strictly possible because patients can’t be bought. A medical practice’s building can be purchased, and even its supplies. Yet, even in the face of a medical practice acquisition, a new clinic owner can only hope that patients will choose to stay with that location, as each patient has the right to transfer their medical records and select a new provider.
To help you retain (or entice) patients, we’ll look at some of the finer details of starting a medical practice and answer questions related to clinic ownership below.
What are the benefits of owning your own medical practice?
Despite recent improvements, close to half of all U.S. physicians still report experiencing at least one symptom of burnout. Owning (or working) in a private practice can help alleviate some of those symptoms due to increased work-life flexibility and practice autonomy. They also offer:
- Reduced healthcare costs with potential for higher earnings.
- Innovative practice models, such as the micro practice and advanced practice provider (APP) approaches.
- Increased opportunities for specialization and concentrated service options.
- More personalized care and opportunities for closer patient-provider relationships.
Can I open a clinic without being a doctor?
Short answer, yes. However, with the nationwide shortage of providers, recruiting a practitioner can be one of the most difficult tasks when starting a healthcare practice (which is why it’s often the providers themselves who start a medical business). Depending on the state-based scope of practice, a nurse practitioner (NP) could also open their own practice, serving as the sole provider until growth allows for expanded employment options.
How much does starting a medical practice cost?
A very lean medical practice startup budget sits at around $100,000. However, depending on factors like the selected real estate and initial staffing structure, that figure can easily shift closer to $500,000 or beyond.
Which legal structure works best for a new medical business?
From liability protections to tax withholdings, selecting a business structure is an important decision. Let’s look at how the size of your facility may determine the best legal structure:
- Small healthcare businesses may get maximum benefits from the LLC structure.
- Mid-sized medical practices often benefit from the S-Corp structure.
- Large healthcare organizations see optimal benefits (like the strongest liability protection) from the C-Corp structure.
What staff are required within a physician-owned practice?
A large portion of a new medical practice’s expenditures will be spent on employees (primarily through salaries and benefits). To keep costs low, it’s important to consider what a skeletal structure looks like within a medical practice staffing plan. This may include employees like:
- Practitioners (physicians, NPs, or physician assistants, for example).
- Other clinicians, including nurses, patient care technicians, or laboratory technicians.
- Reception and patient coordinator staff.
- Administrative support (such as HR, finance, compliance, or billing teams).
- Housekeeping or environmental services.
How long does it take to open a medical practice?
It’s recommended that you give yourself at least seven months to start a medical practice (especially if you’re starting from the ground up). However, it’s important to know that the entire process may end up taking closer to a year, as credentialing alone can sometimes require five months or more.
What are some common challenges with starting a medical practice?
Some of the top challenges facing new medical practice owners today include:
- Rising costs despite patient demands, due to expensive overhead costs and competitive wage considerations.
- Staffing challenges due to persistent, nationwide clinician shortages.
- Reimbursement pressures from increasingly complex payor requirements that enable frequent claims denials, risking unpredictable revenue.
- Disconnected systems or siloed technology that doesn’t communicate, causing confusion and additional administrative (or clinical) staff burdens.
Starting a Medical Practice: Best Practices
Owning your own medical practice can be a challenging, yet rewarding venture. Let’s review some best practices to ensure your business thrives.
1. Develop and Maintain a Comprehensive Medical Business Plan
Starting a medical business with a thorough, strategic plan can help mitigate many of the common startup risks (especially from a legal and compliance-related perspective). Seek expert advice, mentor support, and guidance from qualified partners when mapping out your new healthcare practice’s future.
Tips:
- Create a support system of advisors or subject matter experts to help ensure all the different facets of your healthcare business are being taken care of.
- If available, increase your starting budget (or loan options) to make more funds available for marketing alongside operational requirements.
2. Begin Marketing Your New Medical Practice Immediately
The time to begin marketing your new medical practice was yesterday. Focusing on this aspect of your business plan is crucial to sustainable growth because it introduces your medical practice to new clients, growing your patient base and potential for revenue.
Tips:
- Create and maintain a large community network and use those professional connections to increase word-of-mouth advertising and referrals.
- Make a plan for differentiation, or a strategy for showing your patients and community how you stand apart from the competition.
3. Invest in Your Reception Staff and Patient-Facing Experience
The welcoming staff can make or break the online reviews that inform new patients’ clinic choice. Even when a patient-provider relationship is great, bad communication or negative experiences at check-in will be reported, and can drive patients away. Ensure that your patients feel comfortable and valued from your practice’s first impression within the lobby and onward.
Tips:
- Implement a user-friendly patient relationship platform that allows for easy messaging, result checks, and appointment management.
- As the practice grows, reinvest in your employee benefits, scheduling flexibility, and pay to recruit and retain the highest quality staff.
4. Leverage Technology to Boost Your Operational Efficiency
Workforce shortages represent a primary challenge facing new medical practice owners. By leveraging technological solutions, skeletal staffing structures can be supported with tools such as artificial intelligence (AI) that boost productivity without risking a burdensome workload.
Tips:
- Consider using compliance monitoring tools to streamline an important aspect of your administrative workflow.
- Optimize your face-to-face time with patients through ambient AI technology that offloads low-value tasks that can take away from patient-provider time.
5. Track Your Progress, Using Data to Inform Medical Business Growth
Starting a medical practice is just the beginning of an evolving business journey, making your business plan a living document. To build on your strengths and address growth opportunities proactively, identify and track the most relevant key performance indicators (KPI) and quality metrics. This data-backed approach will help guide informed decisions and support long-term success.
Tips:
- Opt for shorter insurance payor contracts so that you can renegotiate reimbursement terms that better reflect recent performance trends and clinical needs.
- Be transparent with your quality metrics, sharing positive figures and results to boost morale (or your brand image) and any concerning trends to encourage solution-forward feedback.
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