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An Ultimate Guide To Starting A Medical Practice

Growth and Operations

An Ultimate Guide To Starting A Medical Practice

Updated: December 16th, 2021

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Understanding how to start a medical practice takes time, strategy, and financing. As with any business, the process of opening a private practice can be daunting, but the potential rewards are great. 

Physicians and healthcare providers may want to start their own practices for a number of reasons: to offer services that aren’t accessible in their area, for example, have more autonomy over their schedules, or develop more intimate relationships with patients.

If you want to learn how to start a medical practice, our comprehensive guide can help. Keep reading for seven tips to get your medical practice off the ground. 

1. Organize your finances and apply for funding

Before you start planning how to start a medical practice, you need to figure out how much it’s going to cost to launch and run it. Opening any business is expensive, but starting a medical practice — that requires specialized equipment and technology — maybe even more expensive. 

It’s a good idea to meet with an accountant to review your finances, check your credit score, and go over your debts, including student loan debt and any debt from credit cards. Then, add up potential business expenses, taking into account the following:

  • An office space
  • Medical supplies
  • Equipment
  • Legal or consultant fees
  • Computers 
  • Medical records software 
  • Furniture 
  • Pharmaceuticals 
  • Payroll 
  • Utility bills
  • Insurance 
  • Marketing

Estimating startup costs and expenses will give you a better idea of your funding needs as you start your own medical practice. Keep in mind that it may take time to become profitable, so you’ll want to have enough funds to cover three to six months of operating expenses. 

The type of medical practice loan you apply for will depend on the amount of funding you need, as well as your credit score and personal finances. Bank loans and loans backed by the Small Business Administration typically offer the best interest rates, but the application process for these loans can be tedious. In addition to submitting a detailed business plan, you usually have to gather a host of financial statements and documents. The wait time for an initial response is also longer, sometimes taking up to 90 days. 

Online lenders, on the other hand, may have higher interest rates, but they’re generally easier to qualify for. You typically only need a handful of financial documents to apply. Plus, depending on the lender, you can receive a response in as little as one day. 

2. Follow government and state regulations for how to start a medical practice

Before you can start a private practice, you need to make sure you’re abiding by federal and state government regulations. Depending on your medical specialty, you may have to obtain additional medical licenses or credentials, but these are the general requirements:

Get a license

The first step in how to start a medical practice is getting licensed by your state’s medical board, a process that can take up to 60 days or more. You usually have to submit a handful of documents, including your resume, school records, and exam records. Visit the Federation of State Medical Boards for more information about the licensure process. 

Obtain a national provider identifier number 

Every healthcare provider needs to apply for a national provider identifier (NPI) number. Much like an employer identification number (EIN), an NPI serves as a way for government and private insurance companies to keep track of you. You can apply for an NPI on the National Plan and Provider Enumeration System website. 

How to purchase insurance when starting a medical practice

Purchasing insurance is critical to starting a medical practice. On top of general liability insurance and life insurance, you’ll also need to buy medical professional liability insurance. Sometimes called malpractice insurance, this type of coverage protects you in case a patient sues you for wrongdoing. 

Get credentialed

Credentialing is the process an insurance company goes through to determine whether or not you’re qualified to serve on their behalf. You need to get credentialed with different insurers to be a recognized healthcare provider and accept your patients’ health insurance. 

The process can take a few months, so it’s helpful to get started right away. Insurance companies will usually inquire about your medical education, residency, and licenses. Depending on the state you’re practicing in, they may also ask to see proof of your malpractice insurance.

The insurance programs you choose will depend on your specialty and the area where you’re looking to start your own medical practice. If you practice in a lower-income area, for example, then you may want to participate in Medicaid. You can start the credentialing process on the Federation of State Medical Boards website. 

Get a DEA number

If you’ll be prescribing medication to patients, you have to apply for a DEA number through the U.S. Drug Enforcement Administration. You’ll need to provide personal and business information, as well as your state license. 

3. Choose your business structure

Once you have your licenses and credentials, you can register your practice as an official business. When starting a medical practice, your business structure determines how much you pay in taxes, what type of paperwork you’ll file, and how personally liable you are for any losses or legal claims. 

Keep in mind that all physicians are personally liable for negligence or malpractice, whether or not their practices are incorporated or not. However, certain business structures can protect you from liability in other instances. 

To help guide you in the decision-making process, consider hiring a healthcare attorney and accountant. Here are the most common business structures to keep in mind as you consider how to start a medical practice:

Sole proprietorship

A sole proprietorship gives you total control over your business, but it’s not considered a separate business entity. Your practice is effectively an extension of you, so you’re personally liable for any debts or losses your business incurs.  


If you’re considering a business partnership when starting a medical practice, know that it consists of two or more individuals who form a business together. Limited partnerships (LPs) consist of one partner with unlimited liability and the rest with limited liability. Limited liability partnerships (LLPs), on the other hand, mean that every partner has limited liability. 

In an LP, each partner is responsible for the debts of the other partners, but an LLP protects each partner from the actions of the others. 

C corporation

A C-corporation is a legal entity separate from the business owner. Corporations pay income tax on their profits and require more precise record-keeping and reporting, but they also give business owners the greatest protection from personal liability.

S Corporation 

An S corporation is certain type of corporation that allows profits to go straight to the business owner’s personal income without being subject to taxes. When you start your own medical practice as an S corp, you need to meet certain criteria — like not having more than 100 shareholders, for example — to qualify. Each state also has different tax requirements for S corps.

After you choose your business structure, make sure you apply for an EIN, register your business, and register for state and local taxes

4. Gather the equipment needed to start your own medical practice

Starting a medical practice requires special equipment, machines, and software — and these can be expensive. 

Start by making a list of the items you need, including computers, point-of-sale software, billing service software, and electronic health record (EHR) software. Make sure you check with your state health department to see whether or not you have to register certain equipment.

Next, rank your equipment by importance. Instead of spending money on the latest technology for every item, try to prioritize the pieces that will have the greatest impact on your day-to-day operations or patient care. 

For example, if you run a dentistry clinic, then purchasing a top-of-the-line X-ray machine is critical. Buying the latest printer, on the other hand, probably isn’t necessary. 

Most medical practices should consider investing in new EHR technology. This stores and organizes patient records, prescription orders, lab results, provider messages, and payment information. Advanced EHR software can streamline communications and facilitate tedious processes like record-keeping, billing, and payment. 

If you have a long list of equipment and tech to purchase when starting your own medical practice, consider applying for an equipment loan to help free up your cash flow. 

5. How to organize your team before starting a medical practice

Set yourself up for success as you consider how to start a medical practice by hiring staff before you open your clinic doors. Of course, you can continue to hire as you grow. But, it’s smart to recruit a couple of trusted individuals to ensure you’re not in over your head when patients show up. 

Depending on how large your practice is and how many patients you plan to see at the beginning, you may only need one or two employees. Think of a part-time physician assistant or office manager who can greet patients, handle paperwork, and lead billing and payment. 

If you haven’t already, you may also need to recruit outside team members you can turn to for advice. These can include individuals like an accountant, healthcare attorney, or business consultant.

6. Find an office space

Finding the right office space is key to starting a medical practice on a good note. The size of your practice and the treatments you offer will dictate the type of space you should look for.  

If you’re opening a small physical therapy clinic, for example, you may only need one patient room and a waiting area. On the other hand, if you’re opening a primary care physician practice, you’ll probably need a waiting area, front or back office, and a few different rooms to see patients.

When searching for real estate to start your own medical practice, consider location first. You want to set up your practice in the area where your target patient demographic lives, but you and your staff should also be able to commute easily. Make sure you assess the neighborhood, nearby amenities, and parking situation, too. Ideally, your facility should be within easy walking or driving distance for the majority of your patients.  

The second consideration is the space itself. Take into account the overall size, lighting, bathrooms, room configurations, and general condition of the facility. You may need to do tenant improvements or remodeling before you open for business.

7. Market your medical practice before and after you start it

To maximize patient opportunities and minimize wasted money when starting a medical practice, it’s important to have a few patients before you even open your practice doors. To do that, you need to market your practice.

First, consider your target patient demographics. Where do these people live and how do they spend their time? If you know you’re targeting older patients who don’t spend as much time online, you can concentrate your marketing efforts on mailers, calls, and community events. However, if you’re trying to attract a wide range of patients, you’ll need to experiment with several different distribution channels.

That said, there are certain base marketing strategies every owner should use when considering how to start a medical practice. Start by creating a website, then optimizing your website for search by using keywords and emphasizing your location. Other effective strategies include making flyers to mail to your target patients, starting an online ad campaign, and posting on social media using local terms and hashtags. 

Remember: marketing isn’t a one-time task. It’s an ongoing process, so it’s important to continue experimenting as you begin to see patients.

Starting a medical practice takes patience and hard work, but opening your doors is the easy part. To set yourself up for success going forward, it’s crucial to continue marketing, focus on improving customer service, and find ways to reduce operational expenses. For additional resources on everything from practice management to patient advocacy, visit the American Medical Association


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