Can I Start a Private Practice on the Side While Still an Employed Physician?
- 6 days ago
- 11 min read
Many employed physicians in our online physician communities debate starting side practices for extra income, or want to build a practice over time that they may eventually transition to full-time. Starting a private practice is a big step that comes with a lot of risk, and many physicians wonder if they can dip their feet into the space and try it out or build it before officially leaving their job. Of course, it’s not usually that simple. While it’s legally possible to have your own private practice while holding an employee position, you’ll need to do proper due diligence before going down this pathway. Your employment agreement, state laws, specialty-specific considerations, and your employer's policies can all affect whether you can legally and ethically start a practice while remaining employed. Below, we'll discuss what physicians should know before opening a private practice while still working for an employer, whether you may need to resign first, and how to approach conversations with your employer when seeing if they will permit it.
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Can physicians legally own a private practice while still employed?
Avoid conflicts of interest or with your current employer, or causing harm to the current employer
Can you start seeing patients after work, on weekends, or on vacation days?
Advantages to starting your private practice before leaving employment
How should you approach this conversation with your employer?
Can physicians legally own and open a private practice while still employed?
In many cases, yes. Many employed physicians legally own LLCs, side businesses, small telemedicine practices, and cash pay clinics while continuing their employed jobs. Many employers are fine with doctors having a side practice as long as it doesn’t interfere with the responsibilities of the main gig.
The real question is usually not whether ownership is allowed legally, but whether your employment agreement restricts outside clinical work or creates conflicts with your employer, and whether your employer will ultimately permit it. Before signing a lease, forming an entity, or starting to launch your private practice, you’ll want to review your employed physician contract very carefully and consult with legal expertise as needed to ensure that you aren't violating the terms of your employment.Â
Review your employment contract first before planning to open up a private practice on the side while you’re still employed
Before you do anything else, review your contract carefully. There are many provisions within your agreement that may affect whether or not your employer will have a problem with you practicing medicine elsewhere on the side, and it's not just your non-compete. These include:
Outside employment or clinical side gig restrictions
Moonlighting policies
Exclusivity clauses
Non-compete agreements
Non-solicitation provisions (regarding patients, colleagues, or employees at your current practice)
Confidentiality or intellectual property provisions (less common but potentially an issue)
It's not uncommon for contracts to prohibit any outside clinical practice without written permission. Others allow outside work as long as it does not interfere with your employed position. Don’t be the physician that discovers these provisions only after you’ve already started planning your new practice, or after you receive a legal notice from your employer. If there's any ambiguity in your contract about what's allowed and what's not, have a healthcare attorney review the contract before investing significant time, energy, or money planning for the new practice.
In some cases, you may find yourself having to resign if you really want to try your hand at practice ownership. In others, though, there may be a conversation to be had with your employer about ways to go down this pathway with their blessing.
Related PSG resources:
Pay attention to non-compete clauses that could restrict you from opening a private practice in the local area
One of the most obvious things that most physicians think about offhand is their non-compete, and whether it prevents them from opening a practice. The answer depends on several factors:
Whether the noncompete is always in effect, or only goes into effect after employment ends as part of the termination clause of your contract
Whether your state actually enforces physician non-competes, and to what extent
Whether your contract restricts ownership in other medical entities during employment
The specific geographic limitations of your noncompete
Any specialty-specific language that may allow you to do some things but not others
Importantly, many non-competes only become effective after your employment terminates. Note, though, that this does not necessarily mean you are free to actively compete while still employed. Other contract provisions may prohibit you from working with competing businesses during employment even if the non-compete itself has not yet taken effect.Â
Because physician non-compete laws vary significantly by state and are constantly evolving, make sure you speak to a healthcare attorney as well as look for prior precedent to see if your employer is likely to take action if you have a clinical side pursuit in the region.
Related PSG resources:
Understand your employer's moonlighting policy
Even if your contract doesn’t specifically include a noncompete clause, your employer may still have formal policies regarding outside work that could affect your ability to work clinically outside of your current job. Examples of common terms in contracts that could impact your right to work elsewhere without permission include:
Requiring written approval before practicing elsewhere
Limiting outside work to a certain number of hours or certain hours of the day
Restricting work for any competing organizations, whether yours or someone elses
Prohibiting the use of employer resources or employer time to work on something else
Requiring disclosure of ownership interests in other entities (and possibly approval)
Avoid conflicts of interest or with your current employer, or causing harm to the current employer
Understandably, employers generally expect physicians to act in the organization's best interests while employed. It's generally going to be best to maintain a very clear separation between your current place of employment and your new private practice. Potential conflicts that could cause serious legal or ethical concerns include:
Referring patients from your current place of work to your own new practice
Recruiting employees from your employer to work for your new practice
Using employer staff, equipment, or resources to help you build your new practice
Accessing employer patient lists for marketing or other purposes
Performing tasks related to your private practice during scheduled employment hours
Starting a private practice can be an all-consuming activity, and it's very tempting to use a few minutes of downtime at your current job to take phone calls or make progress on your to-do list. This sort of activity, though, could be used against you in a legal setting. Similarly, if anything you do is perceived to cause harm to the emploiyer, such as poaching employees or patients away from the current employer, hostility may quickly escalate or result in legal action.
Can you start seeing patients after work, on weekends, or on vacation days?
Many physicians kick off their practices by starting to see patients during evenings, weekends, or days off from thier place of employement. They may see patients in person at a new or rented location or via telemedicine. They may also offer concierge services or cash pay services on a limited hour schedule. This situation allows physicians to validate patient demand and experiment with running their own practice, while preserving the financial security of their employed position. The goal for many in this situation of course is to scale that practice to the point where they feel comfortable resigning from their day job, and this is precisely what most employers would be worried about. Once your current employer gets wind of this, they will most likely be operating under the assumption that you're on the way out. If this is not your goal, it's to your benefit to have an open and honest conversation with them about why you have the side practice, and reassure them that it's not your intention to eventually leave.
Address credentialing and malpractice coverage
As anybody that's ever looked into starting a private practice knows, it's about a lot more than hanging up a shingle and advertising that you're open for business. There are lots of legal and logistical boxes that need to be checked.
Note that all of these things, especially things like credentialing with insurance companies, can take several months, so if you are planning an insurance-based practice, you'll want to start this process well in advnace of quitting your day job.
You may (and most likely) also need to address:
Business formation (LLC, PLLC, or professional corporation depending on state law).Â
Individual malpractice insurance
Chances are, your current employer’s policy will not cover liability incurred by your new practice. Do some research to determine whether you'll need a separate policy.
Our guide to Insuring a New Medical Practice goes over various policies you’ll want to consider
Facility and business insurance as applicable
NPI and tax registrations
Medicare and commercial payer enrollment
Hospital privileges, if applicable
Office policies and HIPAA compliance
Billing systems
EMR selection
PSG resource:
Our Private Practice Startup Checklist covers these steps and more.
Addressing credentialing or enrollment with multiple practices
This may or may not be a big deal, but it is important that you navigate it correctly. The nuances are going to depend on how your new practice is set up and whether it accepts Medicare or commercial insurance as well. For example, there are real issues when it comes to opting out of Medicare in one practice but accepting it in another. That said, you are allowed to be enrolled in Medicare and commercial insurers in different settings; you'll just want to make sure that your NPIs and TINs are set up appropriately to ensure that you're billing correctly and appropriately credentialed.
Again, make sure you work with an attorney experienced in these matters to ensure everything is done properly and to avoid big issues further down the road.
PSG resource:
Should you tell your employer about your side practice?
While transparency is generally always a good thing, the real answer is that this depends. If your contract requires disclosure or approval, then yes, you should follow those requirements. If disclosure is not required, you'll have to weigh several considerations.
Reasons to disclose early:
Fosters transparency and good will, and not burning bridges is always a good thing
Avoids misunderstandings or accusations later
Allows for formal approval if required
Reasons physicians sometimes wait:
The practice is still in planning stages or they’re not sure it will even be successful, and don't want to create conflict or doubt before they're even sure they want to embark on the pathway
Concerns about retaliation on the job or about the employer terminating their contract early
Because every employment relationship differs, there is no universal answer. If disclosure could affect your employment, obtaining legal advice beforehand would be prudent.
As we alluded to before, especially if your intention is not to leave the employed position entirely, and this new practice really is a ‘side practice,’ it may actually be helpful to have your employer’s blessing, as it may help address issues like scheduling or any other conflicts that come up. The more your employer feels confident that you intend on staying at your current job and that the side practice won’t affect them, the more likely they are to be okay with it. Even in this scenario, though, it would likely be beneficial to get something in writing legally that states that they’re signing off on it to prevent further issues later.
Advantages to starting your private practice before leaving employment (if that is the intention)
It takes a long time to get a practice off the ground, and comes with a fair amount of risk, both professionally and personally. Advantages to trying to stay employed while you launch your practice include:
Continued salary and benefits
Stable health insurance
Time to build patient volume
Opportunity to refine workflows
Less pressure to generate immediate revenue
Ability to test your business model
Launching a private practice while employed can reduce financial pressure, and allow you to test the waters and see if you like being a practice owner, if your model is financially viable, and if you’re getting traction.Â
For physicians with families or educational debt, this gradual transition can significantly reduce financial risk. Additionally, it may take a lot of time to get the practice off the ground, and having income while you’re waiting for credentialing, hiring, etc., will avoid months where you have no income.Â
When you may want to wait to start your private practice until after you’ve resigned and are leaving your employed physician job
Starting while employed is not always ideal, though. Sometimes delaying the launch by several months avoids unnecessary legal complications, and allows you to launch fully focused on the practice, instead of trying to juggle it with a full clincal load at your day job. Additionally, there is some risk that you may get fired or asked to resign if your employer realizes you have one foot out the door.
Consider how much time you’ll need to launch your practice, and whether you can devote the energy you’ll need to make the practice successful while still employed. Waiting until after resignation to start your practice may make sense if:
Your contract prohibits outside practice
Your employer is likely to view the practice as direct competition
Your specialty requires significant upfront infrastructure
Your schedule leaves little time to build a practice
You anticipate litigation regarding restrictive covenants
Your employer is likely to terminate your employment once they learn that you are starting a private practice, and you’re not financially stable enough to have a period of unpaid time
How should you approach this conversation with your employer?
There are always nuances to this, and only you know your relationship with your employer, how amenable they may be to a less traditional situation, etc. The discussion is likely very different if you’re opening a side practice than if your intention is to eventually leave.
If you’re starting a side practice (let’s say a cash pay practice on the side on nights and weekends), you may just want to talk to them transparently about your goals, why you’re doing it, and also reassure them that it won’t affect your employment with them and that you have no intention of leaving. This will foster a much friendlier conversation.
If you’re starting a practice with the intention to leave, recognize this is going to raise lots of red flags. You can try your best to alleviate tension, tell them about the timeframe so they can plan accordingly, and tell them you’re happy to help with the transition or maybe even chip in as a per diem or locums while you’re building your practice, if and when the time comes to leave.
The best scenario is of course to approach this amicably. However, always be prepared for a scenario in which they decide to terminate employment once they realize that you may not be 100% committed to their job.
Related PSG resource:Â
Conclusion
While opening a private practice while staying employed reduces risk and has many advantages, you’ll want to make sure you approach it carefully so that you don’t expose yourself to legal liability or financial distress. Many successful practice owners spent months, or even years, building their business on evenings and weekends before making the transition full-time.
Enthusiasm should never replace due diligence. Before opening your doors, take the time to understand your employment agreement, avoid conflicts of interest, obtain appropriate legal and insurance guidance, and build a thoughtful business plan. Doing so can help position your future practice for long-term success while minimizing unnecessary legal and financial surprises.
Related resources for starting a private practiceÂ
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