We are big fans of the autonomy physicians have when they own their own private practice. The idea of starting a private practice is understandably daunting, with many steps to even open the practice, let alone run the practice. That said, for decades, physicians have done this and you can too.
Prepare well in advance to set yourself up for success, and take things one step at a time. While the process is time and resource intensive and will require a willingness to learn and get your hands dirty, you can make it easier by leveraging the expertise of your colleagues, consultants, and vendors. Below, we cover a checklist of priorities to include when starting a private practice.
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When you need financing for your medical practice, you want to work with someone who understands your industry. For over twenty years, Bank of America Practice Solutions has helped doctors across the nation reach their goals through smart financial solutions1 and expert guidance. Whether you own a practice or are just getting started, we can provide customized financial help for your short-term needs and long-term aspirations.
Purchase and start-up:
Practice sales and purchases
New practice start-ups
Owner-occupied commercial real estate products2
Growth and restructuring
Improvement and expansion financing
Practice debt consolidation3
Expert guidance. Personal attention. Real solutions.
To learn more, reach out to Paul Belau, 614.679.5321 or email@example.com.
1 All programs are subject to credit approval and loan amounts are subject to credit worthiness. Some restrictions may apply.
2 For Owner-Occupied Commercial Real Estate loans (OOCRE), terms up to 25 years and 51% occupancy are required. Real Estate financing options are subject to approval and product availability is subject to change. For SBA loans, SBA eligibility and restrictions apply.
3 Bank of America may prohibit use of account to pay off or pay down another Bank of America account.
4 To be eligible for this reduction, applicants must provide association name and membership number at time of approval.
Bank of America is a registered trademark of Bank of America Corporation. Bank of America Practice Solutions is a division of Bank of America, N.A. ©2019 Bank of America Corporation | MAP#3249875
Learn more at bankofamerica.com/practicesolutions
Disclosure: Bank of America is a sponsor of our Private Practice Education Series and partner of ours, which means that we may earn a referral fee if you decide to contact them.
Billing and Coding
Cosentus has been reviewed highly by several physician clients that we spoke to who are currently using their credentialing, billing and coding, revenue cycle management, and accounts receivable services. As part of our partnership, they offer our members a free professional billing and coding review as well as 5% off services through our affiliate link with the code PSG5OFF.
Visit our credit cards page to view the list of highest ranked credit cards from within our physician communities, including business cards.
Credit Card Processing
Visit our Physician Website 101 page to learn more about developing your website for your private practice, as well as relevant resources.
Visit our insurance primer pages for more information and resources for:
Edge Health provides college educated remote employees that work full time for your practice. They perform tasks such as primary or secondary phone support, billing, claims, insurance verifications, scribing, social media, and other tasks. Practices tend to use the services in multiple different ways. They are trained prior to starting in your office, and the cost is substantially less than what you would pay an in-house employee. To learn more about Edge's services and schedule a demo, and receive $500 off each of your first 3 months, connect through our affiliate link.
Gusto (affiliate link) has been highly reviewed by many of our members, and includes options for managing payroll and benefits. We have partnered with Quickbooks to offer PSG members an exclusive 30% off discount on Quickbooks Online accounting software for your first 6 months using our affiliate link.
Starting a Private Practice Checklist
Start by establishing the big picture and ensuring viability, and then take a step-by-step approach (some steps may take longer than you think, so plan accordingly).
Below, we cover a broad overview list of your priority steps.
Business Pro Forma
A pro forma is a set of financial statements a business uses to project out future income and expenses to help forecast profits. Having a pro forma is a fundamental first step starting your private practice. Do not skip this step, as this will guide many of your financial decisions. Often, the entity providing your finances will also create a pro forma for you based on their experience lending to private practices, so leverage their expertise as well.
Consider the following when building your future private practice's first pro forma:
First, decide what your ideal patient population is. Start without limitations and picture what your practice looks like. The different possibilities will vary by specialty, but it's important to think about what mix will give you the right balance of personal, professional, and financial satisfaction for you. What kind of hours do you want? What start up costs are feasible? Some options include:
Cash Based Practice
Direct primary care (DPC)
Hybrid Insurance and Cash Based Practice
Then start figuring out what you would need for that model to happen. Be practical about the feasibility. While you may dream of an all cash practice providing concierge services to the stars, it may not be viable in your market (or you may need to move to make it happen). Thinking about the payor mix, demographics in your desired area, and market saturation will all come into play. Are any of the options eliminated? Don't be discouraged - there are plenty of hybrid models you could consider and ways to get creative. You should innovate and iterate until you've found something that seems like the right fit for you. Maybe you do some days of conventional care and do telemedicine on other days while renting out your office to a related service such as a physical therapist, so that you can have the life you want. Keep in mind this may be a long term goal, and at the beginning you may have to do whatever it takes to keep the lights on.
Determine the Need for Your Services
Do a SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis on your practice model before starting your private practice. It's important to factor in local market conditions and competition, as well as payor mixes and referral patterns as you shape how your go to market strategy and how you will set yourself up for success. You're going to want to find out which payors are accepting new contracts, as well as get the inside scoop on who people are currently referring patients to for the services you provide. Are they happy with those options? Where can you fill a niche that is needed, or create demand based on a popular trend? Are there ancillary services you could add to make your practice more well rounded and create more income streams?
Analyze your competition to determine where you can fill a gap in the current market. Consider:
Volume of patients
What you can offer that's different than the competition, whether it's a specific procedure or service, or whether it's different office hours
Financial Analysis and Budget
Now comes the practical part. How much of an upfront investment are you going to need to get this practice off the ground? It's important to note that most people don't go straight to the multi-million dollar space on Park Avenue in NYC.
What do you need to generate to break even? This is critical to know, as the vast majority of small businesses that fail due so from a lack of capital. When starting your private practice, we recommend looking at conservative 1 year, 3 year, and 5 year projections for revenue with as much information as you can.
As you put pull together this analysis, take into consideration (at a minimum):
Start up costs - legal, accounting, consulting, etc
Year 1 expenses
Other potential major expenses like marketing, website development, inventory, hiring, etc
You will want to budget for at least 6 months worth of expenses when considering how much financing you need, as it will take a while for insurance payment account receivables to start coming in and for your practice to really pick up speed. Particularly in today's market where credentialing is taking a while and interest rates are high, it's best to be conservative and hope to be pleasantly surprised.
Your location will in part determine your financial forecasting, so consider location as you build your pro forma. Determine the location most accessible to the largest percentage of your target patient population. Heavily research:
Proximity to referring practitioners and hospitals
When your location is secure, it's time to plan what it will look like. Consider the following, making sure you account for them in your business pro forma analysis:
Potential rehab expenses for the space
Learn more about leasing versus purchasing and a more comprehensive list of considerations on our choosing a location for your private practice page, linked here.
Financing and Documentation
Once you have your business pro forma and your private practice's location, it's time to put your pro forma plan into action.
We recommended having a line of credit or loan to cover at least 120 days of initial expenses when starting a private practice. Whoever you choose for financing should be able to be a true partner in this process. Choose someone who has worked with practices in your specialty before and can help you objectively evaluate the pro forma you've put together and point out any additional considerations. They will typically run their own projections as well. Our partner, Bank of America, has a dedicated Practice Solutions department to help physicians become entrepreneurs and establish their own practices. View the resources section above for more information. We also did an entire event with them on practice financing on Physician Side Gigs, which you can review for a lot more details (you must be a member of the group to watch).
When setting up a private practice, the type of entity you set up is important. Depending on how many partners will be forming the private practice, you may want to consider:
LLC or PLLC
Visit the types of business section of our self-employed finances page for more information on each. Setting your private practice entity up can require a lot of paperwork, such as articles of organization/incorporation. Rules can vary by state depending on the entity type, so we recommend working with an attorney.
Before opening your doors and seeing your first patient, you'll want to have the following in place:
EIN/tax ID: You can do this directly with the IRS online. There are different types of EINs, so be careful when setting yours up. A business accountant can help you through all the logistics, including setting up your software before, if you need professional guidance.
Business bank account: Even if you're starting a private practice as the only physician, you'll want to make sure you have a separate bank account.
Business credit card: The same applies for a business credit card. Visit our credit cards page to learn more and to see which cards, including business cards, our members recommend the most within our physicians-only Facebook communities.
Accounting software: When starting a private practice, you'll need a fairly robust accounting software that can handle tax reports, payroll, financial statements, and more. We have partnered with Quickbooks to offer PSG members an exclusive 30% off discount on Quickbooks Online accounting software for your first 6 months using our affiliate link.
Your practice manager will be the most important (and usually, your first) hire. The practice manager oversees strategy/execution and hiring. Ideally, find one with past practice management experience, a large network of others in the space who they can call upon for advice, and one who is driven to make your practice succeed. Make sure that you find someone who you enjoy working with and get along well with, as you will be working with them very closely. You are also going to need somebody that you can trust. While many practice owners (rightfully) want to oversee everything at the beginning, you will quickly find that the need to outsource tasks will be important so that you can focus on good patient care and building the reputation of the practice rather than day to day management. Incentivize your practice manager to be a go getter.
Other staff to accountant for in your planning include:
Front desk staff
Stay as lean as possible, as payroll is one of the most expenses overhead costs. A virtual assistant can help immensely as you start your private practice and while you grow. Staffing costs are one of the largest expenses for a private practice, and it's important that you think carefully about each hire. At first, some of your hires may be help in multiple capacities, and as you get bigger and busier, you can have them hone down on specific areas of expertise.
Software such as Gusto (affiliate link) has been highly reviewed by many of our members, and includes options for managing payroll and benefits for your staff.
While large companies often have a dedicated human resources department, a small private practice that's just starting out likely won't have the need for a dedicated employee. You will, however, need to follow certain government regulations and it's good to have policies set up. Consider the following before bringing in your first employee:
Policies and procedures manual
Ideally, your practice manager has experience and networks in these arenas and can help you sort through the things you need as well as keep them organized.
Vet Potential Vendors and Services
Depending on the size of your practice and your location set up, you may want to outsource some or all of the following. When bringing in any outside services to help, make sure you vet them properly, as each can contribute to your reputation and will be a line item in your pro forma. Additionally, deficiencies in any of these can really take away from your ability to be profitable. If money isn't coming in or if your time is spent dealing with technical issues instead of seeing patients, issues with these services can quickly become a threat to the viability of your practice.
Information technology (data backup and storage, phone lines, internet)
Electronic Health Record
Practice management software
Credit card processing
Pay particular attention to how you are going to get the word out and what your go to market plan is, as you're going to want to hit the ground running. Once you have a name set, purchase a website domain name and get a website created. More on this here.
Credentialing, Contracting, and Other Logistics
Taking care of credentialing and logistics typically takes longer than you think, so start this early and keep track of your progress so you don't have to delay your opening. Logistics to get in place include:
Get your state license - this typically takes longer than you think
Group NPI/DEA/Medicare provider numbers
Get credentialed at your local hospitals
Apply for insurance and Medicare/Medicaid coverage*
HIPAA and MACRA compliance
* It is likely if you are on your own you’ll have little ability to negotiate private insurer contracts, but try your best, and keep continuing to try as you grow. We have a dedicated section on credentialing and contracting on our private practice page.
Insurance and Benefits
With the changing trends in the job market the past few years, finding and keeping staff has become an increasingly difficult task for private practices. Insurance and benefits can be a large incentive for employee retention while offer you some tax-advantaged benefits and tax breaks as well. Look into the following options for you and your staff:
* Ensure legal compliance. An attorney and/or accountant can help you manage the different compliance requirements.
In order to protect your business and your investment in it, make sure you consider the following policies before starting your private practice:
Commercial umbrella Insurance
Liability insurances (i.e. general liability, professional liability, cyber liability, etc.)
Commercial property insurance
Workers' compensation insurance
Starting a private practice is an undertaking, but one that can be highly rewarding. We hope the above checklist and walkthrough help give you a starting point as you work to open your own private practice. Visit our main private practice page to find more in-depth looks on some of these topics. If you have a question we haven't covered, ask the hive mind in our Physician Side Gigs Facebook community.