How To Start A Medical Practice: 13 Critical Steps

Ever feel like you could run things better on your own?

The thought of starting a medical practice is a powerful one, but it’s easy to get bogged down by all the details. It can feel like a mountain of paperwork and decisions.

You’re not the only one thinking this way. A 2022 survey from the American Medical Association found that 46.7% of patient-care doctors work in practices wholly owned by physicians.

This guide will walk you through the 13 essential steps, from writing a strong business plan to picking the right electronic health record system and getting your national provider identifier.

Let’s get started and make your own medical practice a reality.

Key Takeaways

Following a structured plan is critical for success, as nearly half of U.S. patient-care doctors work in physician-owned practices. Key first steps include crafting a detailed business plan, creating financial projections, which often require over $100,000 for initial equipment, and conducting a thorough market analysis.

You must secure all necessary licensing and registrations before opening. This includes your state medical license, a National Provider Identifier (NPI) from NPPES, a system in place since HIPAA’s mandate in 1996, and a DEA registration for prescribing controlled substances. Delays here can stop your launch cold.

Choosing the right legal structure is crucial. A sole proprietorship is simple but offers no personal asset protection. A Limited Liability Company (LLC) shields your personal assets and provides pass-through taxation. An S corporation offers tax benefits but limits you to 100 U.S. citizen or resident shareholders.

Implementing the right operational systems is non-negotiable. Your electronic health records (EHR) must meet federal “Promoting Interoperability” standards to avoid penalties. You also need reliable practice management software for billing, scheduling, and telehealth.

Comprehensive insurance is mandatory. Most lenders require malpractice insurance to secure a loan. You’ll also need general liability for on-site injuries, property insurance for losses like fire, and cyber liability to protect against data breaches.

Develop a Medical Practice Business Plan

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Before you do anything else, you need a rock-solid business plan. This is the roadmap that bankers, investors, and any potential partners will want to see. It proves you’ve thought through the financial goals and operational details.

A study found that entrepreneurs who complete a business plan are 16% more likely to achieve viability than those who don’t. Think of it as your first diagnostic test for the health of your future practice.

What is your vision and mission for the practice?

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First, decide what kind of practice you want to build. Are you aiming for a solo practice or a group practice?

Your vision should define the patient care you’ll provide and the community you’ll serve. For instance, your mission could be to serve local families or veterans covered by programs like TRICARE or Medicare. You might even consider a newer model like Direct Primary Care (DPC), where patients pay a monthly fee for more direct access, cutting out the insurance middleman.

Lay out your core services, staffing needs, and a realistic growth plan in the executive summary. A strong mission shows how you’ll improve local healthcare access or quality, like providing affordable mental health support in an underserved area.

“Every good doctor leaves more than healthy patients; he leaves a healthier community,” says Dr. Charles Mayo.

If you’re worried about cash flow in the beginning, services like customer financing can help patients manage their bills, which keeps your revenue steady.

How do you conduct a market analysis?

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After setting your mission, it’s time to analyze the local market. You need to understand the patient demographics in your target area, including age, income, and typical insurance coverage.

You can find this data from reliable sources:

U.S. Census Bureau: Provides detailed demographic data for specific zip codes.
Kaiser Family Foundation: Offers state-level health data and statistics.
Google Trends: Lets you gauge local search interest for your specialty (e.g., “urgent care near me”).

Look at your competition, which includes other private offices, hospitals, federally qualified health centers, and academic health centers. Identify any gaps in service. Are there neighborhoods far from the nearest clinic? Is there a long wait time for dermatologists in your city? Finding an underserved niche is a golden opportunity.

Check out the local referral networks and see who the key players are. Your location and service offerings should be based on this hard data, not just a gut feeling.

How to create a 3-5 year financial projection?

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Now it’s time to crunch the numbers. Use a spreadsheet or accounting software like QuickBooks to list every possible startup cost. Initial costs can range from $70,000 to over $200,000.

Your major expenses will likely include:

Rent and Utilities: Varies greatly by location.
Medical Equipment: Often costs $100,000 or more for initial setup.
EHR System: Initial setup can range from $15,000 to $70,000.
Staff Salaries: Factor in pay for nurses, admins, and other staff.
Insurance: Includes malpractice, liability, and workers’ compensation.

You’ll also need a line of credit of at least $100,000 to cover payroll and unexpected expenses while you build your patient base. Project your revenue based on a conservative estimate of patient visits and reimbursement rates from Medicaid and private insurers.

These pro forma statements are what you’ll show to banks to secure a loan. Be prepared to submit your financials to five to ten lenders to increase your approval odds.

How can you secure funding for your medical practice?

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Let’s be honest, opening a clinic costs a lot of money. But there are several avenues for securing the cash you need, from traditional bank loans to private investors.

What loan options are available for medical practices?

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Many banks have dedicated divisions for medical and dental practices because they see physicians as reliable borrowers. Lenders like Bank of America Practice Solutions and Live Oak Bank specialize in healthcare financing and offer competitive terms.

Here’s a quick comparison of common loan types:

Loan Type	Typical Use	Key Feature
Conventional Bank Loan	General startup costs	Often requires a strong credit history and a 10-20% down payment.
SBA 7(a) Loan	Real estate, working capital	Government-backed, allowing for longer repayment terms (up to 25 years) and lower down payments.
Equipment Leasing	X-ray machines, exam tables	Spreads the cost over time, preserving your upfront cash for other needs.

Banks will want to see your business plan, credit history, and medical license before approving an application. They will also require proof of workers’ compensation insurance to protect your future employees.

How to find investors or alternative funding sources?

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If you prefer to avoid traditional bank debt, you can look for private investors or even family members. My cousin invested some seed money in my last practice after I walked him through my five-year financial projection.

Be aware that investors will want a clear view of your numbers and a piece of the action, usually in the form of equity or a profit-sharing agreement. This means giving up some control over your business.

If you want to maintain full ownership, sticking with an SBA loan or a bank loan is your best bet. The Small Business Administration offers several loan programs specifically designed for new medical practices.

I used an SBA 7(a) loan to purchase my first EHR system, which helped me keep my savings for payroll. Always have your National Provider Identifier (NPI) ready, as most lenders will ask for it during the application process.

Choose the Right Legal Structure

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Choosing your legal structure is a big decision that impacts your taxes, liability, and paperwork. You’ll need to decide between options like a sole proprietorship, limited liability company (LLC), or a corporation.

Some states require medical practices to form as a Professional Corporation (PC) or Professional LLC (PLLC), so consulting with a lawyer is a must.

What is a Sole Proprietorship and is it right for you?

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A sole proprietorship is the simplest way to structure a business. You are the business, and all profits and losses are reported on your personal tax return using a Schedule C (Form 1040).

A friend of mine opened his urgent care clinic as a sole proprietor because the setup was fast and easy. However, there’s a huge downside.

With a sole proprietorship, there is no legal separation between you and the business. If the practice is sued for an amount that exceeds your malpractice coverage, your personal assets, like your house and car, are at risk.

This lack of liability protection makes it a risky choice for most medical practices. Banks are also often more hesitant to offer large loans to sole proprietors.

What are the benefits of forming an LLC?

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A limited liability company, or LLC, is a popular choice for physicians. It provides a crucial layer of protection by separating your personal assets from your business debts and lawsuits. If someone sues your practice, your house and savings are safe.

LLCs offer several advantages:

Liability Protection: Your personal assets are shielded from business liabilities.
Pass-Through Taxation: Profits and losses pass through to your personal tax return, avoiding the double taxation that C corporations face.
Flexibility: You can choose how the business is managed and it’s easier to add partners than in other structures.

Setting up an LLC involves filing Articles of Organization with your state, which typically costs between $50 and $500 in filing fees. You can use a service like LegalZoom or hire a local attorney to handle the paperwork.

How do S Corporations and C Corporations differ?

S corporations and C corporations offer strong liability protection, but they have key differences in how they are taxed and structured.

An S corp allows profits and losses to be passed directly to the shareholders’ personal income without being taxed at the corporate level. This avoids “double taxation.” However, the IRS limits S corps to 100 shareholders, all of whom must be U.S. citizens or residents.

The main tax benefit of an S corp is that you can pay yourself a “reasonable salary” and take the remaining profits as distributions. These distributions are not subject to the 15.3% self-employment tax, which can lead to significant savings.

C corps are taxed separately from their owners. This structure allows for an unlimited number of shareholders from anywhere in the world, making it easier to attract venture capital. However, profits are taxed at the corporate level and then again when distributed to shareholders as dividends.

What licenses and registrations are required?

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Before you can see a single patient, you need a stack of official paperwork. Missing a single license can delay your opening for months, so it’s crucial to get this right.

How do you obtain a State Medical License?

You’ll need to submit an application to your state medical board, including your CV, diplomas, and USMLE scores. I recommend starting this process during your residency to avoid any delays after you finish.

To speed things up, you can use services like the Federation Credentials Verification Service (FCVS), which collects and verifies your records for you. This is especially helpful if you plan to practice in multiple states.

The Interstate Medical Licensure Compact (IMLC) is another great resource. As of 2024, it includes 41 states, making it much faster to get licensed across state lines, which is perfect for telehealth. You’ll also need to provide proof of malpractice insurance and undergo a background check.

What is a National Provider Identifier (NPI) and how to get one?

Every healthcare provider needs a National Provider Identifier (NPI). This 10-digit number is required for all billing and electronic claims submission under HIPAA.

It’s important to understand there are two types of NPIs:

Type 1 NPI: For individual clinicians (you).
Type 2 NPI: For organizations, like your group practice or LLC.

You need both. You can apply for free online through the National Plan and Provider Enumeration System (NPPES). The process is straightforward, but it’s a common point of confusion for new practice owners.

Without an NPI, you can’t get credentialed with insurance companies or join managed care networks. The American Medical Association offers guidance if you run into any issues during the application.

How to register with the DEA for controlled substances?

If you plan to prescribe or administer controlled substances, you must register with the Drug Enforcement Administration (DEA). First, make sure your state medical license is active, as you can’t apply without it.

You’ll need to fill out Form 224 on the DEA’s online portal. The application fee is currently $888 and the registration is valid for three years. Don’t wait until the last minute, as approval can take four to six weeks.

The DEA will send you renewal reminders, but if you miss the deadline, you have a one-month grace period. After that, you’ll have to reapply. Prescribing controlled substances with a lapsed DEA license is illegal and can have severe consequences for your career.

How do you find the perfect location for your practice?

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Your location can make or break your practice. It needs to be convenient for patients and have the right infrastructure to support your operations, including reliable internet for your electronic medical records.

How to evaluate accessibility and competition?

Visit potential neighborhoods at different times of the day to check traffic and parking. A lack of convenient parking can be a major deterrent for patients. Check for proximity to public transportation.

Use online tools to scout the competition. A quick Google Maps search will show you how many other practices are in the area. High saturation might mean stiff competition, but it could also indicate high demand.

Look for locations that are visible and have good signage. Being tucked away in a hard-to-find office park is not ideal. A spot near a pharmacy, lab, or complementary specialist can create a natural referral network.

What space considerations are needed for equipment and patient flow?

Once you’ve zeroed in on a location, think about the interior layout. Your space needs to be designed for efficient workflow and patient comfort.

Consider the following:

Accessibility: Ensure wide doorways and hallways to accommodate patients with walkers or wheelchairs.
Workflow: Arrange exam rooms, charting stations, and supply closets logically to minimize staff movement. A study by the an Architectural Research Centers Consortium found that well-designed layouts can improve staff efficiency by up to 20%.
Waiting Area: Make it comfortable and spacious to reduce patient anxiety.
Flexibility: Design rooms that can serve multiple purposes if you plan to add new services or providers in the future.

A practical layout ensures your practice runs smoothly, which improves both patient satisfaction and staff morale.

What equipment and technology do you need to purchase?

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You’ll need a mix of medical tools and modern technology to run an efficient practice. Your choices here will directly impact patient care and your bottom line.

What medical and diagnostic tools are essential?

The specific equipment you need will depend on your specialty, but some items are universal. Every practice needs exam tables, stethoscopes, thermometers, and blood pressure cuffs.

You may also need more specialized equipment, such as:

EKG Machines: For practices with a focus on cardiology.
Point-of-Care Diagnostics: Blood glucose meters and other rapid test kits.
Medical Refrigerators: For vaccines and other temperature-sensitive medications.
Ultrasound Machines: For specialties like OB/GYN or sports medicine.

Don’t forget the technology needed for modern care, like telehealth carts and webcams to connect with patients remotely. All equipment procurement should be driven by patient needs and your business model.

How to choose the right electronic health record (EHR) system?

Choosing an EHR system is one of the most important technology decisions you’ll make. With hundreds of vendors on the market, it’s easy to get overwhelmed. Focus on usability, cost, and how well it integrates with your workflow.

Look for systems that are certified under the federal “Promoting Interoperability” programs (formerly known as Meaningful Use). This ensures the system meets national standards for security and data sharing and helps you avoid reimbursement penalties.

My search took over a year. I recommend creating a detailed Request for Proposal (RFP) to send to vendors and asking for live demos. Platforms like Capterra and G2 provide user reviews that can be incredibly insightful.

An insider tip from Reddit forums is to always ask for a “sandbox” environment. This lets your staff test the software with dummy patient data to see how it performs under real-world conditions before you commit.

Involve your team in the decision, as they are the ones who will use it every day. A system that frustrates your staff will ultimately hurt your practice.

What practice management software should you use?

Your practice management software (PMS) is the backbone of your administrative operations. It handles scheduling, medical billing, and patient communication. The best systems integrate seamlessly with your EHR.

Popular options for small to medium-sized practices include:

Software	Best For	Key Feature
Kareo (now Tebra)	Solo and small practices	User-friendly interface and integrated billing services.
athenahealth	Growing practices	Cloud-based platform with strong revenue cycle management tools.
SimplePractice	Mental health and therapy	All-in-one solution with telehealth and client portal built-in.

I once used a program that constantly had issues with insurance claims, and it created a huge headache. Make sure you test-drive any software before you buy. A solid PMS will boost patient satisfaction and keep your operations running smoothly.

How do you hire and train your medical practice staff?

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Your team is your greatest asset. You need to hire people who are not only skilled but also share your vision for patient care. Good training is equally important to ensure everyone understands their roles and your practice’s policies.

What is the best way to recruit administrative and clinical staff?

Start by writing clear job descriptions. Outline the specific skills and qualifications needed for each role, from the front desk to your clinical staff.

Use healthcare-specific job boards like Health eCareers and Doximity to find qualified candidates. For a new practice, medical staffing agencies can also be a huge time-saver by handling the initial screening for you.

During interviews, use the STAR method (Situation, Task, Action, Result) to get detailed examples of how a candidate has handled real-world challenges. For example, ask them to describe a time they dealt with a difficult patient. Always check references before making a job offer.

If you’re looking to hire clinical support staff, you can learn more about how to become a medical assistant to understand their training and qualifications.

How to provide effective compliance training?

Compliance training is not just a box to check, it’s essential for protecting your practice and your patients. Every employee, from day one, needs to be trained on HIPAA, OSHA, and any other relevant regulations.

Use online training platforms like MedTrainer or Compliancy Group that offer engaging modules and track completion rates. This documentation is crucial if you’re ever audited.

Focus on real-world scenarios. For example, walk through the proper procedure for reporting a needle-stick injury to make OSHA’s bloodborne pathogen standards feel relevant. Regularly discuss cybersecurity best practices, like spotting phishing emails and using two-factor authentication, to protect patient data under the HITECH Act.

Hold brief Q&A sessions after training to make sure everyone understands the key takeaways. This ongoing education is the best way to build a culture of safety and compliance.

How do you secure insurance coverage for your practice?

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Insurance is your financial safety net. You need several different policies to protect your practice from the various risks you’ll face.

Why is medical malpractice insurance important?

Medical malpractice insurance is non-negotiable. It protects you from lawsuits related to patient care that could otherwise bankrupt your business and threaten your personal assets.

Premiums vary widely based on your specialty and location. For example, a general practitioner might pay between $4,000 and $12,000 per year, while a surgeon could face premiums of $50,000 or more. Top carriers in this space include The Doctors Company and MedPro Group.

Most lenders will not approve a loan for your LLC until you provide proof of malpractice coverage. This insurance gives you the peace of mind to focus on your patients without constantly worrying about “what ifs.”

What general liability and property insurance do you need?

Beyond malpractice, you need several other types of insurance to fully protect your practice.

General Liability Insurance: Covers claims for injuries that occur on your property, like a patient slipping and falling in the waiting room.
Property Insurance: Protects your building and equipment from events like fire, theft, or natural disasters.
Cyber Liability Insurance: This is increasingly important. It helps cover the costs associated with a data breach, including patient notification, credit monitoring, and HIPAA fines.
Workers’ Compensation: Pays for medical expenses and lost wages if an employee is injured on the job. This is required by law in most states.
Employment Practices Liability (EPLI): Protects you against lawsuits from employees related to issues like wrongful termination or discrimination.

Consult with an insurance broker who specializes in medical practices to make sure you have the right coverage for your specific needs.

How can you market your medical practice effectively?

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Once you’re ready to open, you need to get the word out. Effective marketing will help you attract new patients and build a strong reputation in the community.

How to build a professional website for your practice?

Your website is your digital front door. It needs to be professional, trustworthy, and easy to use. Clearly display your services, credentials, and photos of your staff to build immediate confidence.

Make sure your site is mobile-friendly, as over 60% of web traffic now comes from smartphones. I learned this the hard way when my first site was slow to load on phones, and my bounce rate was through the roof.

Include a HIPAA-compliant patient portal that allows for secure messaging and online appointment booking. This is not only convenient for patients but also helps keep you compliant with privacy laws.

Basic Search Engine Optimization (SEO) is also crucial. This means using relevant keywords and regularly updating your site with blog posts or practice news to help you rank higher on Google. If you want more general advice on building an online presence, check out these tips to grow an online business.

While your website is your home base, social media is where you can engage with your community. A study showed that 41% of consumers said social media content would affect

their choice of a specific doctor or hospital.

Platforms like Facebook and Instagram are great for sharing health tips, introducing your staff, and answering general questions. Just be extremely careful to never discuss specific patient information to avoid HIPAA violations.

Don’t overlook traditional local advertising. Sponsoring a local youth sports team or having a booth at a community health fair can build a lot of goodwill. Also, claim and optimize your free Google Business Profile. This ensures your practice shows up in local search results and on Google Maps.

Finally, actively manage your online reputation. Encourage satisfied patients to leave reviews on sites like Healthgrades and Vitals, and respond professionally to any negative feedback.

How do you establish relationships with vendors and payors?

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Your relationships with insurance companies (payors) and suppliers (vendors) are critical to your financial health. Good communication and clear contracts are key.

How to credential with insurance companies?

Credentialing is the process of getting approved to be in-network with insurance companies. It’s a notoriously slow and tedious process, so start early.

You’ll need to gather a mountain of paperwork, including your licenses, proof of malpractice insurance, and work history. Many physicians use the CAQH ProView platform, which is a centralized database that many insurance plans use to streamline the process.

Be prepared for the process to take anywhere from 90 to 150 days. Any mistake on your application can cause major delays. Once your credentialing is approved, the next step is contracting, which is where you negotiate reimbursement rates. Set calendar reminders for renewal dates, as your status needs to be re-verified every one to three years.

How to partner with billing and IT service providers?

Choosing the right partners for medical billing and IT can save you countless hours and headaches. When vetting a billing company, ask for their “clean claim rate,” which is the percentage of claims accepted on the first submission. A good partner should have a rate of 98% or higher.

Outsourcing your billing can significantly improve your revenue cycle management and let you focus on patient care. For IT, make sure any provider you choose offers HIPAA-compliant products and robust security measures.

Before you sign any contracts, carefully review the service level agreements, costs, and how well their systems integrate with your EHR and PMS. Switching vendors is a major hassle, so do your homework upfront to find the right fit from day one.

How to prepare for your medical practice’s opening day?

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As opening day approaches, it’s time to finalize all the operational details. A smooth launch will set a positive tone for your patients and staff.

What operations and administrative details need finalizing?

Run through a final checklist to make sure everything is in place. I once forgot to finalize the payroll setup until a week before launch, which caused unnecessary stress. Don’t make the same mistake.

Finalize Finances: Ensure your Tax ID Number is secured and your business bank accounts are open.
Confirm Staffing: Confirm all staff licenses are active and their training is complete.
Test Technology: Double-check that your EHR, PMS, and phone systems are working correctly.
Review Policies: Make sure all insurance policies are active and vendor contracts are signed.
Announce Your Opening: Send out a formal announcement to the community and any referring physicians.

How to conduct a soft opening to test workflows?

A few days before your official grand opening, conduct a “soft opening” by inviting a few friends or family members to act as test patients.

This allows you to do a real-world run-through of your entire patient flow, from check-in to check-out. Let your staff use the EHR system, like Epic or athenahealth, to schedule appointments, create charts, and process mock billing claims.

My first soft opening revealed that our staff needed more training on the EHR. We caught several small issues that would have been frustrating for real patients. Watch for any bottlenecks or confusion in the workflow and gather feedback from your test patients.

This dry run is the perfect opportunity to work out the kinks and build your team’s confidence before the real thing.

How will starting a medical practice change in 2025?

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The trend of physicians moving away from hospital employment and toward private practice is expected to continue. However, the landscape is always changing.

In 2025, data security will be an even bigger focus. With increasing cyber threats, practices must invest in robust security measures and cybersecurity insurance to protect patient data and comply with tightening regulations.

Insurance reimbursement models are also shifting. Many payors are moving toward value-based care, which rewards practices for patient outcomes rather than the volume of services provided. This means private practices will need to track their performance metrics closely.

Technology will continue to play a huge role. Patient expectations are rising, and tools like telehealth platforms, online scheduling, and automated appointment reminders are becoming standard. Practices that adopt technology to improve patient access and convenience will have a competitive edge.

Despite the challenges, private practices remain essential to the healthcare system, often providing care in communities that larger hospital systems overlook.