Skip to Content

How to Start a Medical Practice from the Ground Up

If you graduated from one of the numerous medical fields that abound in the United States, you must be congratulating yourself on a job well done. But then again you have to start thinking of making a good life and future for yourself out of the knowledge you acquired in the school and in various training capacities. While a lot of medical graduates seek paid employment when they graduate, others start thinking of how to set up a private practice.

Yet others would prefer to work a bit to gain more experience before transitioning into private practice. Whichever one you want to do, we are going to provide you a step by step approach on how you can set up your private medical practice in the United States.

12 Steps to Starting a Medical Practice From Ground Up

If you are ready to set up your medical practice business, we will now provide you a checklist that will help you along the way.

  1. Choose the kind of medical practice you want to start

When you decide that starting a private practice is in the cards for you, you have to start thinking about the type of medical practice that would be just right for you. Typically, you can start your medical practice business in five ways. They are;

Solo practice

When you start a solo medical practice, you take on almost all the responsibility. This gives you full control of how your practice operates, but you may encounter higher startup costs for things such as marketing and medical equipment, and you’ll certainly have to put in more hours, since you’re working on both the business and clinical sides. On top of this, you’ll take on all the other risks of starting a business because you are running the ship alone.

Group practice

When you start a group medical practice, you share the work burden evenly with other medical professionals, so you’ll work less. These shorter hours come at the expense of the full control you have with a solo medical practice, but you may have easier access to working capital, thereby lowering your startup costs.


If you start a medical practice within a hospital network, you will work on a schedule and be subject to certain employee constraints, but you’ll have the hospital’s working capital and marketing resources at your disposal. You’ll also minimize the risk involved in starting a new business, though you may not have as much personal flexibility and freedom; you may have to work within the boundaries set by a medical board. Joint ventures with hospitals account for 16% of urgent care clinic ownership, so hospital-owned businesses may be right for you if you’re interested in urgent care.

Federally qualified health center

If you start a medical practice within a federally qualified health center, your launch will work almost the same as it does when you go the hospital-owned route. With federally qualified health centers, you may run up against slight caps on working capital based on federal resource allocation.

Academic health center

As with hospital-owned practices, when you start a medical practice within an academic health center, you minimize risk while sacrificing autonomy. Unlike with a federally qualified health center, though, you’ll experience few caps on working capital.

2. Find a Suitable Location

When choosing the location for your medical practice, you have to take a couple of things into consideration. As well as considering the previous aspects of demographic and new/existing clinics, you also need to think about the following factors:

  • Other medical practices in the area (competitors and complementary businesses)
  • Other Health Services
  • Pharmacies
  • Hospitals
  • Aged Care Services
  • Community Facilities
  • Transport Infrastructure
  • Pathology and Diagnostic Services
  • Any other key personal criteria

If you’re not going to be able to achieve the results you’re looking for in a certain location when it comes to these factors, avoid it and look elsewhere. Additionally, it’s important to consider the things that could affect the population of an area, such as housing prices, local facilities, schools and other aspects, and think about whether changes in the market long-term will support your clinic.

3. Get Incorporate as a Legal Entity and Obtain a Tax ID

Before you can open your doors, you have to choose a legal structure for the medical business you are starting. Incorporate your business as a legal entity to minimize your liability. This means that only business assets are risked in the event of a law suit. The choice you make in legal structure also impacts your tax benefits. You are free to choose between an LLC, S-corp, C-corp, or general partnership. Before making a decision, research each entity structure to determine which is best for your situation. When starting a medical practice from the ground up, it is important to select the right legal structure to limit your liability and take advantage of tax benefits.

The main reason for incorporation is limited liability, which means if you’re sued, only the assets held by the company are subject to any risk. Without incorporating, you’ve opened up your personal assets to the threat of a lawsuit. You should also note that certain tax benefits are associated with each type of entity. Whether you incorporate as an S-corp or LLC, a C-corp or a general partnership, it’s important to do your research on each type of entity and the potential benefits it offers your practice.

4. Apply To Become A Medical Care Provider

Starting a medical practice from the ground up requires you to become a legally licensed medical care provider. All individuals are required to meet certain criteria before opening their small business. As a medical practitioner, you have even more duties. You have to apply with the National Provider Indentifier (NPI) and apply to participate in Medicare or Medicaid programs.

Without approval from these institutions, you will not be able to operate. Having NPI, Medicare, and Medicaid approval means that you will get paid for services provided to patients with insurance. The application itself takes 10-20 minutes and approval is issued within 10 business days. If you want to start your medial practice from the ground up, then you will have to apply to become a licensed medical care provider.

You will also need to get your healthcare providers credentialed to submit claims to the payers you’ll be working with. The credentialing process can take up to three months, but it is best you give yourself 150 days, in case something goes awry. You’ll need to navigate the process for each payer you plan on submitting claims to, which includes offering up information on each physician’s work history, proof of malpractice insurance, hospital privileges and attestations.

5. Create a Pro Forma and Obtain Financing

A pro forma is essentially the lighter version of a full-blown business plan, with revenue and debt projections grounded in reality. In your pro forma, account for all your medical clinic expenses, debt and anticipated revenues. Bankers can tell what projections are realistic and which aren’t; it’s their job to make wise investments, so you’ll want to back up any numbers you use. A strong pro forma will project at least three years into the future, sometimes as far as five years out.

Obtaining financing through a traditional bank loan can be tricky, especially considering that many healthcare providers have a negative net worth after taking on debt to attend medical school. That’s where a solid, realistic pro forma comes in.

6. Get licensed

Before you can get your practice up and running, you need to follow relevant regulations set by the federal government and your state. Many regulations are specific to medical specialties, but here are some basic requirements that most physicians need to follow:

State licensing: You need to get licensed by the medical board in your state. The Federation of State Medical Boards’ website has a list of links to each state’s board.

National provider identifier: All medical providers need a national provider identifier number, which you can apply for on the National Plan and Provider Enumeration System website. Medicare, Medicaid and private insurance companies use this number to keep track of health providers.

DEA registration: To prescribe medication, you’ll need a DEA number issued by the U.S. Drug Enforcement Administration. You can apply online at the DEA website.

Additional regulations: There are other specific rules depending on the type of medicine you practice and the procedures you provide. For example, if you have an in-office laboratory, you need certification by the Clinical Laboratories Improvement Amendment program through the U.S. Centers for Medicare and Medicaid Services. If you have X-ray equipment, you have to register with your state, typically through the health department.

7. Get Insured

Every business owner understands the importance of insurance, but for medical professionals, it’s even more crucial. First and foremost, you’ll want medical malpractice insurance coverage. Beyond that, it’s likely that the bank issuing your loan will require you to adopt additional coverage such as workers’ compensation, though the exact kind might vary from bank to bank. You’ll also need general liability insurance. You will probably at least need life and liability insurance, just because bankers will require it.

8. Get Your Tools and Software Together

Once you’ve obtained a loan and opened a line of credit, you’re ready to start putting together the meat and potatoes of your practice – hiring your team and purchasing the medical equipment you’ll need. This task is easier said than done, and ample research is necessary for each decision. But again, with a little planning and the right information, setting yourself up for success is just a matter of effort. Here are some of the things you’ll need to consider.

Electronic health record system

Electronic health record (EHR) systems are increasingly essential tools of the trade for medical providers. Digitizing records and streamlining communication is a high priority for the modern healthcare provider. An all-inclusive EHR serves as a one-stop system for your patients’ records and histories, communications with other providers, lab and prescription orders, and information on your revenue cycle. Moreover, you’ll need a well-functioning EHR system to qualify for federal incentive payments.

Practice management system

Your practice management system is the lifeblood of your practice. Integrated with your EHR system, a practice management system keeps track of all your front-office information and facilitates operations. Chief among its uses is conducting and monitoring your billing and revenue cycle. Not only will your staff use the practice management system to bill patients and send claims to payers, but any relevant information will be shared between the EHR system and the practice management software, eliminating the need to duplicate records.

Medical billing service

Of course, you can always outsource your billing to a third-party company. You’ll still need a practice management system, but then your staff won’t be responsible for overseeing the billing process. Not only is submitting claims time-consuming and difficult, but your staff would also be responsible for responding to rejected or denied claims to get the money due to your practice. When you opt for a third-party billing service, that burden shifts to the company you’ve contracted with.

Medical transcription software

You’ll want to consider how medical transcription fits into your practice. There are typically three ways a medical business performs transcription: in-house with a staff member, via voice recognition software, or outsourced to a medical transcription service. The key aspects are timeliness and accuracy; you want your dictations returned in print quickly, but only if they’re accurate, especially if they are going to another healthcare provider or will be uploaded into your EHR system.

Background check services

Medical practices are founded on trust. Not only do they handle a lot of sensitive patient information every day, but people are literally trusting the practice with their lives. That extends beyond exams, diagnoses and treatments. You’ll want to know and be able to trust your staff, which means employing a background check system. Of course, you’ll be interested in candidates’ criminal and employment histories, but healthcare providers have more to consider beyond what the average background check provides. There are also required certifications and licenses to consider. Failure to ensure your staff isn’t properly credentialed could result in big problems for your practice.

Credit card processor

Although you’ll be making most of your money through payers like insurance companies and Medicare, your practice will need a credit card processor for when patients have to pay at the point of care. Not only has the world of credit card processing changed lately with the addition of EMV chips and other security measures, but some systems are more suited to the medical field than others.

9. Purchase Medical Equipment

Another thing you will have to do to start your medical practice is purchase the equipment you will need. This covers more than just the medical equipment required to assist patients. In your equipment costs, include computer hardware and software, waiting room furniture, and a communication system. Also, take into consideration any employee amenities you will have to provide. Many practitioners just starting out fail to account for these expenses. This is why it is important to properly evaluate the capital you need while in the fund-raising phase. When starting a medical practice from the ground up, ensure you know what equipment you need to purchase. Standard items you will need include:

  • Clinic Equipment: Stethoscopes, Exam tables, otoscopes, blood pressure monitors and other monitors
  • Office Equipment: Computers, printers, network equipment, phones and payment machines
  • Supplies: General medicine, disinfectant, anaesthetic, gloves, scalpels, syringes, gauze, bandages etc.
  • Network Services: Phone networks, internet, utilities
  • Clothing: Lab coats, uniforms, name tags
  • Furniture: Tables, chairs and décor

10. Medical Clinic Design and Furnishing

If you’re buying a clinic it may come with existing furnishings or may need renovation. When building, you will need to look at hiring designers, builders and more to help create a space that is going to support your business. Things to consider include accessibility, parking space, lighting, space required for chairs, storage areas, administration areas, and the overall design of the clinic. Talking to several experts before building anything can help you avoid potential problems and refine your plans. Remember to plan for the future, as your clinic will grow with time. Failing to plan ahead and outgrowing your space can cause major problems down the line.

11. Hire staff

Hiring the right staff is crucial to running a good medical practice. Your staff need to have the right mix of skills, knowledge and competency, as they will have a large influence on the quality of service, as well as costs and overall performance. Think about the primary care services you will deliver, and every task that is performed to deliver the services. From there, map out the people you will need to hire.

Most clinics will need general practitioners, nurses, receptionists, an account manager, payroll officer, bookkeeper, business manager, practice manager, IT consultant and any specialised staff. While your clinic won’t need all of these, it’s important to work out exactly who you need to hire.

12. Get Your Name Out There

Advertising and marketing is quite important to your business’ success. Business cards, flyers, and banners are all worthwhile expenses for your company’s marketing strategy. Simply making your name and logo visible will help direct more customers to your door. Then, it’s up to you to retain them with top quality treatment and customer service.

Use of social media is also worth the work, as it is often a free option to generate more customer knowledge of your services. Look for groups and organizations who have forums or online communities, in which you can become a known commenter or add your own blog content.

Create a web presence, including social media pages and a professional-looking website that includes all the information a potential client needs to get in touch with you to get a reservation. Take out ads in the local paper as well, and stay connected with those people who answered your questions in the very beginning. They might end up being your first and even longest-term patients.