Doctors all Putting Their Hands Together

Starting a medical practice is a tremendous accomplishment in a healthcare professional’s career. It offers autonomy, the opportunity to care for patients based on your own medical philosophy, and the potential for financial success beyond what is available through employment.

However, launching a practice comes with substantial costs and challenges. This blog will discuss the major expenses of starting a medical practice and how to navigate them.

Costs Associated With Starting a Medical Practice

The startup costs for a medical practice can be extensive. Some of the primary costs to consider include:

1. Leasing or Purchasing Office Space

The cost of leasing or purchasing office space varies significantly depending on location, size, and amenities. Expect to spend between $2,000 and $8,000 per month on rent, with additional costs for utilities and maintenance

The most variable cost in a medical practice start-up comes from office construction. Renovating a space into a functional medical practice requires renovations and design work. Exam rooms, waiting areas, and offices need to be carefully planned. Renovation costs can range from $50,000 to $250,000, depending on the size and scope of the project.

2. Licensing, Insurance, and Legal Fees

Malpractice Insurance and Business Insurance

Malpractice insurance is a required expense for medical professionals. Premiums vary by specialty but often range from $7,500 to $50,000 annually. The practice will be required to carry general business coverage which can range from $3,000 to $10,000 annually.

Provider Credentialing Costs

If you plan to take insurance, you will need a team to credential and contract you with insurance payors in your area. Depending on the number of providers in the practice and the number of payors contracted, the cost can range from $3,000-$5,000.

Legal and Consulting Fees

Consulting with lawyers and medical practice consultants to set up your business entity, draft contracts, and ensure compliance while guiding you through the complex stages of a medical practice start-up can cost $50,000-$60,000.

3. Medical Equipment and Supplies

Equipping your practice with essential medical equipment is a significant expense. Exam tables, diagnostic equipment, sterilization tools, and computers can cost between $50,000 and $150,000. Additionally, regular expenses for medical supplies and disposables such as gloves, syringes, and bandages should be factored into your budget.

4. Healthcare Technology Investments

Electronic Health Records (EHR) System

An EHR system is essential for managing patient records, scheduling, and billing. In today’s practices, most of the costs of the EHR are incurred with the ongoing monthly subscription fees. The cost of an EHR install and implementation system can range from $1,000-$5,000.

IT Set-up and Support

Setting up a secure and efficient IT network is critical for protecting sensitive patient data. This includes computers, servers, cybersecurity software, and IT support services. Budget around $10,000 for initial IT setup.

5. Marketing and Branding Your Practice

Like any other business, attracting patients requires investment in marketing and branding. This includes creating a website, running online advertisements, and designing printed materials. Expect to spend $5,000 to $20,000 on initial marketing efforts.

6. Working Capital

In the first few months, your practice may not generate enough revenue to cover expenses, including staffing costs. Having sufficient working capital to cover rent, payroll, and other costs is essential. Aim to have at least $50,000 to $100,000 set aside to cover costs once the doors open.

Total Estimated Costs For Starting a Medical Practice

When all expenses are considered, starting a medical practice can cost anywhere from $250,000 to $500,000 or more, especially if there is a real estate purchase. The actual figure will depend on your location, specialty, and the scale of your operations. 

Tips for Managing Practice Startup Costs

  1. Create a Detailed Business Plan: Draft Financial Projections that detail the start-up costs and cash flow of the medical practice. These can be sent to financial institutions to receive practice financing.
  2. Secure Financing: Explore loans and other financing options to help cover all or part of the start-up expenses.
  3. Start Small: Begin with a modest setup and expand as your practice grows.
  4. Engage a Practice StartUp Consultant: Engage a consultant who has start-up medical practice experience and understands the cost requirements. This expert can strategize and advise on inevitable tough decisions. This is a crucial investment in the success of your medical practice start-up.

Simplify the Startup Process With DoctorsManagement

Starting a medical practice is an exciting, but costly endeavor. By understanding the major expenses and planning carefully, you can set your practice up for long-term success. The consultants and experts at DoctorsManagement have years of experience starting successful medical practices of various specialties across the country. Let us work with you to design and set up your medical practice from the drafting of the feasibility study all the way through opening the doors.

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