How Much Money Does It Take To Start A New Medical Practice

Starting a new medical practice is an exciting endeavor that requires careful planning and financial consideration. Whether you’re a physician looking to venture into private practice or a group of healthcare professionals aiming to establish a clinic, understanding the financial aspects is crucial. In this blog post, we will explore the various factors involved in determining how much money it takes to start a new medical practice.

Location and Space For Starting Your Medical Practice:

One of the primary considerations when starting a medical practice is the location and space requirements. The cost of real estate varies significantly depending on the region and whether you decide to lease or purchase a property. Additionally, the size and layout of the space needed to accommodate patient rooms, waiting areas, administrative offices, and specialized equipment will influence the overall costs.

Go to LoopNet and see what real estate is renting for in your area. Lets make some Assumptions:

  • 1,500 sq ft rental @ $40 / sq ft per year. = $60,000 rent per year


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Licensing and Legal Requirements:

Before starting a medical practice, it’s essential to fulfill licensing and legal requirements. These may include obtaining a medical license, forming a legal entity, acquiring necessary permits, and complying with healthcare regulations. Costs associated with legal consultations, paperwork, and licensing fees should be factored into your budget.

  • I hired Jim Kelso and paid $1,000 to get my legal structure formed for my practice
  • Another $1,000 in other fees along the way
  • Total – $2,000

Equipment and Supplies:

Medical practices rely on various specialized equipment, instruments, and supplies to provide quality patient care. Depending on the specialty, you may need examination tables, diagnostic devices, laboratory equipment, electronic medical records (EMR) systems, furniture, and more. Researching and budgeting for these essential items is crucial to ensure that when you start your medical practice, it operates efficiently.

  • Exam Tables $1,250 each x 4 exam rooms = $6,000
  • Computer for you and front staff: $3,000
  • Printer: $400
  • Start up material: Business cards, Rx pads etc: $5,000
  • EKG machine $500 second hand on ebay

Staffing and Payroll:

A successful medical practice requires a competent and dedicated team. Consider the number of staff members you will need, including physicians, nurses, receptionists, and administrative personnel. Factor in their salaries, benefits, and training costs. Outsourcing certain tasks, such as billing or IT support, may also be an option to optimize costs. Make sure you account for extra costs of employer paid insurance and taxes.

I’ve found that a good rule of thumb is to estimate about 20% above an employee’s salary to include employer based taxes and benefits.

  • $25 / hr X 80 hour week = $2,000 per week + 20% estimate as above = $2,400 per week.
  • Quickbooks $300 / year

Technology and IT Infrastructure:

In the digital age, a robust IT infrastructure is essential for a modern medical practice. This includes computers, servers, networking equipment, cybersecurity measures, EMR systems, and patient communication tools. Investing in reliable technology and data security is crucial to protect patient information and ensure smooth operations.

I use AdvancedMD for my EMR and Unifi for all my hardware in the practice.

  • AdvancedMD $600 / month per provider
  • Unifi equipment (cameras, router, switch) $4,000

Marketing and Branding:

Establishing a strong presence in the community is vital for a new medical practice. Consider budgeting for marketing initiatives, including website development, online advertising, search engine optimization (SEO), and traditional advertising methods. Building a strong brand reputation and attracting new patients will require strategic marketing efforts.

  • I spent $0 on this but be smarter than I was. Advertise. Even peak advertising we never spent more than $1,000 a month. I would use this as your estimated average.

Insurance and Malpractice Coverage:

Medical malpractice insurance is a critical expense for any healthcare provider. The cost of malpractice coverage can vary depending on your specialty, location, and professional history. Research insurance options and consult with insurance providers to understand the expenses involved.

  • Outpatient primary care malpractice where I’m at $5,500 / year

Financial Reserves and Contingency Planning:

Starting a medical practice is not without risks and unforeseen challenges. It’s crucial to have a financial reserve and contingency plan to handle unexpected expenses, slow patient volumes during initial months, or any emergencies that may arise. Building a buffer for contingencies will provide peace of mind and stability during the early stages of your practice.

A 6 month reserve for all expenses above puts you at $80,450

Thats assuming that you make zero dollars for the first six months, which is highly unlikely and honestly probably overkill. However, if you really wanted a sleep well factor, that is what it takes to have 6 months in cash reserves to pay for a practice assuming that you bring in zero dollars that entire six months (which is not going to happen).

Add to the above total whatever extra start up costs you will need. Such as equipment if you need a C arm, or certain surgical equipment.

How Much Money Did I Have To Start My Medical Practice

I didn’t have the above cash reserves when I started up my medical practice. Instead I started very lean and did locums to pay for expenses as they came up. I also subleased from a general surgeon, which saved me a ton of money.

The above cash reserves are an example for your business plan when starting up your own medical practice. However, it is unlikely that you will need all of this in reserves when you start, especially if you have supplemental income from another source such as locums. In that case, I would look at what is your realistic income going to be from locums (or other sources) over the first 6 months, compare that to the total expenses above, and if there is a difference then save up that amount instead.


Starting a new medical practice requires a comprehensive understanding of the financial implications involved. While the exact cost may vary depending on numerous factors, including location, specialty, and practice size, considering the expenses mentioned above will help you create a realistic budget. By carefully planning and making informed decisions, you can lay a strong foundation for a successful and sustainable medical practice.

One thought on “How Much Money Does It Take To Start A New Medical Practice

  • February 23, 2024 at 11:03 PM

    Dr. Brad,
    I am a family nurse practitioner living in NY. My husband is currently sick and I have small kids 3, the oldest is 8-year-old. I need help in my journey of starting my medical practice. New York is like shark town everyone wants to charge you for inaccurate information. You’ve been there. I want to do the practice on my first floor. I would like to have your advise on how to modify it so that it passes inspection. I already contacted to zoning department they ok the house and encourage me to start the practice.


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