How to Start a Medical Practice: A Physician's Step-by-Step Guide
Starting a medical practice costs $70,000 to $100,000 and turns on one early decision: whether you bill insurance. A step-by-step guide for physicians.
Starting a medical practice takes three things in order: choose your payment model, build the legal and regulatory foundation, then set up the clinical and technical infrastructure. The payment model comes first because it determines everything downstream — whether you need payer credentialing, how much staff you hire, and how long it takes before you can see your first patient.
Most guides skip that. They hand you a checklist that assumes you are billing insurance, which is why so many physicians are surprised when the timeline stretches past six months. If you are opening a cash-pay, membership, or direct care practice, a large share of that checklist does not apply to you.
How much does it cost to start a medical practice?
Plan for $70,000 to $100,000 to open a traditional medical practice, according to Wolters Kluwer, which compiles estimates from Doctorly and Physician Practice Specialists. The largest recurring line items are staffing, space, and insurance.
| Expense | Typical cost |
|---|---|
| Office space (~2,000 sq ft) | $2,000–$2,500 / month |
| Staffing | ~$3,000 / month |
| Medical malpractice insurance | $5,000–$15,000 / year, varies by specialty, location and claims history |
| General liability insurance | ~$1,000 / year |
| Vendor and software setup | ~$5,000 initial, ~$700 / month |
These figures assume an insurance-based practice. A membership practice changes the arithmetic in two specific ways: you are not hiring or outsourcing billing and coding staff, and you are not carrying months of accounts receivable before revenue arrives. Membership dues are collected on day one of the month, not ninety days after a claim.
How long does it take to open a medical practice?
The single biggest variable is payer credentialing. If you plan to bill insurance, credentialing and payer contracting are the long pole, and the American Medical Association's own guidance is to start licensing and credentialing "as early as possible" because the rest of your launch waits on it.
If you do not bill insurance, that entire dependency disappears. A direct primary care or concierge practice has no credentialing queue, no CAQH profile to maintain, and no payer contracts to negotiate. What remains — entity formation, licensing updates, malpractice coverage, a space, and an EMR — is largely work you control the pace of.
This is the decision that should come first, not last.
Which practice model should you choose?
Four models dominate independent practice today. They differ less in medicine than in what you have to build to support them.
| Insurance-based | Direct primary care | Concierge | Hybrid | |
|---|---|---|---|---|
| Revenue | Fee-for-service claims | Monthly membership | Annual retainer, often plus insurance | Membership plus select claims |
| Payer credentialing | Required | Not required | Sometimes | Required |
| Typical panel size | 2,000–2,500+ | ~300–600 | ~100–300 | Varies |
| Billing staff | Yes | Rarely | Sometimes | Yes |
| Cash flow starts | After claims adjudicate | First membership cycle | At enrollment | Mixed |
Panel sizes above are typical ranges, not rules. The point is the shape of the trade: smaller panels demand a higher price per patient and a far better patient experience to justify it, but they remove the billing apparatus entirely.
The nine-domain startup checklist
The operational spine below comes from a checklist prepared by Sarfaraz Dhanji, MD, of Magnus Direct Primary Care. Requirements vary by state and locality — confirm each with your state medical board and local authorities before relying on it.
1. Physician regulatory preparation
- Update your practice address with your state medical board.
- Update your practice address with the Drug Enforcement Administration.
- Update your state controlled substance registration if you hold one.
- If practicing under a direct payment model, consider whether opting out of Medicare through the Centers for Medicare & Medicaid Services is appropriate. Opting out is a formal, time-bound election — read the current rules rather than relying on secondhand summaries.
2. Business formation
- Establish a legal entity — an LLC, PLLC, or professional corporation, depending on what your state permits physicians to use.
- Obtain an Employer Identification Number from the IRS.
- Register a DBA if you will operate under a brand name.
- Open business banking and accounting separate from personal accounts.
Do this before you sign a lease or a vendor contract, so the obligations sit with the entity rather than with you personally.
3. Regulatory and clinical compliance
- Determine whether your state or municipality requires clinic licensing.
- Apply for CLIA certification if you will perform any in-office laboratory testing, including waived tests.
- Check whether a physician dispensing license is required if you intend to dispense medications.
- Establish medical waste and biohazard disposal processes with a licensed vendor.
4. Insurance coverage
- Professional malpractice coverage.
- General liability coverage.
- Property or business coverage.
- Workers' compensation once you hire employees.
Confirm whether your malpractice policy is claims-made or occurrence-based, and what tail coverage would cost if you ever change carriers or close the practice.
5. Workplace safety
Establish workplace safety policies consistent with Occupational Safety and Health Administration standards, including bloodborne pathogen exposure control and sharps safety procedures. These apply from your first employee, not from some later headcount threshold.
6. Practice infrastructure
- Select and implement an electronic medical record.
- Establish HIPAA privacy and security policies.
- Draft patient membership agreements and practice policies.
- Set up payment processing.
The EMR decision is the one most likely to be revisited painfully later, because migrating charts is expensive and disruptive — evaluate it against the model you chose in step one, not against a generic feature list.
7. Office setup
Secure the location, acquire clinical equipment and supplies, and set up exam rooms and workspace. A membership practice with a small panel often needs materially less square footage than the ~2,000 sq ft benchmark quoted for insurance-based practices.
8. Technology and communication
Implement phone and communication systems, establish secure patient messaging, and launch a practice website. For membership practices, patient communication is not a convenience feature — it is a substantial part of what patients are paying for, and it should be evaluated as seriously as charting.
9. Launch preparation
Set your membership pricing structure, prepare patient onboarding materials, and begin community outreach. Pricing is difficult to raise later without attrition, so model it against your target panel size and your actual fixed costs before you publish a number.
Can a non-physician own a medical practice?
In many states, no. The corporate practice of medicine doctrine restricts ownership of medical practices to licensed physicians, with the aim of keeping clinical decisions free of non-clinical commercial pressure. The rules vary substantially by state, and common structures used to work within them — management services organizations, friendly-PC arrangements — carry real regulatory risk if built carelessly. This is a question for a healthcare attorney licensed in your state, not for a checklist.
What physicians most often underestimate
Three things surface repeatedly among practices in their first year.
The administrative work does not disappear, it changes shape. Dropping insurance removes claims and coding. It does not remove enrollment, dues collection, failed payments, refunds, or the patient asking why their card was declined. Whatever handles that should be part of the practice from day one rather than a spreadsheet you outgrow in month four.
Pricing is set once and defended forever. A membership priced to fill quickly is difficult to reprice upward without losing the patients it attracted. Model the panel size you actually want to care for.
The EMR is a workflow decision, not a software purchase. A platform built for high-volume claims submission optimizes for coding capture and throughput. A practice that has neither of those needs is carrying complexity it will never use and paying for it in clicks per visit.
Where SigmaMD fits
SigmaMD is an all-in-one EMR and practice platform for direct primary care, concierge, and membership-based practices — charting, the patient app, memberships, and billing in a single system rather than assembled from separate vendors. For a practice opening without payer credentialing, that consolidation is the difference between one implementation and four.
If you are planning a startup practice, the SigmaMD guide for startup practices covers what to have in place before your first patient enrolls.
When you’re ready, schedule a demo and we’ll walk through what setup looks like for the model you have chosen.
Frequently asked questions
How much money do you need to start a medical practice?
Between $70,000 and $100,000 for a traditional insurance-based practice, per Wolters Kluwer. Membership practices typically start lower, because they carry no billing staff and no accounts-receivable gap before revenue begins.
Is owning a medical practice profitable?
It depends almost entirely on the model and the panel. An insurance-based practice earns per encounter and needs volume. A membership practice earns predictable recurring revenue from a much smaller panel, which makes the economics easier to forecast but caps upside at the panel size you can genuinely serve.
Do you need to bill insurance to open a practice?
No. Direct primary care and concierge practices operate entirely outside insurance billing, collecting membership fees directly from patients. This removes payer credentialing and contracting from your launch timeline.
What is the first step to starting a medical practice?
Choosing your payment model. It determines whether you need credentialing, how large a panel you must build, how much staff you hire, and how quickly revenue begins — which in turn sets your budget and your timeline.