Starting any small business comes with its share of risks, but opening a private practice can bring personal and professional rewards. And as Business News Daily points out, more small practices means benefits for the community, with greater competition and more widespread access to care for patients. But the cost of starting a medical practice and controlling overhead are critical concerns, and planning appropriately is vital to sustainability and future success.
Doctorly estimates that the cost of starting a medical practice ranges from $70,000 to more than $100,000, while Physician Practice Specialists (PPS) projects that the average monthly cost is $6,000. For daily, monthly and yearly functioning, it's important to know how to categorize expenses.
Operating expenses
Operating expenses are those integral to day-to-day operations. According to PPS, you'll need to consider several expenditures.
Staff
Initially, hire an employee who can handle multiple roles — someone who can work the front desk and assist with medical responsibilities. As profits increase, hire any additional staff conservatively, and use a payroll service to handle all taxes, benefits and regulatory requirements. On average, you should plan for $3,000 in monthly staffing expenses.
Vendors
The electronic health record (EHR) and revenue cycle management (RCM) systems are your two most critical vendor expenses. Watch an EHR demonstration before purchasing, and try to use the same vendor for both your EHR and RCM. Anticipate paying between 6% and 8% of your monthly revenue for an integrated EHR. Your other vendor expenses will include internet, phone and credit card and payroll processing. The average initial setup is approximately $5,000 with $700 monthly for services from your various vendors.
Optional operating expenses
Not all operating expenses are mandatory. Business-related travel expenses, membership dues, marketing and social media coordination can benefit you, but forgo them until you have strong financial footing.
Overhead expenses of a medical practice
Two of the other major ongoing expenses to run your practice include rent and insurance.
Office space
Rent a space only big enough for what you need but with room for expansion. PPS says approximately 2,000 square feet, at roughly $2,000 to $2,500 monthly, should suffice. It's best to negotiate a multiyear lease when possible, and be sure to consider other costs, such as common area maintenance, taxes and insurance when negotiating rent.
Insurance
Both general liability and medical malpractice insurance are required. General liability is less expensive, roughly $1,000 annually, and it covers you for accidents. For example, if a patient slips and breaks a hip at your office, this insurance will cover the cost. Medical malpractice insurance is much more expensive, averaging between $5,000 and $15,000 yearly, and the cost varies by specialty, location and your claims history. Obtain at least a few quotes before purchasing, and negotiate with the carrier to ensure you receive all possible discounts. Establish a quarterly payment schedule to pay for the policy in smaller chunks.
