Step-by-Step Guide to Start a New Medical Practice in the USA

Starting a new medical practice is like launching a business. You need to consider the financing, legal structure, technology, staffing, and compliance requirements.

However, there is additional scrutiny involved when you start a medical practice. In addition to providing patient care, physicians must comply with federal, state, and payer requirements governing healthcare operations.

But what makes it so challenging? Most startup challenges arise from financial, operational, and administrative requirements rather than clinical care itself. This may be because of:

• Licensing delays
• Payer enrollment gaps
• Billing setup mistakes 

In this article, we draw particular attention to the most cash flow-affecting areas: 

• Credentialing and payer enrollment
• Medical billing infrastructure

Addressing these areas before opening helps practices bill and collect revenue more efficiently.

Why Are Physicians Starting Their Own Medical Practices? 

Most physicians want to start a new medical practice, but the question is, why? This may stem from multiple recurring reasons like preferring independent practice and leaving employed roles, as this allows providers:

• Greater autonomy.
• Better decision-making over clinical and scheduling concerns.
• Direct, longitudinal relationships with patients.
• Financial upside of practice ownership rather than a fixed salary.

Research also suggests that greater autonomy contributes to physicians’ well-being. For some physicians, independent practice offers greater control over:

• Scheduling
• Workflows
• Patient care decisions

According to the American Medical Association (AMA)’s 2025 survey, out of 19,000 physicians, burnout symptoms declined to 41.9% (published April 2026). This number was 43.2% in 2024 and 48.2% in 2023, respectively. 

AMA guidance identifies control over workflow and scheduling templates as a core driver of this trend. 

Physicians in employed roles often have less control over operational and organizational decisions. For many physicians, starting a new private medical practice is a reaction to that missing autonomy. 

When healthcare professionals start their own medical practice, they have greater control over administrative workflows and scheduling decisions.

Types of Medical Practices to Consider

Starting your own medical practice is a big decision. Rushing it can cost you thousands of dollars in the long run and even your reputation as a healthcare provider.

Before starting a new medical practice, physicians should evaluate whether each practice model aligns with their goals. The final decision depends on whether the practice structure fits their:

• Specialty
• Risk tolerance
• Growth goals

The models for the type of medical practice to choose from include: 

Solo Practice

The solo practice model is the simplest, where a single physician operates and owns the practice independently. This model is ideal for practitioners seeking maximum control over the business and clinical decisions. 

It also suits physicians who are prepared to manage the financial and administrative responsibilities independently.

Group Practice

Group practice involves multiple physicians, often within the same specialty. In the group practice model, these professionals share:

• Ownership
• Overhead
• Staff

The group practice is typically ideal for physicians who wish to share startup costs while still retaining more autonomy than in an employed role.

Multi-Specialty Practice

Multi-specialty practices may seem more complex than the first two models. Here, physicians from various specialties collaborate under a single practice entity. Generally, multi-specialty practices benefit from internal referrals.

This model is suitable for physicians who prefer a patient-centered, more diverse care model with in-house access to complementary services.

Telehealth-Based Practice

In a telehealth-based practice model, physicians provide patient care primarily or entirely through virtual visits. Professionals who wish to start a new medical practice without a physical footprint can choose this model. It is ideal for specialties that can effectively deliver care remotely.

Direct Primary Care (DPC) or Concierge

In a DPC model, patients must pay a subscription fee, which often bypasses traditional insurance billing. DPCs are best-suited for medical professionals seeking lower administrative burden related to insurance billing and who prefer smaller patient panels.

Choosing the right practice model is only the first step. There is a step-by-step process that you must follow. 

How to Start a Medical Practice?

Starting a medical practice is a decision that has a direct impact on one’s career, finances, reputation, and other aspects of life. 

Therefore, knowing the right way to do it is crucial. Here’s a comprehensive, step-by-step breakdown on how to start your own medical practice.

1. Write a Practice Plan

Creating the right plan for your practice is the first step to starting a new medical practice. Ideally, it should define the practice’s:

• Staffing plan
• Competitive assessment
• Specialty focus
• Financial projections
• Target patient population

If you seek financing or partners, they must review this plan before investing in your practice. 

2. Choose a Legal Structure

A practice may operate under one of many legal structures. Therefore, it’s imperative to decide whether your practice will be a:

• Sole proprietorship
• A partnership
• Limited liability company (LLC) 

It is a crucial decision, which will determine your:

• Liability exposure
• Tax treatment
• Practice credentialing with payers

3. Secure Funding

The cost of running a healthcare practice is high and requires substantial upfront and ongoing investment. Thus, most practices employ a combination of financing and personal capital to run services. 

Other options include Small Business Administration (SBA)-backed loans, such as an SBA 7(a) program. The SBA 7(a) program is commonly used by physicians seeking funding for: 

• Equipment
• Practice acquisitions
• Working capital

With such options, practitioners can apply for loan amounts up to $5 million. The best part? Repayment terms can be up to 10 years for general use. 

More importantly, since credentialing and insurance reimbursements can take time even after starting a new medical practice, the working capital should initially cover the operational costs.

4. Obtain Licenses and Registrations

A practice cannot begin operations without obtaining the required licenses and registrations. Therefore, before a new practice begins providing services, it needs:

• An active state medical license for each practicing physician.
• National Provider Identifier (NPI), issued free of charge through the National Plan and Provider Enumeration System (NPPES). 
• Employer Identification Number (EIN) for billing and tax purposes.
• If the practices can prescribe controlled substances, a DEA registration must be completed through the DEA’s Diversion Control Division. 

Important Note: DEA registration can be attained after an active state medical license. In some states, a separate substance permit may be required before submitting the federal application.

5. Choose and Set Up Your Location

Location assessment is a crucial step in starting a medical practice, as it determines the practice’s long-term potential to provide services. Professionals should analyze the space requirements based on:

• Projected patient volume
• Exam room count
• Specialty-specific equipment needs 

However, from an agreement perspective, professionals should consider and carefully negotiate lease terms. Remember, most commercial medical leases can last several years and should have the required scalability potential. 

6. Hire Your Team

Generally speaking, a practice is only as good as its team. Therefore, you should include core hires, including:

• An office manager
• Front desk staff
• A medical assistant or clinical support staff
• Dedicated billing staff or an outsourced medical billing partner

The right team streamlines the billing process from patient scheduling to collections from day one.

7. Set Up Your EHR and Practice Management System

Disruptions in billing workflows lead to claim delays, denials, and financial constraints. Thus, healthcare professionals must select an efficient practice management software and electronic health records (EHR) system. These systems should be selected and integrated based on the practice’s:

• Specialty
• Billing workflows
• Reporting needs

8. Begin Credentialing and Payer Enrollment

This step of starting a new medical practice officially connects physicians and the practice to Medicaid, Medicare, and commercial payers. Once this link is established, claims can be submitted for reimbursement.

Typically, credentialing and payer enrollment can take up to several months. Thus, practice owners should begin the process early.

9. Set Up Your Medical Billing System

The medical billing solution you choose largely determines the accuracy and efficiency of your revenue cycle. The practice can either have an in-house or outsourced billing team. Regardless of what choice you make, they should be able to:

• Build clean-claim submission processes
• Set up denial management workflows 
• Collect claims efficiently once the practice opens

10. Set Up a Patient Payment & Collections Process

Every practice should have clear payment and collection policies. Disparities in financial matters not only harm the revenue but also negatively impact patient care. Therefore, when starting a new medical practice, have a separate policy for collecting:

• Copays
• Deductibles
• Self-pay balances at the point of service

Moreover, the practice should have a well-structured follow-up and billing process to avoid complications. (Learn more about this ahead).

11. Create an Online Presence and Marketing Strategy

Did you know that the Federation of State Medical Boards (FSMB) identified 1,082,187 licensed physicians in the U.S. in 2024? Most of these physicians create an online presence, and their practices attract prospective patients.

Therefore, to explore the potential of your practice, set up:

• A practice website
• Directory listings
• Online scheduling
• Booking and discovery methods

Remember, when starting a new medical practice, patient acquisition influences the time your organization requires to achieve financial sustainability.

Credentialing & Payer Enrollment: The Step Most Practices Get Wrong

Most new practices underestimate the importance and complexity of credentialing and payer enrollment. As a result, delayed enrollment can hinder reimbursements and disrupt the revenue cycle.

Understanding the credentialing and enrollment process helps practices avoid costly delays. Below are the most common questions for new practice owners.

What is Included in Credentialing and Payer Enrollment?

Credentialing is a process used to verify a physician’s qualifications and certifications. It typically includes verification of the provider’s:

• Education and training
• Professional conduct and disciplinary history
• State licensure
• Board certification (if applicable)
• Work history

This information is verified directly with the issuing organizations through primary source verification. Payer enrollment, on the other hand, is different. It involves registering the practice and physicians with each payer. The payers may include:

• Medicare
• Medicaid
• Commercial payers

Once enrollment is complete, claims submitted to the payer become eligible for processing and reimbursement. For Medicare enrollment, providers submit their enrollment application through the Provider Enrollment, Chain, and Ownership System (PECOS). 

Why Does It Take 90-180 Days?

A persistent credentialing challenge while starting a new medical practice is the time duration. According to CMS guidance, the standard Medicare enrollment via PECOS takes 45 to 90 days to complete an application.

Delays often occur because applications require:

• Additional documentation
• Corrections
• Responses to payer requests

Commercial insurers also maintain their own credentialing processes, which can further extend the timeline.

What Happens to Revenue During this Window?

Practices generally cannot receive reimbursement from most insurers until payer enrollment becomes effective. Although some payers allow retroactive billing, delayed enrollment often results in the postponement of claim submission or payment.

In these situations, practices may have to delay claim submission until enrollment is approved or, depending on payer policy, bill patients directly. Even when retroactive billing is permitted, cash flow often suffers during the waiting period.

Which Common Mistakes Restart this Process?

Owners may commit several mistakes when they start a new medical practice. Some common mistakes include:

• Selecting the wrong CMS-855 enrollment application is a common reason Medicare enrollment applications are rejected.
• Failing to include required supporting documentation can result in delays, development requests, or application rejection.
• Mismatched provider information between NPPES and PECOS can delay enrollment and create processing errors.
• When an enrollment application is rejected, it must typically be resubmitted. However, resubmission typically resets the Medicare processing cycle, further delaying billing privileges.
• CMS requires enrolled providers to report certain enrollment changes within specified timeframes (typically 30 or 90 days, depending on the type of change).

A delayed or rejected application can stall revenue for months and significantly affect a new practice’s cash flow. Therefore, credentialing and payer enrollment should be completed the first time accurately. 

Fortunately, MediBillMD’s insurance credentialing services ensure new practices accurately handle commercial payer and CMS enrollment. Thus, the services reduce the risk of revenue delays and rejections.

Medical Billing Setup for a New Practice 

A well-planned medical billing setup is essential for the financial success of a new practice. So, when starting your own medical practice, ensure that your billing setup includes:

In-House vs. Outsourced Billing 

Outsourced billing and in-house billing have their pros and cons. For instance, in-house billing provides greater control over billing but requires more training and a higher overhead. However, outsourcing is often more cost-effective for new practices. The reason? Claim volumes are initially unpredictable, and maintaining a full in-house billing team can be expensive.

Denial Management

New practices should establish a denial management workflow that:

• Submits timely appeals
• Ensures prompt follow-up on unpaid claims
• Identifies denial causes
• Corrects claim errors

Early Revenue Protection 

Billing errors can significantly disrupt cash flow, which is extremely worrying because most new practices have limited financial reserves during their early stages. With proper claims management, new practices prevent and resolve claim denials altogether.

Clean Claim Submission

A clean claim has zero errors, which means it also has: 

• Accurate patient information
• Correct diagnosis and procedure codes
• Complete documentation

Clean claims are more likely to be processed and paid on the first submission without rejection or denial. New practices are at a higher risk of initial claim submission errors because their software, staff, and workflows are new.

Why Outsourcing Makes Sense for New Practices?

New practices cannot risk their operations and finances. Third-party medical billing companies typically charge 4% to 8% of collections. 

This is often significantly less expensive than the cost of maintaining an in-house billing department, including:

• Training
• Hiring
• Operations

Moreover, when starting a new medical practice, the first year can often be unpredictable and prone to errors. Therefore, outsourcing medical billing is often the most financially practical option during this time period. 

As the practice grows and billing volumes become more predictable, it can transition to an in-house billing team.

Common Mistakes When Starting a Medical Practice 

New practice owners often make avoidable mistakes that can delay operations. These mistakes can also jeopardize long-term success and disrupt cash flow. Here’s a comprehensive breakdown of these mistakes so you can avoid them:

• Delaying medical billing system implementation, which results in claim backlogs, increased A/R, and filing delays.
• Limited working capital can strain cash flow before payer reimbursements begin.
• Incomplete or inaccurate credentialing applications can delay payer enrollment and billing.
• Underestimating the cost of in-house billing, which includes training, staff ramp-up time, and software expenses.
• Choosing a legal structure without understanding how it affects contracting, payer enrollment, and tax obligations.
• Starting credentialing with less than 90-120 days before practice operations begin, delaying reimbursement.

Summary

Starting a medical practice requires careful decision-making in several areas. However, two decisions impact the practice’s financial health the most.

• Credentialing and payer enrollment
• Implementation of a medical billing system

Practices that carefully evaluate whether to use in-house or outsourced medical billing services often experience smoother operations and healthier cash flow.

FAQs 

1. How much does it cost to start a medical practice?

The cost of starting a new medical practice typically ranges from $100,000 to $500,000, depending on the practice’s size, location, specialty, equipment needs, and staffing requirements.

2. How long does it take to start a medical practice?

Most new practices could take up to a year to open and be fully functional. Payer enrollment alone could take 90 to 180 days and is the longest part of the process. 

3. How long does payer credentialing take for a new practice?

Medicare enrollment through PECOS typically takes 45 to 90 days. Commercial payers have their distinct credentialing and enrollment processes, which may take longer. As a result, completing enrollment with all major payers can take up to 180 days.

4. Should I outsource medical billing when starting a new practice?

Many outsourced billing companies charge a percentage of collections (commonly around 4% to 8%, depending on the practice and service scope), which is often more cost-effective than hiring and training an in-house billing team.

5. What is the biggest financial mistake when starting a medical practice?

Underestimating credentialing and payer enrollment timelines is one of the biggest financial mistakes when starting a new medical practice. Delayed enrollment postpones reimbursement collections, creating cash flow problems during the critical startup phase.