Medical Practice Startup Checklist and Advice

This guide is a comprehensive medical practice startup checklist and provides a list of steps to consider in opening up a new practice. The information provided is based on my experiences in starting multiple practices in a number of states. My clinics provide patient care via the traditional in-person route as well as through telemedicine.

Business Structure

Every new medical practice startup must decide on a business structure before registering with the state. Following are the types of business entities that a new medical practice may register. Which one you choose will depend on the level of risk and complexity you wish to accept. Each business type has advantages and disadvantages which are best discussed with legal counsel (particularly if this is your first private practice), although I believe that most physicians should be able to grasp the risks and benefits of each structure with a bit of online research. Please know that state-specific rules may place certain business structures off limits to medical practices. Thus, it is important to include your state’s business licensure website in your research.

Sole Proprietorship. This structure is simple and inexpensive to set up. However, the individual risk is unlimited as the medical practice is not separated from the owner. I have never set up a sole proprietorship for any of my practices and would not recommend this option.

Limited Liability Company (LLC) or Professional Limited Liability Company (PLLC.) This structure is also relatively simple and inexpensive to set up. It is a pass-through entity, which means the profits are passed onto the owner(s), who then pay income tax on their earnings. Some states require physicians to set up a their medical practice as a PLLC rather than an LLC.

Limited Liability Partnership (LLP) or Professional Limited Liability Partnership. This structure is a good option if starting a medical practice with more than one owner. This type of business structure shields each partner physician from the liabilities of other partners.

Corporation or Professional Corporation. This structure is the most complicated to set up, though should not be thought of as prohibitive even if you don’t know much about setting up a business or medical practice. Legal counsel can be quite helpful as there are not only liability issues but also tax matters to consider. It is important to consider that a C corporation is double taxed (i.e., once at the business level on its profits; which are then passed onto the shareholders as dividends or bonuses; and then at the personal level on the earnings of the shareholders.) In some states, such as California, a Professional Corporation is the only type of entity available to medical practices.

S Corporation. An S corporation is NOT a type of business. It is simply a type of tax election. Choosing to be taxed as an S corporation can be beneficial in some situations. This is best discussed with your accountant or business attorney.

It is worth noting that regardless of the type of entity you choose for your medical practice startup the malpractice risk always rests with the individual physician(s). In other words, your corporate structure cannot shield you from personal malpractice risk. Thus, it is important for all physicians to carry a malpractice insurance policy no matter how the medical practice is structured.

Secretary of State

Most states have a secretary of state (SOS) and you are required to register your company with the SOS before you can conduct any business. Many states have online applications for this. You will need to have a registered agent before you can file and application with the SOS. I suggest obtaining a registered agent service (discussed below), although you can certainly act as your own agent.

Department of Revenue

Each state has a department of revenue or taxation. You will be required to register your medical practice startup with this department and report your revenues for tax purposes. State websites generally have a new business guide that can outline the steps you need to take in your particular state.

City and County

Many cities and even counties require businesses to register with them as well, and obtain a city business license. Some will have excise taxes that you may need to pay quarterly or annually. Sometimes, the city or cities that you’re setting up in can simply be added on as an endorsement on your state license application, though not every state or city participates in this.

Federal Employer Identification Number (FEIN)

Obtaining a Federal Employer Identification Number (FEIN or EIN) is a must if you plan to have employees. This is the number you will use on your federal payroll tax information. Even if you don’t plan to have employees, an EIN may be required for you to open a bank account so probably worthwhile to just get this. It is an easy online application, and you will receive your EIN right away. The document that lists your EIN is called the CP-575 notice. Keep this document secure as it is difficult to obtain a new one if it is lost. I make a hard copy, and also email one to myself with the subject “EIN” in it so that I can easily search for it if needed.

Click HERE to get to the IRS website for FEIN.

Registered Agent

Every state requires a business to designate a registered agent (sometimes also called a statutory agent or resident agent.) This is a person or entity that has a physical location within the state where the business is located; keeps normal business hours; and is available to be served with any legal documents as required. You can serve as your own registered agent. However, please keep in mind that the name and address of the registered agent is public information so it is strongly advised that you refrain from using your home office or address for this purpose. If you have a brick and mortar clinic, you can use that address. If you are a virtual-only practice, or don’t wish to use your practice address, you can sign up for a registered agent service. These are relatively inexpensive (generally costing $49-99 per year.) Some services will not only allow you to use their address for purpose of getting served as your agent but will also allow you to use it as your own business’ address. Thus, if you do not have a physical presence in a state but still need a practice address then this can be quite helpful.

Using a post office box or a private mailbox (such as from UPS Store) as the address for your registered agent is prohibited.

Click HERE for a registered agent service that works in all 50 states.

Click HERE to learn about the registered agent requirements in each state.

Financial Accounts

Bank Account

Opening a bank account for a new medical practice is a must. Never use your personal account for receiving funds that are meant for the business, nor pay any business expenses or liabilities directly out of your personal account. Such comingling of funds is termed “lifting the corporate veil” and puts your personal assets at risk in case of a lawsuit against your medical practice. I have found business banking with Chase to be quite easy and straightforward. There are also some online only options, such as Mercury Bank, though I’m not sure how willing they are to work with non-tech companies such as a medical practice.

Credit Card

I highly recommend obtaining a separate credit card for your business if you qualify for one. As a new medical practice, you might have difficulty obtaining one until the business is established. Again, comingling personal and business expenses by using a personal credit card is not advised as that would put your personal assets at risk in case of a lawsuit. Look for cards with good rewards attached to them, particularly if your practice spends large sums to buy supplies or equipment. I would also suggest putting as many of your business bill payments on the credit card as you can. This will help you obtain more rewards or miles.

Software and Communication

Electronic Health Record

An Electronic Health Record (EHR) is one of the largest considerations for a new medical practice and deserves due diligence. Since every practice and every physician has different needs and expectations from an EHR, the only way to find the right solution is to try as many different ones as you can. Before you contact an EHR company, I would suggest compiling a list of EHRs that you’re interested in as well as a wish list of features you must have. You may be able to rule some EHRs out simply based on your ‘must-have’ list. Then set up a demo with each of the remaining EHR companies. Prepare a list of questions to ask before the demo and be sure that all your questions get answered. Don’t settle for vague responses and ask the demo team to actually show you on screen how particular areas are accessed or particular tasks are done.

I also highly recommend asking for access to a demo or dummy account so that you can take the EHR for a drive, so to speak, on your own. Such sandbox environments can give you a much better feel for the platform than a sales demo, which can be quite slick at times but belie the true nature of various features.

In addition, ask for references or contact for other medical practices that are currently using the platform and might be willing to speak with you about their experience. Preferably, you want someone in your own specialty or a setup similar to what you have in mind. Also, make contact yourself with other physicians on various online forums, such as some Facebook groups comprising physicians. There is a good chance that someone is using the EHR you’re interested in and is willing to spend a few minutes talking to you about it.

Telehealth and Telemedicine

If you are interested in providing care via telehealth or telemedicine in your new medical practice, first check if your electronic health record has the capability to handle it. You may need specific features, such as a virtual waiting room. If the EHR is not capable of the features you need, look for stand-alone solutions. I have used Doxy for several years and have been very satisfied with it.

Electronic Prescriptions

Most EHRs are now capable of sending prescriptions electronically. If yours is not or if the process is more cumbersome than you would like, you may want to look for a stand-alone solution. I can highly recommend MDToolBox, which I have used without any problems for several years now. If you will be prescribing controlled substances, be sure to check if your platform will allow electronic prescription for controlled substances (EPCS.) Some states now require that all controlled substance prescriptions be sent electronically.

Scheduling and Patient Intake Forms

Most EHRs should be able to handle patient scheduling. Check to see if they have intake paperwork that you can customize and provide to patients before visits, particularly for new-patient visits. This can help cut down the time patients have to spend in the waiting room and will also allow you to review the paperwork ahead of time. Also check to see if they have an embeddable link that you can put on your own website so that patients can access the forms directly without having to go through a patient portal. There are stand-along solutions that can also allow you to do this, in case you are using paper charts or if your EHR does not have robust features. I have used IntakeQ with good results.

Website

A business website is a must and should rank high in your medical practice startup checklist. First, decide if all you want is a static website with some information about your practice, location and hours etc; or, if you want more functionality from it such as having patients schedule their appointments online; access intake paperwork online; make payments online; and have a blog that is updated regularly. If you are technologically savvy you can create your own website, particularly if it will be a simple one. There are a number of platforms such as Wix that will allow you to do that. I learned WordPress so that I could create and update my own websites. However, these days I do not see the value in creating or managing a website on my own as a physician. My time is much more valuable and I can easily pay someone to do this for me. I’ve used various services such as Upwork and Fiverr with great success for such technology tasks.

Phone

Phone options for a new medical practice include traditional landlines (for phone and fax) and these are still an excellent choice, particularly for reliability. However, there are also various VoIP services that can fit the bill. Reliability may suffer some, but should be fine for the most part. I have used RingCentral and continue to use it for some purposes, but switched to Comcast Business for landlines because I found RingCentral to be more complicated and slightly less reliable. There are numerous other options for VoIP which are worth exploring.

Email

It is important to have a robust and user-friendly email system for your new medical practice. Using something like Gmail is fine, but I would highly recommend using your own domain name in the email as that is immensely more professional. Email is not secure or HIPAA complaint in most cases, so don’t bother hunting for solutions that might be. I suggest picking one that you find easy to use. If you plan to grow (adding other physicians or other clinicians, and staff etc.), it is important to find a service that can grow easily with you. I have used Microsoft Office 365 for several years and found it to be an excellent solution. I am able to use my own domain (in fact, I can use multiple domains within the same account); add or remove licenses as needed for new and departing employees/contractors, respectively; use OneDrive for HIPAA-compliant attached storage; and use Teams for easy communications within our practice. Microsoft Teams has been particularly helpful for us as we have multiple locations, each with its own staff; as well as multiple clinicians who are all remote. Teams allows us to seamlessly connect with each other one-on-one or in any number of customized groups (e.g., staff only; or physicians only.) Another such platform is Slack. I have used it as well though not as extensively as Teams.

Cloud Storage

Most patient-related documents can be stored within the EHR. However, if you have need to store other patient care documents and share them with your staff or other clinicians, having a secure and HIPAA-compliant solution is helpful. We use OneDrive simply because it is already attached to our Microsoft Office 365 email accounts (along with a number of other applications which can be quite useful.) There are also other options, such as Box and Drobox. Google Drive might be an option for some, although making it HIPAA compliant was a tedious task when I looked into it around 2017. Things might be different now.

Accounting

First, it helps to understand the difference between bookkeepers and accountants. They are not the same and don’t perform the same tasks, though there are many areas of overlap. The bookkeeper’s job is to record and classify your practice’s financial transactions. An accountant can then use those records to provide additional services, such as analysis of your business and, of course, tax preparation and filing. An accountant’s office may be able to handle both tasks and this might be helpful as you only have to deal with one company instead of two.

Keeping your business’ books clean and up-to-date will save you many headaches later, particularly at tax time. Good bookkeepers and accountants can be worth their weight in gold. I suggest talking to several before deciding on one. Try to get personal recommendations from friends or colleagues. Everything a bookkeeper or an accountant does can be done remotely so don’t worry about finding one in your area.

You will also need to decide on an accounting software for your new medical practice. I have only used QuickBooks Online so cannot comment on any others. I have been very happy with QuickBooks and can highly recommend it. Most accountants are probably using QuickBooks and should be able to set up an account for your new practice. Other options for accounting software include NetSuite, Bench and Xero, though I have no personal experience with any of them.

Payroll

If your payroll is simple enough, you might be able to do this on your own. You will need to pay attention to various tax issues though. I have found it most cost-effective to do the biweekly payroll myself, while delegating the other payroll tasks (such as onboarding new staff members or setting up their payroll accounts or dealing with tax issues, W2s and 1099s) to my accountant’s office.

Your accounting software should be able to handle the payroll. There are also some stand-alone solutions that are excellent. I have used Gusto for payroll before I began using QuickBooks and liked it very much.

Mailbox

If you are a virtual-only medical practice, you will definitely need a mailbox. I highly suggest not using your home address as in some cases the business address is public information. If you have a physical clinic location you may, of course, receive your mail at that address. However, even then there are a number of reasons to consider a mailbox:

Privacy: I prefer handling all business mail myself and not having it pass through various hands (i.e., front-office staff) before it gets to me.

Convenience: I have multiple separate practices (as well as non-clinical businesses.) Having one mailbox for all my business-related mail is quite helpful because I don’t need to go to each location to get all the mail.

Packages: A mailbox service (such as UPS) can securely hold your packages until you’re ready to pick them up. This is particularly important if you don’t keep normal business hours at your physical location. It is risky to have packages left outside the clinic. It is also inconvenient to have them sent back to the sender if signature is required.

Longevity: If you move, it is an arduous task to update your mailing address with various governmental agencies, licensing boards, DEA, as well as insurance companies. A mailbox avoids this mess and you can keep the same business mailing address in perpetuity.

Office

Lease

An office space is another high-impact item on any new medical practice startup checklist. Before you begin looking for a clinic space, compile a list of features that are crucial to your practice. Also, it helps to have an idea of the square footage you require. It is better to have a bit more space than not enough. Take into account any growth you are projecting as well. At a minimum, look for a space that has the following: waiting room, reception area, exam rooms (number will depend on your practice), physician office, break room for staff, and storage for supplies. Private restroom is also helpful, though often not a necessity. Pay attention to the parking situation and make sure plenty of it is available for your patients. Assigned spaces are nice to have, though not necessary.

As for the lease itself, determine if it is a ‘full-service’ lease or a triple-net (NNN.) My preference is always for a full-service lease as you know what your rent is for the entirety of your lease. A NNN lease requires tenants to pay their pro-rata share of common areas, sometimes also including building maintenance and property taxes. These are projected based on similar costs in the previous year (called the base year), although they don’t always fall in line with the past. Please be sure to read your lease thoroughly and if you have questions or concerns bring them up with your broker before signing.

Try to negotiate the shortest term possible with a clause to extend further before the term ends. I generally sign 1-3 year terms and avoid anything longer. Once your practice is set you can be more comfortable signing a longer lease, but avoid it when opening a practice so that you are not stuck with a long-term contract if the practice or location don’t work out for any reason.

Furniture

Used furniture can save you money. Look for deals through classifieds such as Craigslist, Facebook Marketplace, OfferUp etc. Used office furniture stores can also be a good source for quality furniture, often at a fraction of the cost of new furniture.

Equipment

The equipment you need will depend on your medical practice, of course. Used equipment can be a good option. Sources I have used include eBay as well as local medical/surgical supply stores.

Computers

Purchasing computers can be expensive, especially if you need multiple. I strongly suggest purchasing the best ones in your budget, keeping in mind that refurbished computers can save you a lot of money. I have often used eBay with excellent results for used computer equipment. The front office often sees heavy computer usage, and it is worthwhile spending a little extra money to make sure you have a fast computer. Pay attention to the CPU and memory. A Solid State Drive (SSD) is nice to have as the boot drive as it will allow the computer to start up fast. Most storage is now in the cloud so you don’t need to spend extra for internal hard drives. A wide screen monitor (34 to 38 inch diagonally) will also be useful for productivity in the front office as it will facilitate multitasking.

I would highly advise against all-in-one computers (which have everything built into the screen for a single form factor) as this can prove to be expensive. If a component breaks or dies, the rest can be useless. Also, such computers don’t dissipate heat very well.

Medical Supplies

Open an account with one of the large medical supplies companies, such as McKesson or Schein. Often you will find much better prices through them than you will through retail outlets such as Amazon or eBay.

Unless you know how much of something you’ll need avoid ordering it ahead when you are opening your practice. Some things, such as culture kits, have expiration dates.

Office Supplies

Not much to add here. Use whatever you have access to and is cheapest (e.g., Amazon, Costco, Sam’s Club, Office Depot etc.)

Internet

Hardwired internet is a must for clinical practice. Don’t rely on a wireless only service. If you will be doing televisits, opt for higher bandwidth (at least 150mbs) to have some headroom as video streaming can use up quite a bit of bandwidth.

Janitorial

Check to see if janitorial services are included with your lease. If not, you will have to engage an outside agency to do this. If your clinic is small enough, staff can also be tasked to keep the place clean.

Utilities

Check to see if utilities are included in your rent. Often they are not and you’ll be responsible for paying them. The lease should make it clear if you’ll simply pay the landlord for the utilities or if you’ll have to put them in your name and pay the utility provider directly. Utilities generally include the following: water and sewage; gas and electricity; and garbage service.

Shredding service

It is convenient to have a shredding service come to your clinic and pick up the material. Some even do it on site and give you a certificate. Another option is to haul your material to a place like UPS. Low volume or low-paper burden practices may buy their own shredder as well. Cross cut shredders are best as they will meet HIPAA requirements.

Insurances

Malpractice Insurance

Malpractice insurance is yet another high-impact item in any medical practice startup checklist, and every new practice is well advised to have it in place before providing any patient care. This process can take several days to weeks, so it is best to start it right after registering the business.

Besides deciding on a malpractice carrier, you will also need to decide if you want a claims-made policy or an occurrence policy. A claims-made policy will be cheaper, but it only covers incidents that occur and are reported during the time that your policy is active. To continue coverage after the policy expires you will need to purchase tail coverage. An occurrence policy, on the other hand, will cover any incidents that occurred during your policy period regardless of when the claim is filed. In my experience, occurrence policies tend to be too expensive. I would rather pay for tail coverage. Many carriers will provide tail coverage if you decide to retire from your practice, provided that you’ve been with the carrier for some minimum number of years.

Please discuss the different options and the costs for them with your carrier before making a decision. I have worked with The Doctors Company for many years and have been generally happy with their service. You may also choose to work with a broker to obtain multiple quotes.

I would advise checking the rating for you carrier with AM Best Company, which is a credit rating agency and provides a grade/score for each insurance carrier.

Business Insurance

A business owner’s policy is relatively inexpensive and can provide coverage for your property and equipment, as well as various other matters relating to the operation of a medical practice. I have used State Farm for all my locations and have been generally happy with their prices and service.

Disability Insurance

Long-term disability insurance can cover you if you become disabled and are not able to continue working as a physician. It is imperative that the policy be a true “own occupation” policy and define “own occupation” as your particular specialty. For physicians, this means that if you are not able to work in your own specialty due to a disability, you will qualify for full benefits even if you are able to work in another occupation or specialty. Your policy should also cover psychiatric conditions and addiction as the causes of disability.

How much disability insurance you carry will depend on your income and risk tolerance. It will be worthwhile to make sure your policy includes a cost of living adjustment (COLA) rider so that you have periodic options to increase your coverage (with a parallel increase in premiums, of course) without having to go through the hassle of applying again.

I recommend paying for the disability insurance premiums personally, rather than through your company. If you claim the premiums as a business expense or pay for them with pre-tax dollars then the distributions, should you end up requiring them, will be taxed. On the other hand, if you pay the premiums personally with post-tax funds the distributions will not be taxed.

Unemployment Insurance

If you have employees you will almost certainly have to carry unemployment insurance. Some states (such as Washington) mandate insurance purchase through the state itself, which makes matters easier. In other states you will have to obtain insurance through a private carrier. As with any other insurance, obtaining multiple quotes through a broker is helpful.

Worker’s Compensation Insurance

As above, if you have employees, you will almost certainly have to carry worker’s compensation insurance. Again, some states provide this themselves whereas in others you will have to go through a private carrier.

Drug Enforcement Agency Number

If you plan to prescribe controlled substances you will need to obtain a DEA number. Please be mindful that each state that you practice in requires a separate DEA number. You will also need to provide a physical address to obtain a DEA number in each state.

Revenue Cycle Management

If you plan to accept insurance you will need to think through revenue cycle management (RCM.) If your EHR includes RCM it can be a good option as you won’t have to juggle multiple systems. This is a feature you should consider when choosing your EHR. Some EHRs have RCM built into their own system, while others integrate with any number of independent RCM companies. In my experience such integrations can lead to extra work and don’t always work seamlessly. On the other hand, you may not want to be beholden to your EHR for everything.

Claims and Billing

Claims and billing are the mainstay of RCM and a vital part of your practice. You must take some time to understand what you are signing up for before you engage a service to do the RCM for you. Whether you do this through your EHR or through an outside agency, I strongly advise that you speak with a handful of other physicians and practices that are using the same service. Do not rely on a sales demo to make your decision.

Another option is to contract with a small local billing company or even an individual, although obtaining references for them will be more difficult. I have had mixed results with small local billing companies and individuals. If you go this route pay close attention to your accounts receivables as well as claim rejections to identify problems with billing early. It can be an enormous task to unravel billing mistakes if they go unchecked for months.

Credentialing and Contracting

If you are going to accept insurance, getting credentialed and obtaining contracts with insurance companies will be a must. This is a time-consuming step (often 90-180 days) and must be started as early in the business process as possible. Generally, after you’ve obtained your business license and opened a bank account, you should begin applying for credentialing and contracts. Find out who the 3-4 largest insurance providers in your area are and start with them.

Some insurance companies have periods of “contract freeze” during which they do not accept any physicians or practices into their network. It will be helpful to find this information directly from insurance carriers even before you begin forming your business as it can impact your decisions.

Employees

Good employees can make or break your practice and finding them can be a challenge, particularly for a large practice. Recruiters can be expensive so try to find employees on your own. Online job sites, such as Indeed.com can be quite helpful. Of course, a personal recommendation from someone you know and trust can be a much better bet. Don’t hesitate to ask your friends, family and colleagues if they know of someone suitable who might also be looking for work.

As a new practice, you will be better off starting slow and hiring as the workload increases. You may need to wear several hats in the beginning, but it will help the bottom line.