Getting Started

Not all medical practices are built the same way. The model you choose shapes nearly every decision that follows, from credentialing to marketing to technology. There are two distinct dimensions to consider: your payment model and your delivery model. These are independent of each other — any payment model can be combined with any delivery model.

How your practice generates revenue is the most foundational structural decision you will make. Each model carries distinct implications for patient acquisition, administrative burden, startup capital requirements, and long-term financial trajectory.

Payment model comparison

Insurance-based: Revenue flows through contracted relationships with commercial payers and government programs. Patient volume is typically higher, administrative burden is significant, and revenue depends on credentialing accuracy and payer reimbursement rates. Built-in referral pipelines through insurance directories provide patient acquisition support, but robust revenue cycle management is essential from day one.

Direct-pay: Patients — rather than insurers — are the primary payer. This broad category includes Direct Primary Care (DPC), where patients pay a low monthly membership fee for comprehensive primary care access; concierge medicine, operating similarly but at a higher price point with enhanced services; membership-based specialty care; and episodic cash-pay for specific services or procedures. Direct-pay practices carry significantly lower administrative overhead but require intentional patient acquisition and a compelling value proposition.

Hybrid: Many physicians, particularly early in practice ownership, accept select insurance contracts while offering direct-pay services or memberships. This approach smooths early cash flow while a direct-pay panel builds. The tradeoff is administrative complexity — managing two billing models simultaneously requires disciplined systems and clear patient communication.

Delivery model

On the delivery side, two models exist — and these are independent of your payment model:

Brick-and-mortar: A physical office where patients are seen in person. The most common delivery model, often required or strongly preferred in certain specialties. Higher startup costs and operational overhead, but a tangible community presence and the full range of in-person diagnostic and procedural capabilities.

Telehealth-primary: The majority or entirety of patient encounters occur via video or phone. Significantly lower startup costs, broader geographic reach, and greater scheduling flexibility. Unique regulatory complexity around multi-state licensing and prescribing — addressed in detail in the Growth section under Telehealth.

Many practices combine both. A hybrid delivery model can expand access without requiring additional physical space, but requires thoughtful workflow design to manage both effectively.

Not every practice requires external capital — many physicians self-fund, and some models launch with minimal upfront investment. But underestimating startup costs is the leading cause of early practice failure. Before committing to a lease or a build-out, you need a realistic picture of what the financial curve looks like.

The cash flow curve

The cash flow curve is the financial reality most physicians are not prepared for. Understanding it before you open is the difference between surviving the first year and running out of capital in month eight.

• Months 1–3: Pure outflow — build-out, technology, salaries, and overhead with minimal or no revenue
• Months 3–6: Revenue begins but credentialing gaps mean cash collections only; insurance payments have not yet started
• Months 6–9: Insurance payments begin; collections still lag 30–60 days behind services rendered
• Months 12–18: Most practices approach break-even under normal conditions

Six months of operating reserves is the minimum recommended cushion. Twelve months is significantly safer for most practice models.

Startup cost categories

• Build-out and leasehold improvements — often the largest single cost; negotiate a tenant improvement allowance from the landlord
• Technology — EHR, practice management, hardware, phones, networking
• Working capital — 3–6 months of operating expenses during the pre-revenue period
• Legal and accounting — entity formation, operating agreements, initial compliance setup
• Marketing and website — not an afterthought; a fixed operating expense from day one
• Insurance deposits and premiums — malpractice and BOP typically require upfront payment
• Initial medical and office supplies — varies significantly by specialty

Sources of startup capital

• Personal savings and home equity — most flexible, no debt service; the most common funding source for new practices
• SBA 7(a) loans — government-backed loans up to $5M with 10-year terms; require a business plan, personal guarantee, and credit approval
• Physician-specific practice lenders — banks that specialize in medical practice financing and understand the unique cash flow dynamics of physician practices
• Equipment financing — often available at favorable terms through vendors; preserves working capital for operations
• Practice acquisition financing — if purchasing an existing practice rather than building de novo, specific loan products exist with different underwriting criteria

Break-even basics

Divide your total fixed monthly costs by your average revenue per patient encounter. The result is the number of patient visits required per month to cover fixed costs. If that number is not achievable in your market and specialty within your projected ramp-up timeline, revisit your cost structure before you open.

The single most common reason practice opening dates slip is underestimating how many processes run in parallel and how long the long-lead-time items actually take. Credentialing alone takes 90–150 days. A build-out that was supposed to take eight weeks routinely takes twelve. Start earlier than you think you need to on every front.

The critical path items — the ones where a delay pushes your opening date — are credentialing applications, entity formation, and financing. Everything else can flex. Start those three the moment you decide to move forward.

Independent practice is not the path of least resistance. But for physicians who choose it thoughtfully and prepare for it well, it consistently delivers something that employed medicine rarely does: a career built entirely on your own terms.

The physicians who thrive in independent practice are not necessarily the ones with the most business experience. They are the ones who understood what they were building before they started — and who surrounded themselves with the right knowledge and the right team early enough to matter.

What independent practice makes possible

The complexity is real, but it is navigable. What separates the practices that thrive from those that struggle is rarely clinical skill. It is preparation, sequencing, and knowing where the landmines are before you step on them. This guide — and the sections that follow — is designed to give you that map.