Opening an independent medical practice is a dream for many physicians, but figuring out the logistics can turn it into a nightmare—especially when it comes to estimating how much money you’re going to need.
With the cost estimation calculator we’ve created here, you’ll enter information related to the size of your team, your location, your specialty, and your medical software to calculate how much you should expect to spend when opening your medical practice.
Here’s what we’ll cover:
Calculate your cost to start a medical practice
Five considerations when budgeting for a new medical practice:
Calculate your cost to start a medical practice
There are, understandably, a lot of complex factors to consider when figuring out a budget for launching a brand new medical office.
We’ll go over each line in our calculator tool in the next section of this piece, but for those of you who want to jump to the fun part, I won’t keep you waiting. Here’s our medical cost calculator tool:
It’s important to recognize that some costs are too specific to your practice for us to include them in this tool, so try to think of the budget calculated here as an estimate rather than a final number.
Now let’s take a look at the fields we used to come up with your medical practice budget.
Five considerations when budgeting for a new medical practice
To calculate the cost of starting your medical practice, we considered five factors:
- Number of employees
- Software and hardware
- Malpractice insurance coverage
- Miscellaneous expenses
1. Number of employees
To establish any successful medical practice, you need a strong team around you. That includes both licensed and unlicensed employees to serve your patients—that is, nurses and office managers—and you’re going to have to pay them.
RN salaries vary across the country and depend on a number of complex factors: years of experience, education, location, and specialty, to name a few. However, the average salary for registered nurses is currently around $64,000.
There are even more considerations for unlicensed employees such as medical office assistants. Will you pay them by the hour or will they earn a salary? Will then receive benefits? Will they earn bonuses? All good questions that you need to ask before you begin hiring your team. On average, medical office workers make around $35,000 a year, but that also varies.
We’ve used the national averages for those positions to create our calculator tool, but you should get more specific in the next stages of opening your practice.
When determining your budget for employee salaries, research average incomes for those positions in your city and state, for your type of practice, then come up with an acceptable range you’re willing to pay your employees in the first year of opening your practice.
Rent isn’t just a seminal rock musical turned GLAAD Media Award nominated film, it’s also something you’re going to have to pay to open your own medical practice.
To calculate this factor in our budgeting tool, we took the average rent for medical practices last year: $22.90 per sq. ft.
Naturally, rent is another cost that will depend entirely on your location, as real estate in popular areas like San Francisco will be more expensive than others. To find a more accurate price, consider working with a realtor who specializes in medical offices.
3. Software and hardware
There’s absolutely no way you can run a successful medical practice these days without using technology.
Even those practices who opt for the bare minimum software must use electronic medical records software if they want to accept Medicare, and the benefits of most medical software systems far outweigh the cost.
Whether you’re looking at EHRs, practice management suites, or standalone scheduling systems, most providers are going to offer monthly pricing models. To use our tool, simply input your total monthly budget for software and we’ll calculate your yearly spend for technology.
If you’re still shopping for software, check out our EHR Pricing Guide to see what popular products cost.
4. Malpractice insurance coverage
Being a doctor is expensive, and insurance is one of the biggest costs you’ll face. Of the different types of insurance you’ll need, malpractice liability coverage deserved its own input field because it’s one of the most critical types of coverage to secure when opening a new medical practice.
To accurately fill out that field in our calculator tool, determine which of the following levels of risk your practice is likely to fall under:
- High: Specialties with high risk of adverse effects, unsuccessful treatments, negative patient outcomes, or lawsuits fall in this category. Surgery, obstetrics, and emergency providers are a few examples of high risk specialties. These specialties generally pay around $150,000 in malpractice liability coverage.
- Medium: Practices that don’t perform as many intensive procedures, but still do some, are generally classified as medium risk. This is where the majority of general practitioners will fall. These usually pay between $30,000 and $50,000.
- Low: Specialties in which there are few lawsuits and minimal procedures may be considered low risk. They may pay as low as $10,000 for coverage.
In addition to risk level, malpractice premiums will depend on your location. The Cunningham Group has a great tool for looking up historical premiums by state. Use this when considering your insurance budget.
5. Miscellaneous expenses
Finally, we wanted to include a field in our calculator where you could add up other costs that were not already accounted for to make your result as specific to you as possible. Here’s where you’ll think about things like yearly utilities and property insurance for your office, the cost of benefits plans for your employees, office and medical supplies, and IT support.
Add all of those costs up for twelve months, then input that total to complete your calculation.