Startup Cost of Private Practice

[Turducken21]

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After reading many posts on this forum about the subject (which have been extraordinarily helpful), I’m considering starting up a solo private practice. I want to scale it to include other physicians down the road but will for now plan on accepting commercial insurance and trying it full time myself (will plan on moonlighting over the weekend at local inpatient units while getting started). It seems like I would most likely fill by the 6 month mark based on prior posts. I have about 50k saved up for this so far and am curious if this amount seems reasonable for startup costs and a couple months of expenses? I appreciate the responses.

 

[mistafab]

Your costs should be very, very low to start. Scale up costs as business scales. 50K is plenty. You can even ask some therapy practices in your area to rent rooms by the hour to start, to save money on facility costs at first. Just some ways to keep costs low while working your main gig as this builds. Don't jump ship until the ship is closer to the dock, i.e., you're starting to make some decent money through the solo practice. You can 'start' right away with commercial insurance, but it will take months for each one going back and forth to actually be approved to see their patients as in network.

Instead of just moonlighting on the weekend, build your practice monday, tuesday only to start (for example) and do wed-fri somewhere part time. Or, do a evening only clinic and work 7a-12p at an inpatient place rounding. Otherwise, you run the risk of a week full of stressful nothing for months, followed by hard work every weekend. Just work part time while you build up, and leave your main gig when you're ready to expand.

 

[Orgone]

Your costs should be very, very low to start. Scale up costs as business scales. 50K is plenty. You can even ask some therapy practices in your area to rent rooms by the hour to start, to save money on facility costs at first. Just some ways to keep costs low while working your main gig as this builds. Don't jump ship until the ship is closer to the dock, i.e., you're starting to make some decent money through the solo practice. You can 'start' right away with commercial insurance, but it will take months for each one going back and forth to actually be approved to see their patients as in network.

Instead of just moonlighting on the weekend, build your practice monday, tuesday only to start (for example) and do wed-fri somewhere part time. Or, do a evening only clinic and work 7a-12p at an inpatient place rounding. Otherwise, you run the risk of a week full of stressful nothing for months, followed by hard work every weekend. Just work part time while you build up, and leave your main gig when you're ready to expand.

I have started up a private practice twice (after moving) and cosign all the above, especially looking into getting another part time gig several days per week rather than just weekend moonlighting. I wouldn't assume anything about how fast you will fill; every location is different. My experience is that even in high demand areas that are desperately short of psychiatrists, growing a practice tends to start slow and then momentum slowly builds. And insurance credentialling is a hugely variable and uncontrollable wild card. Might take 1-2 months, might take six. Also keep in mind that when you think of being full you want to be "full" with follow ups, not new patient evals, and that inevitably takes longer.

50k (I assume you mean for practice startup and not personal living expenses) is way more than enough. I'm in a high cost area and even here there are nice therapy offices to sublet for several days per week starting at around $500. EMR with bells and whistles another $100-200. Malpractice obviously varies by state but shouldn't be too much for a part time psychiatrist. There'll be some other incidentals but shouldn't be much more than that to start. I'd recommend not hiring any staff until things get pretty busy, not only to save money but more importantly so that you actually know how things work.

 

[Atreides]

As others have said, I wouldn't assume anything about how fast you'll fill. I take insurance and it took me way more than 6 months to fill up my half-time practice. Even now, I'd say easily 80% of cold appointment requests I get lose interest when they find out I can't see them within 24 hours. Direct referrals are willing to wait much longer of course, but if someone finds you on Google or through their insurance directory, they're looking for someone to see them very quickly. Contrary to popular belief, there's no shortage of insurance-taking "prescribers" willing to see patients. I could set up an appointment with a dozen psychiatrists and psych NP's for tomorrow without spending more than 30 minutes on a few directories.

 

[Bartelby]

The biggest cost is the opportunity cost. You need to live on very little for the first months, maybe longer. Your personal expenses thus play a huge role.

Initial expenses might be:
Office furniture/setup - 5k
Good computer setup - 3k


Monthly business expenses might be similar to:
Office - 2k
EMR - 200
Other software - 50
Malpractice - variable. 500?
Professional dues/licenses/etc - variable. 300?
Miscellaneous (business lunches, CME, random supplies) - 250?

So basically you might spend $10k in setup + 1st month rent, then maybe 3-4k per month expenses with a modest sole prop setup. These are very rough ballparks.

If 50k is all you have saved and you will need to live off of that money until your practice is generating a significant profit I agree it is wise to have some sort of side job/ moonlighting work until you are up and running.

 

[TexasPhysician]

filling is highly variable. If doing hour long therapy + med management + insurance, you will earn less $ but fill faster. If you are aiming for a typical insurance practice, I’d expect much longer to fill. NP’s are saturating many areas. You can’t put yourself on insurance panels and get floods of patients any longer. You’ll need to network, advertise, etc to gain traction. It’s getting harder and harder.

 

[Sushirolls]

I'm like 5 years or more in. Moved from big metro with ARNPs everywhere to BFE, and the rural PCPs seldom refer.
Both locations have not led to filling.
*but I'm not taking on new medicare which may be an issue.

So don't just assume psychiatry private practice guarantees robust practice.

 

[shoomer]

For those talking about difficulty with filling a patient panel, how does child psychiatry factor in to this? Significant difference or not really?

 

[TexasPhysician]

For those talking about difficulty with filling a patient panel, how does child psychiatry factor in to this? Significant difference or not really?

It helps, but it still isn’t as easy as years past.

 

[Turducken21]

I really appreciate this insight. Many of the people posting are those I really look up to in this forum and have given a lot of really good information about starting up a clinic. I guess the consensus is it is not as easy as it used to be and may require quite a bit of work/time to fill. All that said, would you all say it has been worth it?

 

[ObsequiousAplomb]

Absolutely worth it.


I'm 2 years in with one insurance and I'm still at around 10 clinical hours per week. It really depends how saturated the market is.


There are tons of NPs with back offices able to set up next day appointments. As others have said, 30 minutes for 5+ appointments with NPs who accept 10+ major insurers. They probably all make more per hour than I do tbh.

 

[clausewitz2]

This makes me think that really establishing a reputation as the psychiatrist who does X or works with niche population Y is really critical for making private practice work. For me Psychology Today remains a magic spigot that I turn on when I need to top up my panel and then can turn off when I have enough new intakes. A month ago after some patients moved out of state I changed my PT profile from 'NOT accepting new patients' to 'accepting new patients' and within two weeks I changed it back because I had eight new intakes scheduled.

 

[TexasPhysician]

I really appreciate this insight. Many of the people posting are those I really look up to in this forum and have given a lot of really good information about starting up a clinic. I guess the consensus is it is not as easy as it used to be and may require quite a bit of work/time to fill. All that said, would you all say it has been worth it?

Worth it is subjective. I enjoy the diversity of my jobs, the control, pay, and business aspects. I mold jobs to work for me, or I leave. There are aspects I don’t love. Vacations are more difficult. I can’t throw my phone away and not look at it. I’m juggling too much at the moment to do that. Sometimes I have to fire employees and handle office drama.

If you look at my past co-residents, they would each say that they now enjoy their work. One in academia can do multi-week vacations and not know where his phone is located. He does have to deal with bureaucracy, meetings, and can’t moonlight. His performance can be monitored. He enjoys teaching. He enjoys fellow faculty.

One has a government contractor job that is flexible in that she can do 80 hours per week on-site. No family. You can’t have your phone while working. She didn’t particularly like private practice. This job can involve 12+ hour shifts and maybe only 2 patients in a day. She brings books and enjoys reading. Getting paid 10 hours to read books is a dream for her. Some weeks she out-earns every other past co-resident while seeing the fewest patients. She can then hop on a plane and take random vacations without worry about what is happening. Clock in, clock out. The job could disappear tomorrow with 0 notice, but that isn’t a problem now.

Then there is everything in-between. You have to find what works well for you.

 

[clozareal]

It's really hard how long it'll take you to fill without knowing more details. There are many variables to consider. Where are you located? Where did you do training? Do you have a network of psychiatrists who are full, therapists, primary care doctors, neuropsychologists, and colleagues who can refer to you?

Having a polished website, PsychologyToday profile, easy system to schedule phone screens, and a niche really helps with marketing which I think is the biggest thing that people struggle with when they tell me they have a hard time filling in private practice. I think 6 months is ambitious to "fill" although I'm not sure what that means for you.

With regards to startup cost, I agree with the above. Your main goal is to keep expenses low. You should first start off either virtually or sublet a part time space from another therapist/psychiatrist. If you want your own office, try to find a low cost one to start. What matters most is that it's private, quiet, accessible. All you really need are two nice chairs and a few decorations, which you can find cheaply (for example, two Ikea EKENÄSET armchairs = $500) and then you can buy more as time goes along and you have more steady income.

$50k seems like a ton to start up. I started with $10k but I also had my own office with nicer furniture (didn't need at the beginning) which ended up costing around $6k. My monthly expenses were around $3k per month starting off but now is around $5k/mo since I have an assistant.

 

[ObsequiousAplomb]

Absolutely worth it.


I'm 2 years in with one insurance and I'm still at around 10 clinical hours per week. It really depends how saturated the market is.


There are tons of NPs with back offices able to set up next day appointments. As others have said, 30 minutes for 5+ appointments with NPs who accept 10+ major insurers. They probably all make more per hour than I do tbh.

I suppose I didn't mention the start-up funds. I started with $15k and that floated me until I was profitable (didn't pay myself for a good 9 months though)

 

[randomdoc1]

As others have said, I wouldn't assume anything about how fast you'll fill. I take insurance and it took me way more than 6 months to fill up my half-time practice. Even now, I'd say easily 80% of cold appointment requests I get lose interest when they find out I can't see them within 24 hours. Direct referrals are willing to wait much longer of course, but if someone finds you on Google or through their insurance directory, they're looking for someone to see them very quickly. Contrary to popular belief, there's no shortage of insurance-taking "prescribers" willing to see patients. I could set up an appointment with a dozen psychiatrists and psych NP's for tomorrow without spending more than 30 minutes on a few directories.

so much this. the "shortage" is a myth and training programs need to prep physicians to excel in the field. Telling us we are hot sh**** breeds arrogance and terrible bedside manner. I keep seeing this myth perpetuated from various programs, it needs to stop NOW. If a young grad (or any psychiatrist at any stage in the career) comes out of a program with a realistic, respectful, and humble demeanor (plus willingness to take feedback and learn) --> they are much more likely to get hired, promoted, paid more, attract and retain good patient traffic than the opposite. Teaching the reality, although it may have it's brutal parts is what is in our best interest.

And this is just talking about filling up a schedule. Now, to fill up a schedule with motivated patients who are not drug seeking, attend appointments reliably, don't monopolize your unpaid time with their personal chaos, and pay their balances reliably, it takes even longer to fill up with that. With the poor teaching though of the reality of the market, psychiatrists are at risk of not knowing how to survive on their own and being at the mercy of hospital systems. Learning how to be independent is our ticket and an avenue to deliver care the way we envision.

 

[lol.psych]

Super worth it. I’m around 2-2.5yrs in, 1 insurance, 50/50 in-person/tele, mostly weekly therapy +/-meds (just a handful of q2wk supportive therapy or q1-3month psychopharm). Small single room office in a medium-ish building with all sorts of other professionals (massage therapists, psychotherapists, estheticians, a variety of artists/artisans).
I make less than I did in a forensic setting, but I could make more if I wanted (like if I updated my psychology today more often to get to the top of the search results, or if I took a 2nd insurance). I average 20 clinical hours per week, give or take.
The main advantages for me (for reference, I have no human dependents, but my partner earns less than I do so I cover more of our collective costs) are that I get to do a lot of therapy, I get to decorate/furnish my own office (which affects my day to day happiness), and I don’t have a non-clinical admin boss. Obviously also flexibility and independence, but that seems like a given. The main drawbacks are that I cover my own vacation (I’m sure I could find someone but it hasn’t seemed worth it so far), I don’t have an immediately available (like, same workroom) group of peers to bounce ideas off of, I have to sort out my own finances, and I have to keep track of my own business-y tasks.

My start up costs were around 10-15k, including furniture and tech (not including malpractice insurance or other recurring fees). But I also had savings to cover a long ramp up (I was out of network for at least the first 6-12 months). I’m not sure how long it took to fill my practice, because there’s kind of a dynamic equilibrium of terminations (insurance/finances, moving, schedule changes, feeling better, not feeling better…) and intakes, but by 6-9 months I was feeling mostly reassured that this could be a sustainable plan.

 

[Cath Up]

Question related to new private practice, piggy-backing off this recent thread. I've read all the private practice threads I could find from recent years. If it is best to start my own thread, could do that.

I am starting a private practice during residency using some moonlighting savings and PGY4 time. Still looking for employment after graduation but hoping to get a small practice off the ground in the coming months then work it alongside employment for an escape route, and fulfillment. I'm aware of the camps who say "don't half ass, go all in" versus "okay to set up on the side" initially. I am choosing the latter. I think I would max out at 3x 3-4 hour slots per week, with perhaps some weekend clinic, during residency (wouldn't anticipate getting that much business before July 2026 though).

My private practice is located in state 2, while state 1 is location of training. Once graduated, very important for me to see most patients in-person most of the time, once I move to state 2, but for the fun of it and while I have time in a chill PGY4 year, I'd like to see some virtual patients located in state 2 while in training.

All the business entity stuff/website/licensing stuff is going along in probably typical fashion. It does seem like I would need a second DEA in state 2 as I still moonlight with a DEA in state 1. So maybe I'll hold off on controlled substances for now in state 2.

Haven't really seen much discussion about medicare. I see sushirolls takes medicare in solo practice, would love to hear your experience. My question with preamble:
I am not CAP and will work on marketing my differentiators, but the HCOL, psychiatrist-dense area I am moving to seems to have folks with solid differentiators and definitionally more experience. Given my stats (I look young, current trainee, currently virtual only, likely less compelling differentiators to most folks) I am anticipating a tough time attracting cash-pay folks. That's not to say I do not feel ready (very much do!) I just know marketing is its own beast. I will still list some average market rates for cash pay, but that leaves the question of insurance. I know as a resident commercial insurances won't touch me with a 10 ft pole. BUT, that still leaves medicare. Given time and motivation to sort through what appears to be some BS in dealing with them, what are some thoughts on registering with medicare for my practice? I imagine it would be a relatively much faster way to fill up my part time hours? Their reimbursement for 2x 99214 + 90833 is still ~$400/hr... kind of seems it is worth the hassle if one selects patients properly (I am not aware of any restrictions on screening forms and calls for medicare).

 

[NeedAdvicelol]

Question related to new private practice, piggy-backing off this recent thread. I've read all the private practice threads I could find from recent years. If it is best to start my own thread, could do that.

I am starting a private practice during residency using some moonlighting savings and PGY4 time. Still looking for employment after graduation but hoping to get a small practice off the ground in the coming months then work it alongside employment for an escape route, and fulfillment. I'm aware of the camps who say "don't half ass, go all in" versus "okay to set up on the side" initially. I am choosing the latter. I think I would max out at 3x 3-4 hour slots per week, with perhaps some weekend clinic, during residency (wouldn't anticipate getting that much business before July 2026 though).

My private practice is located in state 2, while state 1 is location of training. Once graduated, very important for me to see most patients in-person most of the time, once I move to state 2, but for the fun of it and while I have time in a chill PGY4 year, I'd like to see some virtual patients located in state 2 while in training.

All the business entity stuff/website/licensing stuff is going along in probably typical fashion. It does seem like I would need a second DEA in state 2 as I still moonlight with a DEA in state 1. So maybe I'll hold off on controlled substances for now in state 2.

Haven't really seen much discussion about medicare. I see sushirolls takes medicare in solo practice, would love to hear your experience. My question with preamble:
I am not CAP and will work on marketing my differentiators, but the HCOL, psychiatrist-dense area I am moving to seems to have folks with solid differentiators and definitionally more experience. Given my stats (I look young, current trainee, currently virtual only, likely less compelling differentiators to most folks) I am anticipating a tough time attracting cash-pay folks. That's not to say I do not feel ready (very much do!) I just know marketing is its own beast. I will still list some average market rates for cash pay, but that leaves the question of insurance. I know as a resident commercial insurances won't touch me with a 10 ft pole. BUT, that still leaves medicare. Given time and motivation to sort through what appears to be some BS in dealing with them, what are some thoughts on registering with medicare for my practice? I imagine it would be a relatively much faster way to fill up my part time hours? Their reimbursement for 2x 99214 + 90833 is still ~$400/hr... kind of seems it is worth the hassle if one selects patients properly (I am not aware of any restrictions on screening forms and calls for medicare).

You’re definitely on the right track thinking about stuff like marketing and what you want to offer in your practice.

I do want to highlight (and more folks need to be aware of this) that a lot of your competition is going to be from these huge venture-backed outpatient orgs (Lifestance, talkiatry, headway etc) trying to profit off our field. The game is a bit different now. You’ll also have to look at how you set yourself apart from their drones of MDs/NPs, not just your local market. Lots of other factors at play as well. Theres nothing wrong with going Medicare at first and eventually pulling in more private pay, but everything is going to take more time.

Ironically if people stopped working for these big guys and did their own thing, it makes all of our lives (small independent PP) easier.

 

[Merovinge]

I do want to highlight (and more folks need to be aware of this) that a lot of your competition is going to be from these huge venture-backed outpatient orgs (Lifestance, talkiatry, headway etc) trying to profit off our field. The game is a bit different now. You’ll also have to look at how you set yourself apart from their drones of MDs/NPs, not just your local market. Lots of other factors at play as well. Theres nothing wrong with going Medicare at first and eventually pulling in more private pay, but everything is going to take more time.

It's about communicating your ability to provide timely and good care where someone is not just another cog in the machine. There is certainly a real demand for bespoke products across the country in general and also in the healthcare space. I don't know a single person who actively wants to be cog 38257919 for private equity. I do think you need to be very good about response times in this day and age to stay competitive.