Licensing background
The Medical Board of California says it licenses physicians and surgeons and also licenses midwives. Its site notes that a Fictitious Name Permit lets a physician or podiatrist practise under a name other than their own, and that it offers expedited review for certain applicants, including veterans and those serving medically underserved areas, and publishes processing times. Individual licensing is separate from business setup, so check the Board for current requirements.
Phase 1: before the doors open
This is the heaviest spending and none of it earns anything yet.
- Lease, deposit and build-out of exam rooms
- Exam tables, diagnostic equipment and a medical records system
- Malpractice and business insurance
- Signage and a website so patients can find you
- Credentialing with insurance plans, which takes time and cannot be hurried
Credentialing deserves emphasis. A practice may be ready to see patients before the plans have approved it, which means early visits may be self-pay or delayed.
Phase 2: the first months of low volume
Patient volume builds slowly. Rent, equipment payments and at least a minimal staff are all fixed. Revenue per visit is real but the number of visits is small. Most owners carry the practice from reserves in this phase, and the risk is that reserves run out before volume arrives.
Phase 3: the billing delay
When insurers pay, they pay after the visit, sometimes after a claim has been corrected and resubmitted. The result is that the practice's income lags the work by weeks. In a growing practice, the lag gets worse before it gets better, because each month's work is bigger than the payments that arrive from earlier, smaller months.
| Month | Work done | Payments arriving |
|---|---|---|
| 1 | Small | Almost none |
| 2 | Growing | Small, from month 1 |
| 3 | Larger | Growing, from month 2 |
The pattern is illustrative: the payments always trail the work.
Phase 4: steady state
Once the practice has settled into a regular pattern of visits and payments, cash flow evens out. The lag does not disappear, but it becomes predictable, and a reserve of a fixed size covers it. The goal of the first three phases is to reach this one without running out of cash.
Where funding fits
Working capital from $25,000 to $5,000,000 can cover equipment, payroll or the billing gap in the first year. Funding can arrive in as little as 24 hours, FICO scores of 500 and up are considered, and the file centres on about three months of bank statements, with no tax returns required. The credit pull is soft and sole proprietors can apply, including solo physicians. A new practice has little history, so approval is not assured. The application takes about five minutes.