Starting an Internal Medicine Practice vs. Buying an Existing Practice
Physicians interested in practice ownership generally have two primary options: start a new internal medicine practice or purchase an established practice. Both approaches can provide opportunities for physicians to build their own businesses, but they can also involve very different financial requirements, risks, and timelines.
Understanding the differences between starting and buying an internal medicine practice can help physicians determine which option may be a better fit for their goals and financial situation. For physicians evaluating internal medicine practice financing, understanding these differences can also help determine what type of financing may be needed.
Here are five important differences between starting an internal medicine practice and buying an existing practice.
1. Startup Costs Can Be Different From Acquisition Costs
Starting a new internal medicine practice typically requires the physician to build the business from the ground up.
Startup expenses may include:
- Office space
- Medical equipment
- Office furniture
- Technology and software
- Renovations
- Employee hiring
- Marketing
- Insurance
- Initial working capital
Buying an established practice involves a purchase price, but the acquisition may also include equipment, furniture, technology, an existing patient base, and other business assets.
The total financial requirement will depend on the specific practice and transaction.
2. Buying an Existing Practice May Provide an Established Patient Base
One potential advantage of purchasing an established internal medicine practice is that the physician may acquire an existing patient base.
An established practice may already have:
- Active patients
- Referral relationships
- Employees
- Established procedures
- Existing technology systems
- Established billing processes
- Historical financial performance
A new practice, on the other hand, generally needs to develop its patient base and referral network after opening.
This does not mean that purchasing an established practice is automatically the better option. Physicians should evaluate the quality and stability of the practice before making an acquisition decision.
3. Financing Needs Can Be Different
The financing requirements for starting a practice can differ significantly from those associated with purchasing an existing practice.
A physician starting a new internal medicine practice may need financing for:
- Startup expenses
- Equipment
- Office improvements
- Technology
- Working capital
- Commercial real estate
A physician buying an existing practice may need financing for the acquisition itself as well as working capital, equipment, real estate, renovations, or other eligible expenses.
Physicians can explore internal medicine practice financing options to better understand the potential financing structures available for their specific situation.
4. Starting a Practice Provides More Control Over the Business
Starting a new practice allows the physician to make decisions about the business from the beginning.
This may include choosing:
- The practice location
- Office size and layout
- Technology systems
- Equipment
- Staffing structure
- Practice management systems
- Branding
- Hours of operation
The physician does not inherit the existing systems and procedures of another practice.
However, building these systems from the ground up can require significant time, planning, and capital.
5. Buying a Practice Can Provide Historical Financial Information
One potential advantage of buying an established practice is access to historical financial information.
A buyer may be able to review:
- Revenue history
- Profitability
- Operating expenses
- Patient volume
- Accounts receivable
- Existing business operations
This information can help the physician evaluate the practice before purchasing it and can also be important when seeking acquisition financing.
A startup practice does not have the same operating history, so financial projections and the physician’s professional and financial profile may become particularly important when seeking financing.
What Are the Advantages of Starting an Internal Medicine Practice?
Starting a practice can provide physicians with significant control over how the business is established.
Potential advantages may include:
- Choosing the practice location
- Building the practice’s brand
- Selecting technology and equipment
- Creating the staffing structure
- Developing the patient experience
- Establishing the practice’s operating model
The physician also has the opportunity to build the practice according to their own long-term goals.
The primary challenge can be establishing a patient base and generating consistent revenue while managing startup expenses.
What Are the Advantages of Buying an Existing Internal Medicine Practice?
Buying an established practice can provide immediate access to an existing business operation.
Potential advantages may include:
- An established patient base
- Existing revenue history
- Established employees
- Existing referral relationships
- Established office operations
- Existing equipment and technology
However, an acquisition also requires careful due diligence. Physicians should review the practice’s financial statements, patient trends, expenses, equipment, contracts, liabilities, and other relevant information before completing the transaction.
Which Option Costs More?
There is no universal answer to whether starting or buying an internal medicine practice costs more.
A startup may require significant upfront investment in office space, equipment, technology, employees, marketing, and working capital.
An acquisition may involve a substantial purchase price but can provide an established business, patient base, equipment, and revenue history.
The financial requirements should be evaluated based on the specific opportunity rather than assuming one option will always be less expensive.
How Should Physicians Decide Between Starting and Buying?
Physicians should consider both their professional goals and financial circumstances when deciding between starting and buying an internal medicine practice.
Important considerations may include:
- Available capital
- Financing requirements
- Desired location
- Patient demographics
- Growth objectives
- Practice management experience
- Timeline for becoming a practice owner
- Risk tolerance
Physicians should also consider whether they prefer the flexibility of building a new practice or the established operations associated with an acquisition.
Final Thought
Starting an internal medicine practice and buying an existing practice can both provide physicians with opportunities for practice ownership. The better option depends on the physician’s goals, financial position, preferred location, desired level of control, and willingness to build or acquire an established operation.
Starting a practice may provide greater control over the business from the beginning, while purchasing an established practice can provide an existing patient base, financial history, staff, and operational infrastructure.
Understanding the differences between the two options can help physicians determine which path may be appropriate and how much financing may be required.
