Cost to Start an Oncology Practice: Budget and Financing
The cost to start an oncology practice is typically higher than for many other physician specialties. Beyond the usual office lease, staff and technology, a new medical oncology practice needs an infusion area, pharmacy space, specialized equipment and, most significantly, the cash to buy drugs before payers reimburse the practice.
Every start-up is different, and costs depend on location, size, services offered and whether the practice leases or owns its space. This guide outlines the main budget categories and how oncologists typically finance them, without assigning specific dollar figures that can vary widely. Ownership, licensing and pharmacy rules vary by state, and nothing here is legal, tax, billing or compliance advice.
Main Categories in the Cost to Start an Oncology Practice
Most start-up budgets fall into several broad buckets:
- Space and build-out: exam rooms, infusion bays, pharmacy and compounding areas, nursing stations and waiting areas
- Equipment: infusion chairs, pumps, pharmacy hoods, refrigeration, monitoring equipment and furniture
- Technology: electronic health records with oncology functionality, practice management and billing systems
- Drug inventory: initial stock of infused and injected therapies
- Staffing: recruiting and paying oncology nurses, pharmacy staff, front desk and billing personnel before revenue ramps
- Working capital: covering payroll, rent and supplier payments while claims are processed
- Professional fees: legal, accounting, consulting and credentialing support
Space, Build-Out and Pharmacy Requirements
Oncology space requires more than standard exam rooms. Infusion areas need comfortable chairs, nurse visibility, appropriate utilities and room for patients who may be in treatment for extended periods. Sterile compounding and hazardous drug handling may require dedicated rooms, ventilation and equipment that meet applicable standards.
Pharmacy and compounding requirements should be confirmed with qualified pharmacy and compliance professionals early in the design process, since retrofitting later can be costly. Practices planning to grow their infusion capacity over time can read our article on oncology infusion suite expansion.
Equipment and Technology
Equipment for a medical oncology start-up may include infusion chairs and pumps, compounding hoods, medical-grade refrigerators, emergency equipment, laboratory analyzers if the practice runs in-house testing, and office furniture. Many practices finance equipment separately from the build-out so that each asset is matched with an appropriate term.
Our oncology equipment financing and leasing page explains options for spreading equipment costs over time.
Drug Inventory: The Largest Variable
For many new practices, the opening drug inventory and the cash needed to keep buying drugs are the largest and least predictable costs. Under buy-and-bill, the practice pays for drugs, administers them and waits for reimbursement. Early in a practice’s life, payer enrollments may still be in process, which can stretch that wait.
Our guide to oncology buy-and-bill cash flow explains why this gap exists and how practices manage it. Start-ups should build inventory and receivables into their budget rather than treating them as an afterthought.
Credentialing and Payer Enrollment
A new practice must enroll with Medicare, Medicaid and commercial insurers before it can be paid. Enrollment and contracting can take time, and claims submitted before enrollment is complete may be delayed or denied. Healthcare counsel and qualified billing professionals can help plan this process. Payer participation from a previous employer should not be assumed to carry over to a new practice.
Staffing Before Revenue
Oncology nurses, pharmacy technicians and experienced billing staff can be difficult to recruit. Many start-ups hire key staff before opening so they can be trained and ready on day one. That means paying salaries before revenue arrives, which should be reflected in the working capital budget. Worker classification and employment terms should be reviewed by qualified professionals.
Radiation Oncology Start-Ups
A radiation oncology start-up is a different project, with shielded vaults, linear accelerators and physics staff. Costs are often substantially higher, and certificate-of-need rules may apply in some states. Our article on radiation oncology center cost covers those projects in detail.
How Oncology Start-Ups Are Financed
Start-up financing is often a combination of tools:
- Start-up practice loans: covering build-out, equipment and initial working capital
- SBA 7(a) loans: may be used for start-up costs in some cases, with eligibility and terms depending on the business, the borrower, use of proceeds, program rules and lender review
- Equipment financing: matching equipment costs to useful life
- Working capital lines: helping bridge drug purchases and receivables once operations begin
- Personal capital: lenders often expect the borrower to contribute some equity
You can estimate payments under different scenarios with our SBA loan calculator. Estimates are for planning only and do not represent an offer or approval.
What Lenders Want to See
Lenders evaluating a new oncology practice generally look for a detailed business plan, a realistic budget, market analysis, referral relationships, the physician’s clinical and management experience, personal credit and liquidity. Projections should show how the practice will cover drug purchases and expenses while volume builds. Our article on oncology practice loan requirements covers the documents lenders typically request. Every loan is subject to approval, and nothing here is a commitment to lend.
Ways to Manage Start-Up Costs
- Phase in infusion capacity rather than building every chair at once
- Consider leasing some equipment to preserve cash
- Negotiate tenant improvement allowances with landlords
- Build a conservative ramp-up timeline into projections
- Keep a cash cushion for delayed enrollments and denials
Final Thoughts
The cost to start an oncology practice reflects the specialty’s unique demands: specialized space, compounding and infusion equipment, experienced staff and, above all, the cash to fund drug inventory before reimbursement. A detailed budget and a financing plan that includes enough working capital can give a new practice the runway it needs.
US Medical Funding helps oncologists finance new practices from build-out through opening. Learn more about our oncology practice start-up financing.
