Medical Practice Running Costs
Expect monthly running costs for a Medical Practice to start around $103,500 in 2026, primarily driven by specialized payroll and facility expenses This total includes $64,000 for wages, $21,700 in fixed overhead (like rent and insurance), and approximately $17,763 in variable costs tied to patient volume Payroll is your dominant expense, consuming over 60% of your operational budget in the first year Understanding this structure is crucial because while the practice reaches break-even quickly—in just 2 months—you still need a significant cash buffer The model shows a minimum cash requirement of $670,000 by May 2026 to cover initial capital expenditures (CapEx) and working capital needs before positive cash flow stabilizes This guide breaks down the seven core recurring expenses you must track to ensure sustainable growth and a healthy 938% Return on Equity (ROE) You must defintely prioritize staffing efficiency early on
7 Operational Expenses to Run Medical Practice
| # | Operating Expense | Expense Category | Description | Min Monthly Amount | Max Monthly Amount |
|---|---|---|---|---|---|
| 1 | Payroll | Wages | Wages total $64,000 monthly in 2026, covering 7 FTEs including Primary Care Physicians and support staff. | $64,000 | $64,000 |
| 2 | Clinic Rent | Facility | Facility costs are fixed at $12,000 per month, regardless of patient volume or utilization rates. | $12,000 | $12,000 |
| 3 | Medical Supplies | COGS | Costs of goods sold like supplies and vaccines are 40% of revenue, totaling about $4,584 monthly in 2026. | $4,584 | $4,584 |
| 4 | Billing Fees | Admin | External billing and collections services cost 60% of revenue, amounting to roughly $6,876 monthly in the first year. | $6,876 | $6,876 |
| 5 | Malpractice Insurance | Insurance | Professional liability insurance is a critical fixed cost, budgeted at $2,500 per month. | $2,500 | $2,500 |
| 6 | EHR Software | Technology | Electronic Health Record (EHR) and scheduling software are fixed at $2,000 monthly to ensure compliance and efficiency. | $2,000 | $2,000 |
| 7 | Utilities & Maint. | Facility | Fixed facility upkeep, including utilities ($1,500) and cleaning ($1,200), totals $2,700 monthly. | $2,700 | $2,700 |
| Total | All Operating Expenses | $94,660 | $94,660 |
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What is the minimum total monthly running budget required to operate the Medical Practice sustainably?
The minimum total monthly running budget required to operate the Medical Practice sustainably in Year 1 is approximately $103,500, which covers all projected fixed and variable expenses before patient revenue stabilizes; if you're looking at the initial capital required to cover this burn rate until profitability, you should review the startup costs detailed here: How Much Does It Cost To Open And Launch Your Medical Practice Clinic?
Fixed Overhead Drivers
- Facility lease payments are a major fixed component of the $103,500 burn.
- Core administrative staff salaries must be covered regardless of patient volume.
- Essential malpractice and facility insurance premiums are non-negotiable monthly outlays.
- Maintaining the modern facility infrastructure requires predictable spending, defintely.
Variable Burn Components
- Medical supply restocking scales directly with patient treatments delivered.
- Variable compensation for practitioners tied to utilization rates adds to the monthly spend.
- Utility costs fluctuate based on facility operating hours and patient load.
- We must track utilization closely; if capacity management fails, costs spike fast.
Which expense categories represent the largest recurring financial risks?
For the Medical Practice, the largest recurring financial risks are locked into fixed operating expenses, primarily payroll and facility rent. If you’re planning this structure, Have You Considered The Best Strategies To Launch Your Medical Practice Clinic Successfully? is a good place to start mapping out operational stability, but understanding these baseline costs is step one. Honestly, these numbers are defintely your first line of defense against negative cash flow.
Payroll Dominance
- Payroll runs at $64,000 per month, making it the largest fixed cost.
- This expense is not tied to patient volume; it must be covered every month.
- If practitioner utilization drops, this cost immediately pressures contribution margin.
- You need clear productivity targets just to break even on staff costs.
Facility Overhead
- Facility rent is the second major fixed burden at $12,000 monthly.
- This cost is incurred before the first patient walks in the door.
- Rent represents 18.75% of the monthly payroll ($12,000 / $64,000).
- High rent locks you into a high revenue target from day one.
How much working capital cash buffer is necessary before the practice becomes self-sustaining?
The Medical Practice needs a minimum cash buffer of $670,000 ready by May 2026 to absorb initial operating losses while covering necessary capital expenditures; understanding these upfront costs is crucial, as detailed in research on How Much Does It Cost To Open And Launch Your Medical Practice Clinic? This figure represents the runway required before your fee-for-service model generates enough consistent revenue to sustain operations.
Minimum Cash Requirement
- Total required runway cash by May 2026.
- Covers planned Capital Expenditures (CapEx).
- Funds initial operating deficits until break-even.
- This buffer assumes standard physician utilization targets.
Accelerating Self-Sufficiency
- Maximize practitioner availability immediately.
- Drive high utilization rates on scheduled treatments.
- Optimize scheduling to reduce patient wait times.
- Ensure service pricing reflects true cost recovery.
If patient volume is 20% below forecast, how will we cover the high fixed operating expenses?
If patient volume falls 20% below forecast, the Medical Practice faces immediate insolvency because variable costs are already 155% of revenue, meaning you lose 55 cents on every dollar earned before covering the $85,700 fixed overhead. This scenario requires immediate surgical cost control or massive revenue acceleration; if you're planning this launch, Have You Considered The Best Strategies To Launch Your Medical Practice Clinic Successfully?
Variable Cost Trap
- Variable costs are 155% of revenue; this is a structural loss.
- For every $100 earned from treatments, $155 goes to direct operating costs.
- The business loses $55 per $100 of revenue generated right now.
- Volume reduction defintely worsens this structural margin problem.
Fixed Cost Burn Rate
- Fixed overhead sits at $85,700 per month, no matter patient flow.
- A 20% volume drop means this fixed base must be covered by fewer dollars.
- You must calculate the exact break-even point based on the negative contribution margin.
- The immediate action is cutting variable spend or increasing practitioner utilization fast.
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Key Takeaways
- The essential monthly running budget for a new medical practice is projected to start around $103,500 in 2026, heavily weighted by specialized payroll expenses.
- Payroll represents the dominant financial burden, consuming over 60% of the operational budget at $64,000 per month in the first year.
- A significant minimum cash buffer of $670,000 is necessary to cover initial capital expenditures and working capital needs before the practice stabilizes, even with a projected two-month break-even point.
- High fixed operating costs, including $12,000 monthly rent, create significant financial risk if patient volume utilization rates fall below initial forecasts.
Running Cost 1 : Payroll
2026 Payroll Burden
Your 2026 payroll commitment hits $64,000 monthly for 7 full-time equivalents (FTEs). This staff mix includes both Primary Care Physicians and necessary support personnel. Honestly, this is your largest fixed operating expense, so managing staffing levels is key to profitability.
Cost Breakdown
This $64,000 figure represents the total monthly cost for 7 FTEs in 2026. You need quotes for physician salaries and support staff wages, then aggregate them monthly. This cost dwarfs other fixed expenses like rent ($12k) and insurance ($2.5k), making it the primary driver of your operational burn rate.
- Covers Primary Care Physicians.
- Includes essential support staff wages.
- Total is $64,000 per month.
Managing Staff Costs
Controlling payroll means maximizing the revenue generated per provider hour. If onboarding takes 14+ days, churn risk rises because you aren't billing. Avoid overstaffing support roles early on; scale them only when patient volume demands it. A good benchmark is keeping staff costs below 45% of projected gross revenue.
- Tie hiring to confirmed patient pipeline.
- Ensure physicians meet utilization targets.
- Review support staff ratios quarterly.
Breakeven Focus
Since wages are fixed at $64k, revenue must consistently cover this before anything else. If your average revenue per treatment is low, you'll need significantly higher patient volume just to break even on payroll alone. This cost structure demands tight revenue forecasting, defintely.
Running Cost 2 : Clinic Rent
Fixed Facility Cost
Clinic rent sets a baseline operational hurdle you must clear every month. This facility cost is a hard floor of $12,000, meaning utilization doesn't change this primary overhead. You pay this whether you see one patient or one thousand. That’s the reality of physical space.
Rent Calculation Inputs
This $12,000 monthly figure covers the physical space for the medical practice. It is a critical fixed expense, unlike variable costs like supplies (which are 40% of revenue). This rent is non-negotiable overhead that must be covered before payroll or insurance payments can be considered.
- Fixed monthly outlay: $12,000
- Covers physical location costs
- Independent of revenue targets
Managing Rent Overhead
Since rent is fixed, the only way to lower its impact is by increasing revenue density within the existing footprint. Avoid signing leases longer than necessary; flexibility matters more than a small discount if patient volume lags behind projections. You must defintely optimize scheduling to maximize service slots.
- Increase patient throughput now
- Avoid long-term lease penalties
- Ensure utilization covers this base cost
Rent's Break-Even Role
This $12,000 rent, combined with other fixed costs like $64,000 payroll and $2,500 insurance, sets your minimum revenue requirement. If utilization is low, this fixed cost rapidly erodes the contribution margin from every service you sell. It’s the anchor weighing down your early profitability.
Running Cost 3 : Medical Supplies (COGS)
COGS Rate Check
Medical supplies and vaccines are a significant variable expense for your clinic. In 2026 projections, these Costs of Goods Sold (COGS) hit 40% of revenue, translating to roughly $4,584 monthly. This cost scales directly with patient volume, unlike your fixed facility overhead.
COGS Inputs
This 40% figure covers direct patient consumables. You need actual unit costs for vaccines, syringes, and standard examination materials. If revenue projections hold at $11,460/month (derived from $4,584 / 0.40), then COGS management is crucial. What this estimate hides is the variability in vaccine pricing.
- Vaccine pricing volatility.
- Inventory holding costs.
- Usage rate per procedure.
Controlling Supply Spend
Managing supply cost requires tight inventory control, defintely. Since this is a percentage of revenue, high utilization is good, but waste kills margin. Negotiate bulk purchasing agreements with two primary distributors to lock in pricing tiers. Don't let staff overstock, which ties up cash.
- Centralize ordering authority.
- Audit usage vs. patient volume.
- Review distributor contracts yearly.
Margin Pressure Point
If you miss your revenue targets, this $4,584 cost shrinks, but the 40% relationship remains your primary margin pressure point against fixed costs like $64,000 payroll. Focus on efficient patient throughput to drive revenue faster than supply consumption rises.
Running Cost 4 : Billing Fees
Billing Fee Shock
Billing fees are a massive variable cost for your medical practice. Relying on external billing and collections services will consume 60% of your revenue. This translates to an estimated $6,876 expense monthly in the first year, heavily pressuring initial cash flow.
Fee Calculation Inputs
This 60% fee covers patient invoicing, insurance claim submission, and collections follow-up. You need to track total monthly revenue (treatments times price per service) to calculate this exact cost. It’s a direct variable cost tied to every dollar earned, unlike fixed overhead like $12,000 rent.
- Track gross revenue monthly.
- Verify the contract percentage.
- Calculate collections recovery rate.
Reducing Collection Costs
That 60% rate is extremely high for standard medical billing; most practices aim for 3% to 8%. You must negotiate this rate down immediately or plan to bring billing in-house later. If you onboard 7 FTEs, optimizing this fee saves thousands monthly.
- Negotiate rate below 10% now.
- Audit collection success rate.
- Plan for internal billing staff.
Cash Flow Impact
If your initial revenue projection is low, this $6,876 monthly expense will quickly exceed your $2,700 utilities and maintenance budget. You must secure a better vendor or your path to profitability gets significantly harder, defintely.
Running Cost 5 : Malpractice Insurance
Insurance Baseline
Professional liability insurance is a non-negotiable fixed operating expense for your clinic. Budget $2,500 monthly for this coverage. This cost protects your practice against claims arising from professional negligence, regardless of patient volume. It’s a baseline expense you must cover before seeing the first patient.
Coverage Inputs
This $2,500 per month covers professional liability insurance, protecting Vitalis Health Clinic from errors or omissions in patient care. Premiums depend on physician specialties, coverage limits, and claims history, not just monthly revenue. This is a fixed cost that must be paid regardless of your $64,000 payroll or patient flow. It's defintely a baseline requirement.
Managing Premiums
You can’t cut corners on liability insurance, but you can manage the cost structure. Focus on maintaining a clean claims record to keep renewal rates stable. Avoid common pitfalls like letting coverage lapse between operations.
- Shop quotes annually for comparison.
- Increase deductibles cautiously.
- Bundle policies if possible.
Fixed Cost Impact
As a fixed cost, this $2,500 directly impacts your operating leverage. It sits alongside $2,000 for EHR software and $12,000 in rent. If your revenue projection based on treatments is slow to materialize, this insurance payment drains cash reserves quickly. It’s a significant hurdle to clear before achieving profitability.
Running Cost 6 : EHR Software
Fixed EHR Cost
EHR and scheduling software is a fixed operating cost of $2,000 monthly necessary for compliance. This expense supports the practice's core promise of efficient, accessible care at Vitalis Health Clinic.
Cost Breakdown
This $2,000 covers essential Electronic Health Record (EHR) functions and appointment booking systems. It’s a non-negotiable fixed expense, unlike variable costs like supplies (40% of revenue). If you skip this, regulatory risk spikes defintely.
- Covers HIPAA compliance needs.
- Includes patient scheduling modules.
- Fixed cost, not volume-based.
Managing the Spend
You can’t easily cut the $2,000 base fee, but scope creep kills budgets. Focus only on core scheduling and charting features initially. Avoid paying for advanced population health analytics until utilization is high.
- Negotiate implementation fees first.
- Reject unused premium features.
- Benchmark against similar small clinics.
Break-Even Impact
Because this cost is fixed, it directly pressures your break-even volume. Add this $2,000 to other fixed costs like rent ($12,000) and insurance ($2,500). This mandatory software spend must be covered before any revenue hits the bottom line.
Running Cost 7 : Utilities & Maintenance
Fixed Upkeep
Total fixed facility upkeep for utilities and cleaning is a predictable $2,700 monthly expense for the medical practice. This cost is stable, sitting outside the direct revenue cycle, meaning it must be covered regardless of patient volume.
Upkeep Components
This $2,700 covers essential, non-negotiable facility operations needed to keep the clinic open and clean. You need signed vendor agreements to lock these estimates in for budgeting purposes. This cost is not scalable down.
- Utilities estimate: $1,500 monthly.
- Cleaning services quote: $1,200 monthly.
- Fixed cost baseline established.
Control Facility Spend
Since this is fixed, optimization centers on negotiation and efficiency, not volume scaling. Review utility usage patterns quarterly to spot unexpected spikes. Cleaning contracts should have clear scope definitions to prevent scope creep, defintely.
- Audit utility contracts yearly.
- Benchmark cleaning rates against peers.
- Focus on energy efficiency upgrades.
Fixed Burden Share
This $2,700 is a non-negotiable baseline cost. If your total fixed overhead (rent, insurance, software) hits $16,500 monthly, this upkeep represents about 16.4% of that core facility burden before payroll hits.
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Frequently Asked Questions
Typically $103,500 per month in the first year (2026), with $64,000 dedicated to payroll and $21,700 to fixed overhead;