Orthopedic Clinic Running Costs
Running an Orthopedic Clinic in 2026 requires substantial upfront capital and high monthly fixed costs, primarily driven by specialized payroll Your total monthly running costs start around $306,700 in the first year, based on $212,500 in wages and $25,800 in fixed overhead Payroll alone accounts for over 69% of these initial operational expenses You must defintely manage a significant cash burn until you hit break-even in February 2028, 26 months into operations The model shows a minimum cash requirement of -$316 million by January 2028 High revenue per treatment (Surgeons: $4,000) helps, but scale is crucial This guide breaks down the seven core recurring costs you must track to maintain solvency
7 Operational Expenses to Run Orthopedic Clinic
| # | Operating Expense | Expense Category | Description | Min Monthly Amount | Max Monthly Amount |
|---|---|---|---|---|---|
| 1 | Specialized Staff Payroll | Payroll/Labor | Monthly payroll for 20 FTEs, including 2 Orthopedic Surgeons ($350,000 annual salary each) and 5 Nurses ($80,000 annual salary each), totals $212,500 monthly in 2026. | $212,500 | $212,500 |
| 2 | Facility Lease | Fixed Overhead | The fixed monthly expense for the Facility Lease is $15,000, covering the physical space required for clinical and administrative operations from 2026 through 2030. | $15,000 | $15,000 |
| 3 | Direct Medical Supplies | Cost of Goods Sold (COGS) | Costs of goods sold (COGS) include Medical Supplies (70% of revenue) and Pharmaceuticals (40% of revenue), totaling 110% of gross monthly revenue. | $0 | $0 |
| 4 | Malpractice Insurance | Risk Management | Malpractice Insurance is a critical fixed cost, budgeted at $5,000 per month to cover liability risks associated with surgical and diagnostic procedures, defintely a non-negotiable expense. | $5,000 | $5,000 |
| 5 | Revenue Cycle Management | Variable Overhead | Billing Services represent a variable operating expense, calculated at 50% of gross revenue, covering the cost of processing claims and managing collections. | $0 | $0 |
| 6 | Utilities & Maintenance | Fixed Overhead | Utilities ($2,000 monthly) and Maintenance ($1,500 monthly) combine for a fixed facility operations cost of $3,500 per month. | $3,500 | $3,500 |
| 7 | EHR Software Subscription | Technology | The fixed cost for EHR Software is $1,000 monthly, separate from the initial $100,000 EHR System Implementation capital expenditure in 2026. | $1,000 | $1,000 |
| Total | All Operating Expenses | $237,000 | $237,000 |
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What is the total monthly running budget needed for the first 12 months?
The total monthly running budget for the first 12 months requires summing fixed overhead, initial payroll, and variable costs projected against patient volume, which for a starting Orthopedic Clinic might total around $1.155 million over the year. Before you even see the first patient, you need capital secured to cover the fixed costs, so thinking about the legal structure now—Have You Considered Registering Your Orthopedic Clinic As A Legal Business Entity?—is defintely key to managing that initial outlay.
Initial Fixed Burn Rate
- Estimated fixed overhead (rent, utilities, insurance) is $25,000 per month.
- Initial payroll for essential staff and administrators is budgeted at $45,000 monthly.
- Total non-volume-dependent fixed costs equal $70,000 per month.
- This fixed burn rate requires $840,000 just to cover the first year of overhead.
Calculating Total Operating Budget
- Variable costs are estimated at 25% of monthly revenue.
- Revenue projection assumes 150 treatments monthly at $700 average service price.
- Variable costs add approximately $26,250 to the monthly operating expense.
- The full 12-month budget sums to $1,155,000 based on these initial targets.
Which recurring cost category represents the largest percentage of total operating expenses?
The largest recurring cost for an Orthopedic Clinic is defintely specialized practitioner compensation, often eclipsing 50% of operating expenses, followed closely by facility overhead, so immediate focus must be on optimizing utilization rates; check if the Orthopedic Clinic is currently generating sustainable profits here: Is The Orthopedic Clinic Currently Generating Sustainable Profits?
Pinpoint Top Expense Driver
- Calculate total monthly payroll burden for specialists.
- Compare personnel costs against the facility lease expense.
- Determine the true cost per available practitioner hour.
- Review utilization targets versus actual booked patient time.
- If salaries are 60% of OpEx, that's your lever.
Drive Efficiency in High-Cost Areas
- Negotiate medical supply contracts based on volume.
- Implement capacity management to boost patient throughput.
- Target a consistent 85% practitioner utilization rate.
- Analyze the cost impact of non-billable administrative work.
- If wait times rise above 10 days, churn risk increases.
How many months of cash buffer are required to cover costs before reaching operational break-even?
The Orthopedic Clinic needs enough capital to cover 25 months of negative operating cash flow leading up to the projected break-even point in Month 26. If the average monthly burn rate is $85,000, you need a minimum runway of $2.125 million to survive until February 2028. Have You Considered Registering Your Orthopedic Clinic As A Legal Business Entity?
Calculating Runway Needs
- Fixed overhead costs are estimated at $65,000 monthly.
- Variable costs (supplies, direct labor) average 35% of gross revenue.
- Cumulative loss until Month 25 is defintely $2,125,000.
- This calculation assumes target utilization rates are hit by Month 26.
Funding Buffer Triggers
- If insurance credentialing takes 60 days longer than planned, the cash requirement increases.
- A 10% drop in Average Revenue Per Patient (ARPP) adds $212,500 to the required buffer.
- If patient volume growth stalls below 15 cases per week in the first quarter, the runway shortens fast.
- You must secure this capital before the first patient visit.
If patient volume is 20% below forecast, how will we cover the fixed monthly costs?
If patient volume for the Orthopedic Clinic drops 20% below plan, you must immediately trigger cost containment protocols and secure a working capital buffer to cover the fixed overhead, which remains constant regardless of patient flow. This scenario highlights why understanding the break-even point is crucial before scaling, as detailed in analyses like How Much Does It Cost To Open An Orthopedic Clinic?
Trigger Fixed Cost Review
- Identify all costs that don't change with patient count—rent, core salaries, insurance.
- Pinpoint discretionary fixed spend like non-essential software subscriptions or marketing pilots.
- Prepare immediate pauses on non-critical capital expenditures, like delaying equipment upgrades.
- If volume is down 20%, you defintely need to review vendor contracts for immediate rate renegotiation.
Secure Cash Bridge
- Model the exact shortfall: Fixed Costs divided by the expected contribution margin percentage.
- Confirm availability of a short-term line of credit, ideally before the shortfall hits.
- Accelerate Accounts Receivable (AR) follow-up to speed up cash collection cycles.
- If your fixed costs are $150,000/month, a 20% revenue hit requires $30,000 in extra cash flow per month to maintain operations.
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Key Takeaways
- The initial monthly running budget for the orthopedic clinic is estimated to start at $306,700 in 2026.
- Specialized staff payroll is the single largest expense category, accounting for $212,500, or over 69% of initial monthly operating costs.
- The clinic faces a significant cash burn, requiring a minimum capital buffer to cover a projected peak deficit of $316 million.
- Operational break-even is projected to be reached late in the second year of operation, specifically in February 2028, after 26 months.
Running Cost 1 : Specialized Staff Payroll
Staff Payroll Snapshot
Your specialized staff payroll for 20 FTEs in 2026 hits $212,500 monthly. This figure includes 2 Orthopedic Surgeons earning $350,000 annually and 5 Nurses at $80,000 yearly. This is your single largest fixed operating expense, so managing headcount growth is crucial for margin protection.
Cost Breakdown
This $212,500 estimate covers 20 full-time employees (FTEs) projected for 2026. The inputs are 2 surgeons ($350k salary) and 5 nurses ($80k salary), plus 13 other staff members. Here’s the quick math: the surgeons alone cost about $116,700 monthly before employer taxes and benefits, which aren't explicitly detailed here.
- Surgeon monthly cost: ~$116.7k
- Nurse monthly cost: ~$33.3k
- Total listed roles: 7 FTEs
Payroll Control
Payroll is a fixed cost until you adjust staffing levels, so control hiring speed. Avoid over-hiring support staff based on optimistic utilization projections. A common mistake is forgetting the 20% to 30% overhead (taxes, benefits) added to base salaries; this $212.5k is likely just the base pay.
- Tie hiring to booked utilization.
- Benchmark surgeon-to-nurse ratios.
- Ensure compliance on contractor status.
Budget Reality Check
Compare this payroll against your lease ($15,000) and insurance ($5,000). Your $212,500 payroll dwarfs all other fixed overhead combined, making it the primary lever for cost control. If revenue ramps slower than expected, you’ll need swift action on non-clinical hiring defintely.
Running Cost 2 : Real Estate Lease
Lease Cost Baseline
The facility lease sets a firm $15,000 monthly overhead for clinical and admin space needed from 2026 through 2030. This fixed commitment must be factored into your initial burn rate calculations, as it's not tied to patient volume. We need to budget this defintely.
Cost Coverage Inputs
This $15,000 covers the physical footprint for both clinical treatment areas and administrative functions. It’s a pure fixed cost, meaning it hits the P&L every month whether you see zero patients or max capacity. The key input here is the five-year term commitment starting in 2026.
- Fixed monthly cost: $15,000
- Coverage period: 2026–2030
- Budget line: Fixed Overhead
Managing Fixed Space
You can't easily cut this once signed, so pre-lease diligence is everything. Make sure the square footage aligns precisely with your projected 20 FTE staff capacity and planned treatment rooms. Don't overpay for space you won't use by 2028.
- Avoid signing for future expansion needs now.
- Ensure lease terms allow for subleasing options.
- Verify utility costs aren't bundled into the base rent.
Fixed Cost Floor
Compared to the $212,500 monthly payroll, the lease is small, but it’s the first fixed cost you must cover before any revenue comes in. This lease forms the absolute minimum baseline operating expense floor for 2026 operations.
Running Cost 3 : Direct Medical Supplies
Negative Gross Margin Alert
Your Costs of Goods Sold (COGS) currently total 110% of gross monthly revenue due to high input costs. This structure guarantees a loss before factoring in payroll or overhead. You must address the 70% Medical Supplies and 40% Pharmaceuticals components right away.
Input Cost Calculation
COGS is calculated by summing Medical Supplies, set at 70% of revenue, and Pharmaceuticals, set at 40% of revenue. This calculation requires knowing your projected monthly service revenue and tracking supplier invoices against sales records. If revenue hits $100k, COGS is $110k.
- Medical Supplies: 70% of revenue
- Pharmaceuticals: 40% of revenue
- Total COGS: 110% of revenue
Reducing Supply Drag
You cannot sustain a gross margin below zero; focus on negotiating supplier contracts immediately. Since pharmaceuticals are 40%, explore direct sourcing or bulk purchasing agreements with distributors. Also, review if the 70% supply cost is based on standard pricing or includes waste; defintely audit usage logs.
- Negotiate supplier pricing tiers.
- Review utilization rates for waste.
- Increase service prices by 10% minimum.
The Real Cost Layer
Remember that the 50% Revenue Cycle Management fee is an operating expense layered on top of this negative gross margin. This means your true cash burn rate is significantly higher than 110% of revenue, eating into your payroll and fixed lease payments quickly.
Running Cost 4 : Professional Liability Insurance
Insurance Fixed Cost
This insurance protects the clinic against claims arising from patient care. Budgeting $5,000 monthly covers the inherent risks of performing surgery and detailed diagnostics. This mandatory fixed outlay is essential for operational continuity.
Cost Structure Detail
Malpractice insurance is a non-negotiable fixed operating expense. The $5,000 monthly premium covers potential legal defense and payouts related to orthopedic procedures. It sits outside variable costs like supplies (110% of revenue) and billing fees (50% of revenue).
- Covers surgical errors.
- Fixed cost, $5k/month.
- Essential for compliance.
Managing Liability Spend
Reducing this cost requires careful risk management, not just shopping quotes. High utilization rates (driven by the capacity model) can sometimes lower per-procedure risk exposure. Avoid setting deductibles too low, as that spikes the monthly premium unexpectedly.
- Bundle coverge types.
- Maintain high claims history.
- Review policy annually.
Cash Flow Implication
Since this is a fixed cost, it must be covered even during low-volume months when revenue is tight due to high variable costs (110% COGS). If utilization drops below the break-even point, this $5,000 expense directly erodes cash flow.
Running Cost 5 : Revenue Cycle Management
Billing Cost Structure
Billing Services are a major variable operating expense, fixed at 50% of gross revenue for your orthopedic clinic. This rate directly impacts profitability because it scales instantly with every service billed, covering claims processing and collection efforts.
RCM Expense Breakdown
This 50% fee is for Revenue Cycle Management (RCM), which handles submitting claims and chasing down payments from insurers. Since this cost is tied to revenue, it’s critical when calculating true contribution. If you bill $200,000 in a month, $100,000 goes straight to billing fees before considering supplies.
- Input: Gross monthly revenue.
- Calculation: Gross Revenue × 0.50.
- Impact: Scales with every patient visit.
Managing Variable Billing Fees
You must push back on this rate if volume allows; 50% is very high for established practices. A defintely common mistake is paying this rate while having high claim denials, meaning you pay fees on money you never collect. Focus on clean claim submission to improve net realization.
- Negotiate based on projected volume.
- Improve internal coding accuracy.
- Audit service provider performance metrics.
Profitability Check
Remember that your direct medical supplies already cost 110% of revenue. Factoring in the 50% billing fee means your variable costs alone exceed 160% of what you bring in before covering fixed overhead like payroll or rent.
Running Cost 6 : Facility Operations
Fixed Facility Cost
Fixed facility operations cost totals $3,500 monthly, combining utilities and maintenance for the orthopedic clinic space. This is a predictable overhead layer before considering the high payroll or supply costs. Know this baseline to calculate your true operational runway.
Cost Inputs
This $3,500 figure comes from two fixed buckets: $2,000 for utilities—powering diagnostic equipment and climate control—and $1,500 for scheduled maintenance. These costs are locked in regardless of patient volume. They sit above the massive $212,500 monthly payroll expense.
- Utilities: $2,000/month fixed.
- Maintenance: $1,500/month fixed.
- Total: $3,500 monthly overhead.
Cost Control Tactics
Managing these costs means focusing on efficiency, not just negotiation, since they are fixed inputs. For utilities, look at HVAC scheduling; for maintenance, stick to preventative contracts. Don't let minor issues escalate into costly emergency service calls, which defintely blow up the $1,500 budget.
- Benchmark utility spend against square footage.
- Use preventative maintenance schedules strictly.
- Avoid reactive, high-cost emergency repairs.
Volume Risk
Because facility costs are fixed at $3,500, they become a higher percentage of your total costs when patient volume is low. If you aren't utilizing your surgeons fully, this baseline overhead eats into your contribution margin faster than variable supply costs do.
Running Cost 7 : Software and Technology
EHR Cost Split
Your technology stack requires two distinct financial treatments: a significant $100,000 capital outlay in 2026 for implementation, plus a recurring $1,000 monthly operating expense for the Electronic Health Record (EHR) software itself. This distinction matters for cash flow planning.
Monthly Software Fees
The $1,000 monthly EHR Software fee is a fixed operating cost covering ongoing licensing and support for your clinical documentation system. This is separate from the $100,000 implementation CapEx planned for 2026. Budget this recurring fee against your projected monthly revenue capacity.
- Covers ongoing EHR licensing.
- Fixed at $1,000 monthly.
- Separate from $100k upfront implementation.
Managing Recurring Tech Spend
Negotiate the monthly EHR fee based on projected patient volume or provider count, not just a flat rate. If you onboard 10 providers, check if the vendor offers a tiered discount below the standard $1,000. Avoid paying for unused modules, that's just throwing money away.
- Tie fees to utilization tiers.
- Benchmark against similar clinic software.
- Confirm support inclusion costs.
CapEx vs. OpEx Timing
The $100,000 implementation cost hits your 2026 budget as a large, one-time capital expenditure, but the $1,000 monthly fee starts affecting contribution margin immediately upon launch. Don't confuse the two line items when forecasting profitability.
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Related Blogs
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- How to Write an Orthopedic Clinic Business Plan: 7 Actionable Steps
- 7 Critical KPIs to Measure for Orthopedic Clinic Success
- How Much Orthopedic Clinic Owners Typically Make
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Frequently Asked Questions
Initial monthly running costs are estimated at $306,700 in 2026, primarily driven by $212,500 in payroll