Starting a Private Practice

Starting a Private Practice?

What New Physicians Need to Know About Medical Billing, Credentialing, and Revenue Cycle Management

New physicians launching a private practice should start payer credentialing 90–120 days before their first patient visit, budget in thousands per physician for full credentialing across core payers, and build a revenue cycle management (RCM) plan – in-house, outsourced, or supported by trained virtual assistants – before opening day. Credentialing delays and claim denials are the two biggest threats to first-year cash flow for independent practices in the United States.

Medical school prepares physicians to diagnose and treat. It does not prepare them to read an EOB, appeal a denied claim, or track a credentialing application that has been “in process” for four months. For young physicians launching a private practice in the U.S., that knowledge gap is now one of the biggest financial risks in year one – and the data backs that up.

Private practice itself is becoming rarer. Just 42.2% of U.S. physicians were in a wholly physician-owned private practice in 2024, down from 60.1% in 2012 – a drop of roughly 80,000 physicians industry-wide, according to the American Medical Association’s Physician Practice Benchmark Survey. Rising administrative burden, low reimbursement growth, and the complexity of billing and credentialing are among the reasons AMA leadership has cited for that decline. For the physicians who still choose independence, getting the business side right from day one matters more than ever.

Credentialing: The Clock Starts Before You See Your First Patient

Credentialing is the process by which insurance payers verify a physician’s education, licensure, training, and background before allowing that physician to bill for services. It is, functionally, the gate between “licensed to practice medicine” and “allowed to get paid for it.”

How long does physician credentialing take in 2026?

• Medicare (PECOS): Roughly 60–90 days after electronic submission; manual signature re-verification can push this past 100 days.
• Commercial payers (Aetna, Cigna, BCBS, UnitedHealthcare): Typically 90–150 days, with complex specialty or Medicare Advantage panels sometimes reaching 180 days.
• Industry-wide range most sources cite: 60–180 days depending on payer type and state.

What does credentialing cost? Outsourced credentialing typically runs $1,500–$5,000 per physician for the initial round across core payers (Medicare, Medicaid, and major commercial plans), with recredentialing costing less – roughly $600–$2,400 per year once a physician is established.

Why it matters financially: A physician who isn’t yet credentialed can’t bill in-network for the payers still processing their application. Industry analysts estimate this can cost a practice $1,000–$5,000 per provider, per day in uncollectible revenue during the gap. The practical lesson for new physicians: start the credentialing process 90–120 days before your intended opening date – not after you’ve signed a lease or hired staff.

Two additional 2026 developments are worth knowing:

• The Interstate Medical Licensure Compact (IMLC) has expanded to roughly 40 participating states, speeding up multi-state licensure for physicians who may practice across state lines or via telehealth.
• OIG exclusion list screening is increasingly treated as a monthly compliance requirement rather than a one-time check, since knowingly or unknowingly employing an excluded individual can jeopardize Medicare billing privileges.

Medical Billing and Claim Denials: A Growing Problem, Not a Shrinking One

Once credentialed, billing accuracy becomes the next major variable in a new practice’s cash flow — and the numbers show this is getting harder, not easier.

• The Healthcare Financial Management Association (HFMA) considers a 5–10% first-pass claim denial rate the acceptable benchmark.
• The current published industry average sits closer to 9–12%, and according to Medical Group Management Association (MGMA) data reported by Fierce Healthcare, 41% of providers now report denial rates above 10%.
• 65% of denied claims are never reworked, according to MGMA – meaning that revenue is simply written off, not merely delayed.
• Reworking a single denied claim costs a practice an estimated $25–$181, depending on claim complexity, per MGMA-cited figures.

What’s driving the increase? Stricter automated payer edits, more aggressive AI-based claims adjudication, expanded prior authorization enforcement, and periodic CMS coding-edit updates are all cited as contributing factors in 2026 industry reporting. For a solo or small practice without a dedicated billing team, even a handful of preventable denials each month can meaningfully affect take-home revenue.

Prior Authorization: A Specific and Growing Burden

Prior authorization deserves its own mention because of how disproportionately it affects physician time. According to the AMA’s 2024 Prior Authorization Physician Survey of 1,000 practicing physicians:

• Physicians complete an average of 39 prior authorization requests per physician, per week.
• That workload consumes an average of 13 hours of physician and staff time weekly — the equivalent of nearly two business days.
• 40% of physicians employ staff who work exclusively on prior authorization tasks.
• 89–94% of physicians say prior authorization contributes to burnout.
• 93% of physicians say prior authorization delays access to necessary patient care.

CMS’s interoperability and prior authorization rules, with phased requirements through 2026–2027, are intended to push payers toward faster electronic prior authorization – but for now, this remains one of the heaviest administrative loads a new practice will carry.

Revenue Cycle Management (RCM): The System Behind the Numbers

Billing is one component of the broader discipline of revenue cycle management – the full financial lifecycle of a patient encounter, from scheduling and eligibility verification through final payment collection. A functioning RCM process typically includes:

1. Eligibility and benefits verification before the visit
2. Accurate charge capture at the point of care
3. Clean claim submission with correct coding
4. Denial management — tracking, appealing, and resubmitting rejected claims
5. Payment posting and reconciliation
6. Patient billing and collections

This is also, increasingly, an area where practices are choosing not to go it alone. The U.S. healthcare RCM outsourcing market was valued at roughly $25.2 billion in 2025 and is projected to keep growing at a compound annual rate of around 7–12% through the early 2030s, according to multiple industry market-research firms. Separately, one industry analysis found that 70% of hospitals and health systems plan to expand their RCM outsourcing engagements, and that AI and automation across the revenue cycle could generate as much as $360 billion in annual industry-wide savings.

For a new, independent physician, the takeaway isn’t necessarily “outsource everything” — it’s that RCM has become specialized enough that few solo practices can handle it well with a single front-desk hire, and the market of specialized support (services, software, and staffing) is growing quickly for a reason.

Where Virtual Assistance Fits In

Hiring a full in-house administrative team is expensive and often impractical for a physician in year one. This is where trained virtual assistants – remote staff specifically trained in healthcare administrative workflows – have become a common middle-ground solution. Typical tasks include:

• Insurance eligibility verification and prior authorization support
• Appointment scheduling and patient reminders
• Claims follow-up and denial tracking
• Credentialing paperwork and payer communication
• Patient billing inquiries and front-desk-style support

The appeal for a new practice is straightforward: dedicated, specialized support without the fixed overhead of full-time, in-office staff — which matters most in the first 12–24 months, when patient volume and revenue are still ramping up.

The Bottom Line for New Physicians

The data paints a consistent picture: independent practice is harder to sustain than it was a decade ago, credentialing and billing have gotten more complex rather than less, and the practices that come through their first two years in the best financial shape tend to treat the business side – credentialing, billing, denial management, and staffing – with the same seriousness as clinical care, starting before day one rather than after.

Concretely, that means:

• Start credentialing 90–120 days before opening.
• Build a denial-prevention workflow, not just a denial-response one.
• Decide early whether billing and RCM will be handled in-house, outsourced, or supported by virtual assistants – and staff accordingly.
• Revisit credentialing and payer enrollment status regularly; it isn’t a one-time task.

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References

1. American Medical Association – Smaller share of doctors in private practice than ever before (2024 Physician Practice Benchmark Survey). https://www.ama-assn.org/practice-management/private-practices/smaller-share-doctors-private-practice-ever
2. American Medical Association – Fixing prior auth: Nearly 40 prior authorizations a week is way too many (2024 AMA Prior Authorization Physician Survey). https://www.ama-assn.org/practice-management/prior-authorization/fixing-prior-auth-nearly-40-prior-authorizations-week-way
3. American Medical Association – AMA survey: Prior authorization reform pledge falls short with physicians. https://www.ama-assn.org/press-center/ama-press-releases/ama-survey-prior-authorization-reform-pledge-falls-short-physicians
4. Medical Group Management Association (MGMA) – MGMA Stat: Strategic improvements in your RCM to reduce your practice’s claim denials. https://www.mgma.com/mgma-stat/strategic-improvements-in-your-rcm-to-reduce-your-practices-claim-denials
5. Fierce Healthcare – Doctors continue shift away from private practice, citing insurer payment and regulatory issues. https://www.fiercehealthcare.com/providers/doctors-continue-shift-away-private-practice-citing-insurer-payment-and-regulatory-issues
6. Healthcare Financial Management Association (HFMA) denial-rate benchmarks, as cited in industry reporting on MGMA DataDive figures.
7. Centers for Medicare & Medicaid Services (CMS) – PECOS enrollment and interoperability/prior authorization rule information. https://www.cms.gov

Market-size and cost figures for RCM outsourcing and credentialing pricing are drawn from multiple 2026 industry market-research and healthcare-consulting publications and represent industry estimates rather than a single official government source; figures can vary by methodology and should be treated as directional.