How Much Does it Cost to Start a Physical Therapy Practice?

Opening a new physical therapy practice is a great way to supercharge your career; it sends you down a path where you can learn more skills, influence the lives of more patients, and increase your personal wealth. But opening a new clinic is no easy task—especially when it comes to saving up the capital necessary to, at bare minimum, get the clinic up and running. 

Speaking of capital, how much does it cost to start a physical therapy practice, anyway? 

Well, it depends on a lot of factors. Chief among them: Your location, your specialty, and how thrifty you’re willing to be. Beyond that, startup costs vary for a lot of different reasons—but there are some universal basic costs that intrepid therapy entrepreneurs must account for. So, let’s start there.

State and Local Permits 

The very first business expense that fledgling practices must cover is the cost of obtaining a state (or other local or regional) business permit—and the price tag varies drastically from one location to the next. In Arizona, for instance, an entrepreneur without a PT or PTA license would need to shell out $50 for a state business license (though a PT or PTA would not have to get one at all). If that same entrepreneur opened a practice in Phoenix, then the practice owner may also need to get a massage business license ($30) and a privilege tax license ($12). 

In terms of licensing costs, prospective Arizona practice owners get off easy. According to this article, a permit to open a physical therapy practice in New York costs $2,000. (See what I mean about price variances?)

When pricing out permit costs, reach out to your city and/or state clerk. These folks should be able to tell you: 

• How many permits you need to open your business, 
• Which permits you specifically need for a physical therapy practice, and 
• How much those permits cost. 

Rent (or Mortgage) and Utilities 

The next expense to consider is the rent (or mortgage) for your clinic space. Where are you planning to open your practice? Will you have a smaller location in a high-traffic downtown hub, or will you venture into the suburbs or city outskirts to secure a bigger building for less money? What do building prices (for rent or for purchase) look like in your city? 

Your answers to these questions will majorly influence the amount you must allot for your rent (or mortgage)—but you can still get a ballpark estimate without nailing down your exact location. In this article, Dr. Jarod Carter recommends calculating the square footage you think you’ll need and then either searching online to get a feel for the local market, or asking “a commercial real estate agent the going rate/sq-foot in order to get an idea of your up-front rent costs.” 

Remember that if you do choose to rent, you will likely need to budget “the first and last month’s rent plus a security deposit” in order to lock down the location. Additionally, you’ll need to find out if the landlord will pay for renovations—or if you need to do them yourself. 

Utilities

Once you have a solid idea of how much you’ll need to spend on the space itself, you’ll need to account for utilities like:

• Electricity/gas,
• Water/sewage, and
• Phone/Internet.

Some landlords may factor water and sewage into their base rent, but electricity typically isn’t included—and it often requires an initial deposit to open the account. While Internet providers don’t usually require new customers to pay a deposit, you will have to shell out for your first month of service upfront. 

Equipment 

Now, it’s time to consider equipment costs. What is your planned specialty or treatment niche? What equipment will you need to work in that niche? According to this source, “The basic equipment includes treatment tables, which retail from around $1,500 each, fitness equipment such as upright bicycles costing from $800, and treadmills, which start at $1,800 each. Miscellaneous equipment such as heart rate monitors sell at around $150. You will also need items such as several ultrasound muscle stimulators, which sell for around $3,600 each.” 

Cutting Costs

Those price tags may look intimidating, but you can always find good deals—if you’re willing to look. In this article, Jack Sparacio says it’s possible to significantly cut back on your equipment costs if you’re willing to put in the legwork and compromise a little bit. “Why spend $3,500 on a high-end ultrasound-electric stimulation combo machine when you can buy separate portable ultrasound and electrical stimulation units for about $100 each?” he writes. He also encourages therapists to think outside of the box in terms of equipment: “You can buy a $3,000 automatic high-low treatment table or an economical wooden table (with an adjustable backrest) and a step stool for under $500. Or, watch for other clinics going out of business, and you may be able to snag a high-low table at a discount.”

You also may be able to secure provider discounts through one of your vendors. For example, at WebPT, all Members with our EMR have access to the WebPT Marketplace: a Member-exclusive, online rehab therapy equipment shop with deeply discounted prices.

Furnishings

Therapy equipment isn’t the only furniture your practice will need to succeed. Other pieces you’ll want to purchase include:

• A desk and chair for you and/or other personnel you hire;
• A computer or tablet for scheduling appointments, documenting during appointments, billing payers, and tracking finances;
• A front desk for you reception area;
• A few chairs for your waiting room;
• Lamps (if you need additional lighting);
• Decorations like framed pictures or plants to make the space feel more inviting; and
• Other miscellaneous supplies like personal protective equipment (PPE), hand sanitizer, cleaning products, bathroom items, pens, paper, and printers. 

Space Constraints

When shopping for your equipment, don’t forget to consider the constraints of your clinic space. A new whirlpool might sound really neat, but if you can’t comfortably fit it between your all-too-crucial high-low tables and your critical fitness equipment, then it’s probably not time to branch into hydrotherapy. (Not yet, at least!) 

Software 

The next cost to consider when pricing out your PT practice is software. Now, you might be able to get away with completing some of your admin and documentation work on paper, but you’d be doing yourself a disservice. The world is digitizing—fast—and I strongly recommend digitizing your clinic along with it. 

EMR 

Electronic medical record (EMR) systems are arguably the most important software purchase for new practices. They help you document patient progress (and keep tabs on it) while remaining compliant with all relevant regulatory guidelines—thus safeguarding you from future audits. 

EMRs can climb in price pretty quickly, because there’s no shortage of nice-to-have features that companies offer. But, if you’re building a practice from the ground up, there’s no need to invest in a bunch of bells and whistles right away. EMR vendors usually offer a low-cost package that includes only the basic essentials. At WebPT, for instance, we offer a simple version of our EMR to small startup clinics for as low as $59 per month. 

Scheduler

Along with an EMR, you’ll also probably want to purchase a scheduling software—preferably one that integrates with your EMR. Remember, you can’t just whip out the free version of Google Calendar to schedule your patients. All patient information (including names) is PHI, which means using a non-HIPAA-compliant software to manage your schedule could land you in legal hot water. 

Billing 

When it comes to billing, you have a couple of options. You could purchase a billing software and handle claims in-house—or you could offload your billing to another company altogether. If you plan to perform your own billing (or hire an in-house biller), then you’ll need to purchase a billing software—ideally one that’s fully integrated with your EMR so you’re not stuck entering data twice. 

However, this may not be the most cost-effective option when you’re first opening a clinic. It may make more financial sense to outsource your billing to a medical billing company. These companies take a percentage of all the money that you earn—but there are rarely large upfront costs. Ultimately, you have to weigh the pros and cons of outsourcing your billing versus keeping it in-house. 

Admin

Remember that you will probably also need to invest in non therapy-specific software that helps you run your business. Think: HR or payroll programs like UltiPro and ADP ($600 per year for every five users and $160 per month for every ten users, respectively), or payment processing and accounting programs like QuickBooks (starting at $7 a month).

Personnel

Labor costs are generally a business’s biggest expense, and—like almost every other item on this list—they vary greatly from state to state and position to position. If you want to hire another therapist, it’ll probably cost you more than a biller, who will cost you more than a front desk admin, who will cost you more than a tech. You get the picture. Ultimately, you must research local pay scales and then use that information to decide which roles are absolutely mission-critical. 

Remember that you don’t have to hire full-time workers from the get-go; you could start by hiring some part-time staff members. Alternatively, this article recommends recruiting PTs who work for commission (i.e., they earn a percentage of the revenue generated from their patients). At the end of the day, though, that same source recommends budgeting for “at least six months’ salary for all positions in your startup finance plan.” This will help you keep your practice stable in the event of an emergency or disaster. 

Benefits

Part of the reason that labor costs are so pricey is because a flat salary isn’t usually enough to entice the best employees. Great employees look for competitive pay, yes, but they also look for decent health coverage, a reasonable PTO and sick time plan, and other various benefits like bonuses, 401k matching, loan payments, or flexible hours. As a small startup, you may not be able to offer all of these items right off the bat, but you may find it difficult to attract stellar employees without offering at least a health insurance stipend. 

To give you a rough idea of what that might cost, let’s say you have a full-time employee who works 40 hours a week, 52 weeks per year. That employee works 2,080 hours each year. According to the Bureau of Labor Statistics, health insurance costs, on average, $2.73 per hour. That means paying for that employee’s health insurance would cost $5,678.40 annually.  

General and Professional Liability Insurance

The next expense to consider is general liability insurance—but before we continue, please understand that I’m not a lawyer, and this does not constitute legal advice. I strongly recommend reaching out to a healthcare attorney to discuss the pros and cons of purchasing general and professional liability insurance. 

General and professional liability insurance cover different scenarios and circumstances in your clinic that could result in a lawsuit. General liability, for instance, “covers physical risks, such as bodily injuries and property damage,” whereas professional liability “covers more abstract risks, such as errors and omissions in the services your business provides.”

With that in mind, if you do choose to purchase both general and professional liability insurance (which some websites advise), the cost will vary based on the: 

• number of people you employ, 
• size of your clinic, and
• insurance carrier you select. 

According to this article from Insureon, the median cost is $42 a month for general liability insurance and $59 a month for professional liability insurance. 

Opening a new clinic is no easy feat—but anything is possible if you put your mind to it. Have more questions about startup costs? Leave a comment below, and our team will do its best to find you an answer!