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Guide

How to Start a Private Practice: The 2026 Checklist

Starting a private practice takes six to twelve months from decision to first paid session. Core steps: confirm your license, apply for an NPI (free), form a legal entity (est. $50-500 filing fee), secure malpractice insurance (est. $670-$1,500/year for mental health), choose an EHR and billing model, and begin credentialing if accepting insurance (budget 90-180 days per payer). Solo therapy startup costs run est. $1,500-$4,000; primary care runs significantly higher.

By Gale Editorial · Updated 2026-06-15. Every figure cited to a dated source. How we write.

Before you start: two decisions that shape everything

Two choices made early determine most of your downstream costs, timeline, and administrative burden: will you accept insurance, and will you see patients in-person, via telehealth, or both.

Insurance vs. private pay. Accepting insurance expands access for patients and can accelerate caseload growth, but requires credentialing (90-180 days per payer 1), ongoing claims management, and reimbursement rates that average ~36% lower than private pay 2. The average insurance reimbursement for a therapy session is ~$111, versus ~$159 for private pay 2. Private pay simplifies operations significantly but narrows your potential patient pool and requires explicit upfront pricing conversations.

Telehealth vs. in-person. A telehealth-first practice can launch with near-zero real estate overhead and, in most states, allows you to serve patients statewide. In-person requires an office lease, which is frequently the largest line item in a practice budget.

Neither choice is permanent. Most practices evolve over time. But starting with clarity on both saves months of course-correcting later.

Step 1: Confirm your license is in good standing

Your state professional license is the foundation everything else rests on. Before investing in any other infrastructure, verify:

  • Your license is active and not on probationary status
  • Your license is in the state(s) where you plan to practice (telehealth typically requires licensure in the patient's state, not your own)
  • Any required continuing education hours are current
  • Your malpractice history is clear (insurers and credentialing bodies will check)

Multi-state practice. If you plan to see patients across state lines, investigate the relevant compact: the Counseling Compact (LPCs/LMHCs), the PSYPACT (psychologists), and the Nurse Licensure Compact (APRNs with prescriptive authority vary by state). Each compact has its own eligibility criteria and fees.

Prescribers. If you prescribe controlled substances, confirm your DEA registration is current. DEA registration for practitioners is ~$888 for a three-year cycle 3, and must be in the state where you practice.

Step 2: Apply for your NPI

An NPI (National Provider Identifier) is required for any insurance billing and for most payer credentialing applications. If you do not have one, apply through the NPPES (National Plan and Provider Enumeration System) at nppes.cms.hhs.gov.

Cost: $0. There is no fee to obtain an NPI, no annual renewal fee, and no recurring charge 4.

Type 1 vs. Type 2. As a solo clinician, you need a Type 1 NPI (individual provider). If you form a group practice entity that bills independently, you may also need a Type 2 NPI (organizational provider). Most solo practices start with Type 1 only.

Online applications are typically processed within a few days. Keep the NPI number on hand before beginning any credentialing applications.

Step 3: Form a legal entity

Operating as a sole proprietor is legally permissible but exposes your personal assets to practice liability. Most independent clinicians form either a sole-member LLC or, in states that require it for licensed professionals, a PLLC (Professional Limited Liability Company).

Cost. State filing fees range from ~$35 (Montana) to ~$500 (some northeastern states) 5. The national average as of 2026 is ~$132 5. Some states impose additional annual fees: Pennsylvania PLLCs pay $610/year per licensed member; New York has its own PLLC formation formula. Budget an additional $100-300/year if you use a registered agent service.

PLLC vs. LLC. Many states require licensed health professionals to form a PLLC rather than a standard LLC. Your state board or a local attorney can confirm which applies to your license type. The practical differences for a solo practice are minor, but the formation documents and operating agreement should reference your professional license.

EIN. Obtain a Federal Employer Identification Number (EIN) from the IRS at no cost. You will need it to open a business bank account, file taxes as a business entity, and complete many credentialing applications.

Bank account. Open a dedicated business checking account immediately after formation. Commingling personal and practice funds creates accounting problems and can undermine the liability protection of your entity.

Honest note. A legal entity does not protect you from professional malpractice claims arising from your clinical work. That protection comes from malpractice insurance (Step 4). An LLC primarily shields personal assets from business debts and general commercial claims.

Step 4: Secure malpractice insurance before seeing patients

Do not see a single patient without an active malpractice (professional liability) policy in place.

Cost ranges (2026 estimates, solo practitioners). Mental health providers (therapists, counselors, psychologists) typically pay ~$56-$73/month for a $1M/$3M occurrence or claims-made policy, or ~$670-$875/year 6. Psychologist primary policies average ~$765/year 6. Physicians in higher-risk specialties pay substantially more. These are estimates; your actual premium depends on specialty, claims history, state, and coverage limits.

Common carriers for behavioral health. HPSO and CPH & Associates are frequently cited by mental health providers. Berxi, Insureon, and NOW Insurance also serve this market. For physicians and APRNs, specialty carriers vary by discipline.

Claims-made vs. occurrence. A claims-made policy covers claims filed while the policy is active, regardless of when the incident occurred. An occurrence policy covers incidents that occurred during the policy period, even if the claim is filed after the policy lapses. If you choose claims-made, budget for a tail policy when you cancel or retire.

Tail coverage. If you purchase a claims-made policy and later close your practice, a tail policy (also called "extended reporting period") protects you from claims filed after coverage ends. Tail policies typically cost 1.5-2x one year's premium as a one-time fee.

Your state board may require a minimum coverage limit. Verify the requirement before purchasing.

Step 5: Credentialing with insurance panels (if applicable)

If you plan to accept insurance, credentialing is the most time-intensive step and should begin as early as possible -- ideally before you have office space or an EHR in place.

The honest timeline. Commercial payer credentialing takes 60-180 days from completed application to active paneling 1. Medicare takes ~2-3 months; state Medicaid programs 4-9 months 1. California's AB 1041 (effective January 1, 2026) requires insurers to decide within 90 days of a complete application 1, but most states have no such mandate.

CAQH ProView. Most commercial payers use CAQH ProView as the central repository for provider credentials. Create and complete your CAQH profile first -- it takes 3-14 days if your documents are in order 1. Payers then pull from CAQH rather than requiring separate submissions for most data.

What you need for CAQH. Prepare: your NPI, state license number and expiration date, malpractice policy information (carrier name, policy number, limits, effective dates), education and training history, DEA number (if applicable), work history for the past 5+ years, and references.

Panel access. Panels open and close by payer, region, and specialty. A payer may accept your application or tell you the panel is closed. There is no appeal for a closed panel -- you may reapply when they reopen. Check panel status before investing credentialing effort.

Credentialing services. Third-party credentialing services charge ~$100-500 per payer application. They do not speed up payer decision timelines, but they reduce your administrative burden and can catch errors that would otherwise delay an application.

Billing while credentialing. Some payers allow retroactive reimbursement for claims submitted under a pending credential, back to the date of credentialing application. Confirm this policy in writing with each payer before seeing patients and submitting claims in anticipation of approval.

Step 6: Choose an EHR and understand your billing model

Your EHR (electronic health record) and billing workflow are a single decision. The platform you choose determines how clinical notes, scheduling, and insurance claims interact.

The four billing models to understand before choosing a platform.

- Flat monthly subscription. You pay a fixed fee regardless of volume. SimplePractice 7 runs $49/month (Starter), $79/month (Essential), or $99/month (Plus) as of June 2026. Add-on AI note-taker is $35/month; ePrescribe is $49/month. This model is predictable but adds cost before revenue arrives.

- Percentage of collections (negotiated directly). Platforms like athenahealth charge ~4-8% of net collections 8, with solo/small practices typically at the higher end (~5-7%) and large groups negotiating down. athenahealth bundles RCM (revenue cycle management) in this fee. The advantage: you pay proportionally as you earn. The disadvantage: the percentage compounds as revenue grows.

- Insurance network rake (Headway/Alma model). Platforms like Headway and Alma credential you on their panels and pay you a per-session rate negotiated by the platform. They retain the spread between what the insurer pays them and what they pay you. The exact percentage is not publicly disclosed by either platform and varies by payer contract. Independent analysis of Alma's payment records shows the gap between insurer payment and therapist payment on Cigna 90837 claims of $56.74 per session in one documented case 9. These platforms are not free; the cost is embedded in your per-session yield. Headway pays therapists an average of ~$107/session; average direct insurance contracts average ~$106/session 10, with variation by payer.

- Free EHR with optional billing services. A small number of platforms (e.g., CharmHealth, Office Ally) offer a free EHR tier with separate per-claim or optional billing fees. These require more configuration but can minimize cost for a new practice.

Gale's model (for context). Gale is a pre-commercial practice OS (synthetic demonstration as of June 2026, no real patient claims). The software is free. Gale earns on billing by charging the cost of claims processing plus ~15%, applied only to claims that actually pay -- a percentage-of-collections model applied to billing cost rather than gross revenue. Funds settle directly to provider via Stripe Connect. No subscription, no setup fee, no insurance network rake. The Jefferson AI scribe is bundled at $0/month (on-device option; audio deleted after transcription). Licensing and credentialing tracking is end-to-end, but the provider always signs attestations -- Gale does not auto-attest on your behalf.

What to ask any EHR vendor before signing up. (1) What is the total monthly cost at 15 sessions/week and 25 sessions/week? (2) Is insurance billing included or a separate fee? (3) What is the per-claim fee or percentage for clearinghouse submission? (4) Does the price include a patient portal, telehealth, and e-prescribing, or are those add-ons? (5) What is the contract term and cancellation policy?

Step 7: Build your operational infrastructure

Once licensing, entity, malpractice, credentialing, and EHR are in motion, the remaining setup is operational.

Telehealth. If your EHR includes HIPAA-compliant video (most do), you may not need a separate telehealth tool. Verify that the platform's BAA (Business Associate Agreement) is in place before using it for patient sessions.

Phone and messaging. A HIPAA-compliant phone line and secure messaging system are required if you communicate with patients about clinical matters. Many EHRs include a patient portal that covers this. A personal cell number is not HIPAA-compliant for clinical communication.

Consent and intake forms. Draft or adapt: informed consent, privacy notice (HIPAA Notice of Privacy Practices), financial responsibility/fee agreement, and any specialty-specific consent (e.g., telehealth-specific consent required in some states). Your EHR should allow digital signing.

Payment processing. Confirm your EHR supports credit/debit card capture or ACH. If you accept insurance, ensure your ERA (electronic remittance advice) setup is complete so explanation-of-benefit documents post automatically rather than requiring manual reconciliation.

HIPAA compliance basics. Sign BAAs with every vendor that touches patient data: your EHR, telehealth platform, patient portal, billing service, and any cloud storage. A HIPAA-compliant practice does not require a formal "HIPAA officer" for a solo practice, but you do need a written risk assessment and documented policies. Several free HIPAA policy templates exist; this is not a trivial checkbox but also not a multi-thousand-dollar consultant engagement for a solo practice.

Health insurance for you. As a self-employed clinician, you are responsible for your own health insurance. Factor this into your income planning before setting your fee schedule.

Realistic timeline

The following is a typical sequence for a solo clinician launching a private practice. Individual timelines vary by state, payer, and how quickly administrative tasks are completed.

  • Week 1-2. Confirm license status. Apply for NPI (free, 2-5 business days). Begin entity formation in your state.
  • Week 2-4. Receive NPI. Open business bank account. Purchase malpractice insurance. Create and complete CAQH ProView profile.
  • Week 3-6. Submit credentialing applications to target payers (using CAQH profile). Select and configure your EHR. Draft consent and intake forms. Set up telehealth and secure messaging.
  • Month 2-3. Begin accepting private-pay patients (no insurance barrier). Follow up on credentialing applications; respond to payer requests for additional documentation promptly.
  • Month 3-6. First payer panels typically activate in this window. Submit initial insurance claims; monitor ERA for denials and correct promptly.
  • Month 6-12. All target payer credentials typically active. Revenue cycle is established. Evaluate whether your billing model and EHR are working at your current volume.

The income gap. Most private practices do not reach break-even on a full-time clinical schedule immediately. Plan for at least three to six months of reduced income, or structure a part-time launch alongside other employment. At a private-pay rate of ~$150-180/session and monthly overhead of ~$500-$1,500 (solo therapy practice), you need roughly 8-12 billable sessions per month to cover overhead before paying yourself -- and 15-22 sessions/week for a self-supporting full-time income 11.

Startup cost summary

The following figures are estimates based on publicly available data as of June 2026. Actual costs vary by state, specialty, and choices made.

Solo therapy/counseling practice (telehealth-first) - Entity formation (LLC/PLLC filing fee): est. ~$50-500 5 - EIN from IRS: $0 - NPI: $0 4 - Malpractice insurance (year 1): est. ~$670-$1,500 6 - EHR (year 1, mid-tier plan): est. ~$600-$1,200 if subscription-based; $0 if free tier - CAQH credentialing (DIY): $0 for profile; third-party credentialing service $100-500/payer if outsourced - Website and scheduling link: est. ~$100-300 setup - Total estimated year-1 fixed costs: ~$1,500-$4,000 before office space or staffing

Solo primary care or psychiatry (in-person + telehealth) - The above, plus: - Office lease (varies enormously by market; est. ~$1,000-$5,000+/month) - Medical equipment and supplies - DEA registration (if prescribing controlled substances): ~$888 per 3-year cycle 3 - Higher malpractice premiums for physicians - Total estimated year-1 costs: ~$70,000-$150,000 for solo primary care 11, depending heavily on office setup decisions

These are scenarios, not commitments. Your specific costs will depend on your state, your specialty, your payer mix, and your buildout choices.

The honest downsides

No guide to starting a private practice should omit what commonly goes wrong.

Cash flow is non-linear. Insurance reimbursements are delayed 30-90 days from date of service in most systems. New practices can find themselves providing care weeks before receiving any payment. A cash reserve of at least three to six months of personal living expenses is the standard guidance -- not because the practice will fail, but because the timing mismatch is real.

Credentialing denials are common. Payers can decline to open their panel to new providers for reasons unrelated to your qualifications. Medicaid in particular has complex enrollment requirements that vary by state. Plan for at least one credentialing complication.

Administrative time is substantial. Independent clinicians routinely report spending 20-30% of their time on administrative tasks: notes, prior authorizations, billing follow-up, credentialing maintenance, and compliance. Factor this into your fee-setting; your billable hours are not 40/week.

Platforms simplify some things at a cost. Insurance billing platforms (Headway, Alma, and others) reduce credentialing friction and handle claims administration. They also control the terms of your payer contracts, and those terms can change. Therapists on these platforms reported unexpected rate reductions when payer contracts were renegotiated 9 10. If you prioritize control and contract transparency, direct credentialing and a standalone EHR with billing is the more stable long-term structure -- at the cost of more upfront administrative work.

Common questions

How long does it take to start a private practice?

From decision to first paid session, plan for six to twelve months if you are accepting insurance. The credentialing timeline alone is 60-180 days per payer [1]. You can see private-pay patients much sooner -- sometimes within weeks of obtaining your NPI and malpractice insurance -- but building a full panel takes longer.

Do I need an LLC to start a private practice?

You do not strictly need one, but operating as a sole proprietor exposes personal assets to business liability. Most independent clinicians form a sole-member LLC or PLLC (the latter required by many states for licensed professionals). State filing fees run est. ~$50-500 [5]. Consult a local attorney or accountant to confirm the right entity type for your license and state.

What is CAQH and do I need it?

CAQH ProView is a centralized database that most commercial insurance payers use to verify provider credentials. If you plan to accept commercial insurance, you need a complete CAQH profile before your credentialing applications can proceed. Completing the profile is free; the profile is then shared with payers when you apply to join their panels. Completing CAQH takes 3-14 days with all documents ready; full payer credentialing after that takes 60-180 days [1].

Can I accept insurance right away when I open my practice?

No. You need to be credentialed with each payer before billing them. Credentialing applications can be submitted as soon as you have your NPI, malpractice insurance, and a practice address, but approval takes 60-180 days [1]. Some payers allow retroactive reimbursement to the credentialing application date once you are approved -- confirm this in writing before relying on it.

What does an EHR cost for a solo practice?

Subscription-based platforms like SimplePractice run $49-$99/month as of June 2026 [7], with add-ons for AI note-taking ($35/month) and ePrescribing ($49/month). Free-tier EHRs like CharmHealth exist but require more configuration. Percentage-of-collections platforms (athenahealth: ~4-8% of net collections [8]) have no upfront monthly fee but cost more as your revenue grows. The right choice depends on your volume and whether you want billing included.

Is Headway or Alma free for therapists?

Neither platform charges a direct subscription fee to providers. However, both make money by retaining a spread between what payers reimburse and what they pay you. The exact percentage is not publicly disclosed by either platform. Independent analysis of Alma billing records shows the gap between insurer payment and therapist payment on some Cigna claims exceeded $50 per session [9]. These platforms reduce credentialing work and billing overhead, which is a real benefit -- but the cost is embedded in your per-session yield, not charged as a transparent line item.

Do I need a DEA number to start a private practice?

Only if you will prescribe controlled substances (Schedule II-V). DEA registration costs ~$888 for a three-year cycle [3] and must be obtained in the state where you practice. Therapists, social workers, and non-prescribing psychologists do not need a DEA number.

How many sessions do I need to break even?

It depends on your overhead and fee. A solo telehealth therapy practice with monthly overhead of ~$1,000-$1,500 and a private-pay rate of $150-$180/session reaches overhead break-even at roughly 8-10 sessions per month [11]. A self-sustaining full-time income typically requires 15-22 billable sessions per week. Primary care practices with office leases have materially higher break-even points.

Keep reading

Insurance Credentialing, Tracked End-to-End (Never Auto-Attested) · EHR for Independent Practices: Charting That Stays Out of the Way · Medical Billing & Claims: Pay Only When You Get Paid · AI Medical Scribe, Included — No Monthly Fee · Free EHR: What "Free" Really Means (and the Catch to Watch For) · Telehealth Built Into the Chart · How to Get Credentialed With Insurance: A 2026 Guide · Own Your Insurance Contracts: Portability for Independent Clinicians · How Practice Software Charges: Flat Fee vs. Percentage of Collections vs. Network Rake · Gale vs SimplePractice: An Honest Comparison · Gale vs athenahealth: An Honest Comparison · Gale vs Headway: Keep Your Rate, Keep Your Contracts · Gale vs. Alma: The Real Cost of Membership and the Insurance Spread

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References

  1. 1.ORCM Revenue Cycle Management (2026). How Long Does CAQH Credentialing Take? Timeline Guide 2026. ORCM Blog. link ✓Credentialing timeline figures: CAQH profile 3-14 days; commercial payer 60-180 days; Medicare 2-3 months; Medicaid 4-9 months; CA AB 1041 90-day mandate.
  2. 2.Reframe Practice (2026). Insurance vs Private Pay for Therapists: 2026 Income Comparison (Real Numbers). Reframe Practice Blog. link ✓Average insurance reimbursement ~$111/session vs. private pay ~$159/session; insurance rates ~36% lower than private pay.
  3. 3.LegalClarity (2026). DEA Registration Requirements: Forms, Fees, and Renewal. LegalClarity. link ✓DEA practitioner registration fee ~$888 per three-year cycle.
  4. 4.Centers for Medicare and Medicaid Services (2026). How to Apply for an NPI. CMS.gov. link ✓NPI application is free; no annual fee or renewal cost.
  5. 5.Swyft Filings (2026). LLC Costs by State Comparison (2026 Complete Guide). Swyft Filings Blog. link ✓State LLC/PLLC filing fees range from ~$35 (Montana) to ~$500 (some states); national average ~$132 in 2026.
  6. 6.Insureon (2026). Therapy and Counseling Business Insurance Costs. Insureon. link ✓Therapy/counseling professional liability insurance averages ~$56/month ($670/year); psychologist primary policies average ~$765/year.
  7. 7.SimplePractice (2026). SimplePractice Pricing. SimplePractice. link ✓SimplePractice Starter $49/month, Essential $79/month, Plus $99/month as of June 2026; AI note-taker add-on $35/month, ePrescribe add-on $49/month.
  8. 8.Business News Daily (2026). Athenahealth Review 2026. businessnewsdaily.com. link ✓athenahealth charges ~4-8% of net collections; solo/small practices typically 5-7%; larger groups negotiate lower.
  9. 9.Clear Health Costs (2025). Therapists have misgivings on the platforms: Alma, Headway etc. and the business of therapy. ClearHealthCosts. link ✓Documented spread between insurer payment and therapist payment on Alma/Cigna 90837 claims; 84% of surveyed providers not informed of fee-splitting arrangements before joining.
  10. 10.SingleAim Health (2025). How Much Does Headway Pay Therapists?. singleaimhealth.com. link ✓Headway pays therapists average ~$107/session; direct insurance contracts average ~$106/session; rates vary by payer (higher than direct for Aetna/Cigna, lower for BCBS/Optum).
  11. 11.Doctors Management (2026). Medical Practice Startup Costs in 2026: Budget and Funding Guide. doctorsmanagement.com. link ✓Solo primary care startup costs est. $70,000-$150,000; therapy practice overhead and break-even session benchmarks.

https://www.gale.care/for-providers/start-a-private-practice · 11 sources. Competitor details are cited to dated public sources and maintained as they change; figures are estimates, not commitments. Synthetic demonstration.