There are more than 125,000 nurse practitioners (NPs) in the United States, according to the American Academy of Nurse Practitioners. NPs enjoy more responsibility and autonomy than physician assistants (PAs) and are increasingly taking administrative leadership roles in addition to traditional patient-care roles at hospitals and clinics.

Unlike PAs, who must work under the direct supervision of a physician, NPs can establish private practices. Faced with cost-containment challenges and physician shortages in underserved rural and inner-city areas, states are expanding NP scopes of practice and encouraging NP private practices. Because of the detailed knowledge necessary for success in private practice, however, NPs typically establish their own practices after several years of work experience as salaried NPs at a hospital or other health care facility.

Private-practice NPs enjoy greater independence and potentially greater earnings than salaried NPs working at clinics and hospitals and have more freedom to choose the particular patient populations they want to serve. But they also have much broader responsibilities.

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Whereas a hospital or clinic NP can focus on caring for and educating patients, private-practice NPs must shoulder the additional day-to-day responsibilities of running a business while serving as the primary health care provider to their patients.

Both risks and potential rewards of private practice are higher than for salaried work. Overall, median NP earnings are $66,500 per year, while private-practice NPs can potentially earn much more –- well over $100,000 a year. However, insufficient capitalization to cover start-up costs and insufficient cash flow to sustain a private practice are the leading causes of practice failure.

Most NPs have not previously been entrepreneurs, and have little experience with business management or market analysis. Carefully assessing the patient demand and reimbursement potential of a private practice in a particular area is the first linchpin between business success and failure. A practice must be carefully planned, and will require at least contract or part-time assistance from financial management, tax and accounting, human resource, marketing, medical billing and coding and risk management professionals.

State licensure, negotiation of hospital privileges, third-party insurance reimbursement contracts and development of a business plan should begin at least nine months prior to opening a new practice.

Because NPs are likely to establish practices in underserved, low-income areas, provider Medicaid and Medicare enrollment is often crucial. Reimbursement from private insurers can be challenging, but third-party reimbursement can be supplemented with contract services for local businesses, jails and long-term care facilities.

Private-practice NPs are responsible for their own malpractice and liability insurance, and employee salaries and health insurance, while hospitals or clinics cover these expenses and related paperwork for salaried NPs. Many hospitals offer salaried NPs additional incentives, such as recruitment bonuses, raises, housing assistance, daycare and tuition reimbursement. However, NPs do not enjoy the breadth of autonomy seen by private-practice physicians. Private NPs are frequently denied hospital privileges, and prescription authorities vary by state.

Many states require NPs to enter into collaborative agreements with local physicians in order to establish private practices. The scope of practice is regulated by states because there are no federal standards or laws regarding NP practices. While scope-of-practice laws vary by state, all states limit NPs to practicing in those specialty areas for which they are credentialed and certified.

Bryant Furlow is a freelance medical writer living in Albuquerque, New Mexico.