How to Build a Private Practice While You're Still Employed

You can build a private practice while working full time, and most of the psychiatrists we work with started exactly that way: two protected evening telehealth blocks, a handful of patients, day job untouched. What decides whether the arrangement survives is the legal and structural work done before the first visit: reading your employment agreement, buying your own malpractice policy, and setting up an entity, EIN, and Type 2 NPI so nothing about the side practice touches your employer. The money question (how much savings before you quit) has its own post with the math; this one covers the mechanics of running both jobs at once and exiting cleanly.

None of this is legal advice. Your employment agreement is a binding contract, and the clauses discussed below are exactly the ones an employment or healthcare attorney should read before you act on any of this.

1. Read your employment agreement before you form anything

Read the contract first, because what it says determines everything downstream: whether you need permission, where you can practice, and whom you can treat. Three clauses matter.

The noncompete. Look for a geographic radius, a time period, and how "competing practice" is defined. A radius clause written for office practice may or may not reach telehealth patients across the state, and that ambiguity is an attorney question, never a guess. There is no federal ban: the FTC's 2024 noncompete rule was set aside by a federal court before it took effect, and the FTC dropped its appeal in September 2025, so the vacated rule never took effect. States moved instead: Louisiana capped physician noncompete duration and geography effective January 1, 2025; Indiana barred hospitals from entering new noncompetes with employed physicians as of July 1, 2025; and Wyoming and Arkansas both passed laws in 2025 that void physician noncompetes outright. The AMA tracks the state-by-state wave, and the list grows every session, so check your state before assuming anything about enforceability.

The outside-activities clause. Most employed-physician agreements require written approval for outside clinical work, and academic centers usually add an annual conflict-of-interest disclosure. This clause, and how you handle it, is covered in step 2.

The non-solicitation clause. Separate from the noncompete, this bars you from recruiting your employer's patients and staff, and it is frequently the more enforceable of the two. Step 5 covers the boundary in practice.

"An unenforceable noncompete is not a free pass," says David Cohen, CPA, JD, who reviewed this article. "Your employer can still sue on a dead clause, and winning that fight costs a year and five figures. Written permission up front is cheaper than being right later."

2. Get outside-work approval in writing

If your agreement has an outside-activities clause, send the approval request before you register a domain or see a patient, and archive the reply somewhere that survives your eventual resignation, meaning your personal email, never the employer's. A good request names the hours, promises separation from employer resources and patients, and confirms you carry your own malpractice coverage, which answers the questions a medical staff office would otherwise sit on for weeks.

Adapt the bracketed fields and send it to whoever your agreement designates, copying your personal email:

Subject: Outside professional activity approval request - [your name]

Hi [supervisor / medical staff office],

Per section [X] of my employment agreement, I'm requesting approval
for outside clinical work: a small telehealth private practice,
limited to [4-6] hours per week, scheduled entirely outside my
[employer] duties (evenings and weekends).

To keep it clean on your side: the practice will not use [employer]
facilities, systems, staff, or patient lists; I will carry a separate
malpractice policy for that work; and it will never be scheduled
against a [employer] clinical or call obligation.

Could you confirm approval by reply, or point me to the correct form?

Thanks,
[Name]

If there is no outside-activities clause, you generally owe no disclosure, but confirm that reading with your attorney rather than assuming silence means consent.

3. Buy your own malpractice policy before the first visit

Your employer's malpractice policy covers work performed within the scope of your employment and nothing else, so every patient you see on the side is uninsured care until you buy a policy of your own. The same rule applies to 1099 moonlighting shifts: some staffing agencies provide coverage and many do not, so get in writing whose policy applies and whether it includes tail coverage before you take the shift.

For the side practice itself, part-time pricing makes this cheaper than most people expect: first-year part-time claims-made policies for psychiatrists have run roughly $800 to $3,500 a year for under-20-hour weeks, with step-up pricing in later years. The occurrence-versus-claims-made choice, tail mechanics, and real quoted premiums are in the malpractice insurance guide; the short version for a side practice you intend to grow is that claims-made is the usual pick, and the tail is a known, plannable cost rather than a trap. If you build the practice on Eureka, malpractice for the care you deliver through the platform is bundled into the fee, which removes this step for the side practice specifically, though it does nothing for outside moonlighting shifts.

PMHNPs, one addition: in states that require a collaborating physician, your day job's collaboration agreement covers your employed work only. The side practice needs its own arrangement, and that is often the largest fixed cost of the whole setup.

4. Set up the entity, EIN, Type 2 NPI, and a separate bank account

Run the side practice on its own rails from patient one: its own legal entity, its own EIN, its own Type 2 NPI, and its own business checking account. The reason is the exit. When you eventually resign, a practice that never shared a bank account, a records system, or a tax ID with your employer requires zero untangling, and there is no argument about what belongs to whom.

The sequence: form the entity first (whether you need a PLLC depends on your state), get the free EIN from the IRS online in minutes, then apply for the Type 2 NPI on NPPES, which is also free and often approves the same day. The Type 1 versus Type 2 distinction matters here for one strategic reason: keep the new Type 2 completely unattached to any insurance credentialing. Your Type 1 may already carry payer relationships from your employer, and a clean Type 2 preserves the option of a cash-pay practice that pivots on your terms instead of your payers'. While you're at it, check CAQH to see what a current or former employer has already attached to your Type 1; stale credentialing follows people for years.

Two absolute rules while employed: never document a side-practice patient in your employer's EHR, and never use your work email or phone for the practice. Both are records problems and contract problems at once. The full stack for the practice itself, from e-prescribing to intake forms, is in what you need to start a private practice.

5. Keep a hard line between your employer's patients and yours

While you are employed, never recruit patients from your day job. No cards in clinic, no mentioning your practice in visits, no pulling contact lists, no messaging patients through the employer's portal about anything except their care there. Non-solicitation clauses are written for exactly this conduct, and even in states where the noncompete itself is dead, a non-solicitation claim can survive.

What you can do is be findable. Build the website, claim the directory profiles, and cultivate referral relationships outside your employer's system, because patients who search for you by name and find you on their own are making their own choice. One psychiatric NP we followed spent nearly a decade with the same hospital employer and recruited no one; when she resigned, well over a hundred patients found and followed her within about two months, through nothing more than a searchable name and the goodbye letter her employer's departure process permitted. A departure letter, sent through your employer's approved process when you resign, is the sanctioned channel, and the transition guide covers the announcement letter and what belongs in it.

6. Design a schedule the day job can't crush

The schedule that works is a small number of recurring blocks, protected on your calendar even when they sit empty, so the practice has a shape before it has patients. Ad-hoc scheduling ("I'll fit them in somewhere") dies within a month of a bad call week.

The capacity math, with assumptions stated: two 3-hour evening blocks plus an occasional Saturday support 8 to 10 visits a week, assuming hour-long intakes and 25-to-30-minute follow-ups. At a follow-up cadence of every four to eight weeks, that carries a panel of roughly 40 to 60 patients, which is a real practice, near the size where the exit conversation starts. Keep admin inside the blocks too: charting, messages, and refills happen in the last 30 minutes of each block, or unscheduled admin will colonize every evening you have.

7. Know when the anchor gig has done its job

The anchor gig ends when it stops funding the practice and starts capping it. That moment shows up in the calendar before it shows up in the bank account, and the signals are qualitative:

• You waitlist or decline new patients most weeks because the blocks are full.
• Growth is bounded by the day job's calendar, no longer by demand.
• Follow-up intervals are stretching past what you'd choose clinically, purely to fit the blocks.
• Admin has escaped its 30-minute containment and eats non-practice evenings.
• The panel has held or grown for several consecutive months without new marketing effort from you.

When two or three of these are true at once, run the actual numbers: the delta method, break-even patient counts, and the cushion math are in how much savings you need before going full time.

The checklist

• Employment agreement read by an attorney: noncompete, outside-activities, non-solicitation.
• Outside-work approval requested in writing; reply archived in personal email.
• Own malpractice policy active before the first visit; moonlighting coverage confirmed in writing per gig.
• Entity, EIN, Type 2 NPI, and separate business bank account, with the Type 2 unattached to any payer.
• CAQH checked for stale employer credentialing on your Type 1.
• Zero recruitment of employer patients; public findability doing that work instead.
• Recurring blocks on the calendar, held even when empty, admin contained inside them.
• Exit signals reviewed quarterly against the savings math.