How to Grow Your Medical Practice

September 12, 2017

(Even as Market Pressures and Competition Increase)

By Trac Bledose, trac@practicerealestategroup.com and
Thomas Allen, tallen@practicerealestategroup.com

You and your partners run a successful medical practice that you’ve built from the ground up. A few years ago, you brought on a new physician and added a location to improve patient access. You signed a lease for the first two locations, and took on a significant amount of debt for improvements.

You realize that you’re going to need a third location to secure your position in the market so you’re looking back at lessons learned and how much it cost to open the last two.

The next location needs to be much more efficient.

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While you could stand to learn more about healthcare revenue cycle management and there are one thousand other things to optimize, you know the location of this third practice is paramount for growth.

On the wish list is accessibility for the target patient population with limited immediate competition. In addition, you want to make the most out of every dollar you are spending on the startup and operating costs of the new office.

Finding the right spot for your patients to come see you and putting yourself in the right structure to maintain your independence happen simultaneously.

Site Selection with a Retail Mindset

First, what’s a retail mindset?

Historically physicians found office locations by looking close to hospitals – they identified which hospital they needed access to and leased a space nearby. But now, you may not want or need to be next to a hospital to be successful.

Now that medical practices open closer to the patient and further from the hospitals, they find themselves competing with retail, office, and other uses for the same space. This requires a different approach to site selection.

As such, our physician clients are increasingly employing a sophisticated approach to analyze locations. They look for the highest population of high value patient targets while at the same time looking for limited existing competition, to ensure the highest probability of success. Similar to retail, an assessment of the immediate market areas not only tells the practice where to go, but how much they can practically spend in a certain area and remain successful.

Successful healthcare practices spend an incredible amount of time practicing medicine and running an efficient business. It is becoming increasing critical that the selection of where to do so is handled with a similar level of professionalism and focus.

Minimizing Real Estate Costs and Maximizing Flexibility

If you’ve renewed an office lease, you recognize that the improvement dollars you pay for directly belong to someone else at the end of the lease term, however there are locations where a lease is your best option.

If you’ve owned and tried to sell a space, you recognize that the potential buyers pool is really limited, but sole ownership is great for control.

If you’ve partnered in a real estate venture, you recognize the complexity of having partners can be significant, and lucrative.

Our most successful physician clients are proactively putting together a strategy to define the importance of location, flexibility, and appetite for investment as part of their approach to real estate, and thereby maximizing the dollars they spend and invest in medical real estate. Often we find that determining what you need most for either a relocation or new location makes it significantly more likely that it can be found.

Real estate is often the biggest expense for medical practices, only second to human capital. The practice will spend a significant amount of money which can ultimately be routed into a long-term investment vehicle for physician partners. It goes without saying that making a good decision starts with a good plan, and knowing the key advantages and challenges of the multiple options for medical office real estate is the first step in putting together a good plan to approach an office renewal, relocation, or new practice office.

Conclusion

Real estate costs are one of the largest expenses physician practices will see on their profit and loss statements, though with proper strategy it can become one of their most powerful tools. If optimized it will help attract patients, retain physicians, excel practice growth and deter competition from entering the market. If done poorly it will decrease profitability and you will have a sunk cost with a long term commitment.

We strongly recommend that you work with a healthcare real estate professional to assess your current real estate situation, and more importantly plan for the future. Using data and proper guidance you can turn your real estate into an asset of the practice as opposed to an expense.

In the midst of declining reimbursements and increased regulations, our strongest physician-clients are actively planning their long-term approach to site selection and real estate control/investment today so they are prepared for tomorrow and many years to come.

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Practice Real Estate Group offers exclusively medical real estate services for Texas physicians and investors that maximize ROI and grow businesses. How to Grow Your Medical Practice

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