Lease, Rather than Buy

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Physician Groups Band Together for More Sustainable Practices

Not too long ago, it was common to see a single doctor, a nurse and an assistant or two running the whole show in small office setting. Over the past several years, however, doctors have been moving away from smaller offices and have become part of giant healthcare corporations like Kaiser and Humana, to name just a few. Despite this, there are still a number of doctors who are fighting this trend by starting smaller practices, all while finding ways to save money by doing simple things, like sharing rent and equipment.

We spoke with Evan Lewitt, a healthcare-focused broker with CBRE, about this shift. He says that just like any other business, doctors take on additional risk when being self-employed and reductions in funding and variability in patient referral and governmental reimbursement and incentive programs often have a profound impact on the viability of an individual practice.

Many of the single doctor offices of yesteryear have sold their practices to nearby university hospitals or healthcare conglomerates. In turn, these organizations incorporate these practices into their umbrella networks while offering more incentives for patients to come to them.

For doctors that want an alternative to being part of the corporate structure of a large practice, yet desire the support of not having to do it completely alone, there’s a third option. According to Lewitt, many landlords responsible for big developments and vacant business parks are tearing down walls in empty units and converting them into larger multi-unit spaces that allow for multiple renters. While the square footage per doctor doesn’t quite compare to what a doctor in their own space might get, the benefits are tangible.

Doctors Get Together to Reduce Costs

Doctors can improve the viability of their practices by sharing the common costs of running every practice. From sharing the rent associated with the waiting room and other common areas to the hiring of support staff- including receptionists, medical assistants and nurses, can reduce the inefficiencies created by the constant ebb and flow of collections that an individual practitioner might encounter.

Lewitt says that grouping together is also attractive to landlords and developers who want to get large chunks of new buildings rented in short order. Additionally a new medical facility could be used to attract other renters. Landlords like this idea, as three or four doctors are more likely to stay in business for 10+ years meaning there’s less stress about a looming vacancy a year or two down the road.

Being a team player has its benefits, here’s a look at what to consider when setting up a private practice:

Location is Extremely Important

Like most businesses, medical practices benefit from being in an area with high foot traffic and a convenient location. You’ll get patients in the door just because you’re in a visible area.

Lease, Rather than Buy

Commercial real estate is a risk. Most doctors opt to rent to better manage the uncertainty that may lie ahead. Lease before you buy—this way if the space isn’t quite right, you’ll have much room to make the necessary changes down the road.

Get Ready to Market

As much as your group will rely on referrals, you’ll need to do much more when it comes to getting your name out in the community. Once your lease is locked in, set up social media accounts, like Facebook and Yelp and get all your digital directory listings in order. Host an open house, or see if you can get a spot on your local television or radio station. Be creative.

Hire the Right People

In a large medical group, patients aren’t likely to get too familiar with the support staff, so hiring the right people isn’t as important as it is when you’ve only got a few support staff members on the payroll. In a small practice, people will go elsewhere if they don’t like the receptionist or feel your nurse was unprofessional. Choose your staff wisely.

A long story made short, we’ve all had to rely upon each other in this post-recession economy. As the millennial generation is keeping roommates around into their late twenties and early thirties, to afford bigger and more appealing space, these patterns of collaboration with our neighbors is echoed in how we’re beginning to look at starting a business.

Please refer to other articles related to this topic.

Why You Should Enlist the Help of a Broker to Find Your New Medical Space

1 Comment

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  1. Chen MD & Associates

    January 7, 2018 at 10:38 pm

    Looking to Lease or Sublease medical office space (chiropractic office is okay) in Sacramento.
    Only need a small space (about 700 sq.ft.) for once a week.

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