Correctly evaluating the current healthcare market and finding the right location for your practice can mean the difference between success and failure. In a changing healthcare environment, sure to be further impacted by this year's elections, there will be numerous challenges involving Medicare and Medicaid coverage and access to treatment. Physicians across the nation are working to provide a higher quality of healthcare services, while still cutting costs in anticipation of these adjustments. A Data Bulletin from Health System Change reported in 2008 that 67 percent of healthcare providers are solo practitioners or part of medical groups. This implies that strategic location planning is imperative to developing your practice today and developing a clear structure for sustainability.
"It is critical to strategize how you're going to achieve optimal patient care while maximizing revenues," said Ben Rosenfield, founder of Titan Commercial, a Chicago firm specializing in medical real estate. "The most achievable solution is to reduce your practices' costs and create efficiencies. One significant cost control decision is your practices' location, an important part of your branding strategy."
Mr. Rosenfield is an expert and emerging leader in medical real estate, who addresses increased access to quality healthcare via your practice's location. He has brokered over 300 transactions and worked alongside healthcare executives and physicians to find medical facilities that will best serve their business. Mr. Rosenfield devised five ways that will help medical practice owners streamline the process and overcome challenges that could threaten their ability to continue practicing in the future.
1. Is my practice dependent on referrals?
Proximity to a referral source can be a major factor in driving increased business opportunity. For example, an oncologist located close to a major hospital may be more likely to receive referrals from newly diagnosed patients in need of an immediate consultation. While it is important to differentiate your space from other offices that are in competition with your practice, venturing too far from referral sources would ultimately have a detrimental impact.
2. Does my business benefit more from buying and building real estate equity or leasing and limiting liability?
Both buying and leasing have their own risks. You'll need to ask yourself what is your risk tolerance. Determining your risk tolerance requires that you look at your long-term business plan and decide if real estate investment is part of your overall strategy.
Acquiring real estate for the purposes of housing your business has costly up-front charges that can add a significant debt burden. Debt comes with added risk, but provides tax advantages that can ultimately increase the value of the business. Additionally, a real estate investment can provide the long-term reward of increased wealth. While property ownership is not a core part of a medical business, it can become a valuable part of your practice's net worth. If you can acquire a property for less than the cost of leasing, then property ownership is the right decision.
On the other hand, there can be certain advantages to leasing. While leasing does not build equity, a well-written lease can provide you with many options that property ownership cannot. In some off-campus locations, landlords may contribute equity to the cost of the build-out of your space and give you free rent that allows you to get your practice up and running. Additionally, certain responsibilities, such as building maintenance and upkeep are the responsibility of the landlord, allowing you to focus on your business rather than the building in which it is located. Leasing can also limit your liability should something go wrong (e.g., a patient trips and falls on the steps outside), whereas building ownership comes with a potentially higher liability and risk. Both ownership and leasing have positives and negatives, so the best approach is to determine how much risk your business can absorb and then choose appropriately.
3. How significant are the cost savings of being off campus?
Being on campus means that the terms of the deal will be less negotiable, if at all, than if you are off campus. It also means that the costs to lease will generally be higher. Due to Stark Law compliance conditions, hospitals cannot incentivize a physician to lease in the same way as an off-campus landlord. Under current market conditions, there are many private landlords willing to "bend over backwards" to enter into leases with desirable tenants. Consider the economic impact of how your revenues may be impacted based on the distance from a large medical campus and choose appropriately.
4. Is a location near your originating campus medical community more convenient for your patients?
Depending on the core demographic of your patients, convenient access to other medical services which assist in their treatment may influence which doctor they choose. We are a society of convenience and with growing competition, those who are more ideally located will thrive.
5. How important is it that your practice is seen as its own brand?
A medical practicegets immediate credibility from being affiliated and located within a hospital system. However, establishing a brand can add goodwill that, over time, becomes a great referral source. "Branding" is image control that identifies and differentiates a product (or service) from other products (or services). Further, "your brand is your promise to your customer." Operating within a medical campus or community allows you to "hitch a ride" with an established brand, but requires that you pay a premium for this privilege. If you are considering locating off campus, or have any interest in expanding the business to multiple locations, self-branding may be a better option.
Titan Commercial delivers focused knowledge and expertise to medical organizations and practitioners. With a combined transaction history of $400 million over the past five years, Titan Commercial has been successful in the areas of acquisition, leasing, disposition, investing, consulting and management of medical real estate.
As the Founder and CEO of Titan Commercial Real Estate and a medical real estate expert, Rosenfield has personally brokered over 300 transactions with his boutique firm since 2007. He is experienced in a variety of real estate segments, but focuses primarily on healthcare facilities, targeting every level of the medical real estate transaction. Rosenfield is an industry expert and dynamic panel speaker who has been featured in Forbes.com, Medical Office Today and Commercial Real Estate News.
5 Points on Deciding Which Location is Right for Your Practice FeaturedWritten by Ben Rosenfield, Founder and CEO of Titan Commercial Real Estate. | June 13, 2012
This article was written by Ben Rosenfield, Founder and CEO of Titan Commercial Real Estate.
Here are five ways to evaluate"On-Campus vs. Off-Campus."
Here are five ways to evaluate"On-Campus vs. Off-Campus."
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