Rethinking Your Office Investment! on Orlando Medical News

Rethinking Your Office Investment!

Most physicians have at least one critically important asset that significantly impacts the amount of income they earn every year. They “invest” in this asset with a check monthly for as long as they continue to practice medicine yet it is one of the least understood assets in a physician's investment portfolio. What is it? The answer of course is your medical office.

Your office represents one thing: a center of production. As with a manufacturing plant, you produce income by seeing and treating patients in your plant and your income is directly tied to your production. You invest in your plant every month with your rent check or mortgage payment which provides you with the location, parking, services, signage, and physical space for the diagnosis and treatment of patients. All of these items will critically affect the return on your rent or mortgage investment dollar.

Let’s take a look at a simple example. What if your location is inaccessible from one direction on a major road, resulting in patients frequently late for appointments? As a result of its inaccessibility, your staff schedules flex time for this delay, eliminating just one patient seen per day!

Using an average charge of $75 per patient per 250 working days and you have lost $18,750 of potential income in one year. Let's also assume this location was chosen because the rent was $2.00/sf/yr less than a location that provided better access. Using 1,500 sf as a typical office size x $2/sf equals a total rent savings of $3,000. The Net Result is a loss of potential Income of $15,750 per year due to this inaccessibility ($18,750 - $3,000=$15,750). The losses become even more staggering when you factor in lost income and increased costs due to an inefficiently designed or undersized office where you need more employees to produce the work.

Here are some simple rules to follow in order to maximize the value of your office investment:

Treat your office like an income producing investment. Your office is a production facility- period. Maximize your ability to produce income by adding extenders, enlarging your office, renovating your office to streamline operations, add services and procedures, and eliminate or share with other physicians your non-income producing spaces.
Your office is a practice investment and its sole purpose is to allow you to maximize your income. Do not consider your office a real estate investment. If it inhibits your ability to grow and/or add services; move, sell it, or lease it to someone else.
Do not become emotionally attached to your office. The moment you realize that you are losing the opportunity to maximize your income due to your office size and/or location, make a change. This might involve a renovation, an addition or a move to a completely new location that will better support your practice.
4. Recognize that the true value of your office lies in its ability to produce NET INCOME. An efficiently designed office will produce the highest possible return after expenses. Do not equate the lowest possible rent or mortgage payment with the resulting net income. In the example above, a lower rent actually cost the physician more than 5x his/her annual rent.
Enhance the value of your practice and your return on your monthly investment by selecting an office that is efficiently designed, has identical exam rooms, easy vehicular and pedestrian access, is visible with excellent signage, is clean, provides patient privacy, provides opportunity for growth, and does not limit the services which you can provide to your patients.

You can determine whether you are losing income due to your office layout and/or its location by answering these questions:

Would you like to add technologies or services?
Would you like to add a partner or extenders?
Could you share non-income producing areas?
Are your personnel needs higher due to the office layout?
Are you paying overtime frequently?
Is patient scheduling affected by your office location and/or accessibility?
Are your exam room’s sizes and layouts different?
Do bottlenecks in your office occur?
Do your patients lack privacy if discussing illness, treatment and/or payments?
Are certain services prohibited due to your location?

A yes answer to any of these questions indicates you may be losing income opportunities. You can construct a simple cost/benefit analysis to determine the impact of possible office changes to your income. For a more in depth analysis, you may be better served by hiring an expert to assist you in evaluating your options.

In summary, your office represents a significant investment in your practice. It is a tool that you use to complete your production cycle. Recognize this fact and you will be better able to evaluate and plan for the future growth of your practice.

Oftentimes we read about corporations that abandon huge manufacturing plants worth millions of dollars and are amazed at the perceived waste. However, these firms have determined that the “sunk” cost of remaining in a particular location is overshadowed by the opportunities to increase their return on investment elsewhere. In today's healthcare marketplace of declining reimbursement and rising competition, you too should critically evaluate opportunities to maximize the return on your office investment dollars.

Frank Ricci is president of Healthcare Realty & Development and has over 25 years experience helping physicians with their facility investments. He can be reached at HealthcareRealty@cfl.rr.com or visit the company website at: www.HealthcareRealtyOnline.com.

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