Adding a Location to Your Practice

Episode #60: Adding a Location to Your Practice

Welcome to another episode of “Medical Money Matters,” the go-to podcast for insights into the financial and operational aspects of running a successful medical practice. Today we’re diving into a crucial topic for many growing practices: when and how to add a new location. This decision is more than just a financial investment; it’s a strategic move that requires careful consideration of various factors. Whether you’re a seasoned physician or new to practice management, understanding these nuances is key to ensuring the success of your expansion. Let’s explore what you need to know.

First, since this podcast is all about Medical Money, let’s review some of the financial considerations:

Initial Investment: When considering expansion, the first step is assessing the cost involved in acquiring or leasing a new property. As we discussed in Episode 50 in our interview with Brad Christiansen from Colliers, it’s crucial to analyze the real estate market in the desired location, weighing the pros and cons of buying versus leasing. Additionally, the cost of construction or renovation to tailor the space to medical needs must be factored in. This includes not only structural changes but also investments in medical equipment, technology infrastructure, and interior design to create a welcoming and functional environment for patients and staff.

Beware that construction bids can come in with wide variation. We don’t always want to go with the lowest bidder! At times, the highest bidder is the most accurate, and if it’s clear they’ve done their diligence on city and county fees, sewer and water and other municipality costs, you may want to engage them. Frequently, the low bidder starts the project, and continuously comes to you with “change orders” which is construction-speak for, “You gotta pay more.” Those aren’t fun and can often have a project overrunning costs beyond the point of the original “high bidder.” Vet your design and construction folks carefully. Be sure the group you select has many years of experience in medical. The building codes and the build outs are very different from other types of commercial construction, and you don’t want a new contractor learning on your dime.

Return on Investment Analysis: A critical aspect of financial planning is projecting the return on investment (ROI). This involves estimating patient volume based on demographics and healthcare needs of the location’s population. Revenue projections should include not only patient consultations but also ancillary services that could be offered. It’s important to calculate the break-even point, considering the time it may take for the new location to become profitable, and set realistic financial goals.

Next, you’ll want to consider Funding Options: Exploring various funding options is key. Traditional bank loans are a common route, but it’s important to negotiate favorable terms. Additionally, partnerships or collaborations with other healthcare providers can provide financial and operational benefits. Crowdfunding and seeking investors are also viable options, especially for innovative healthcare services.
When planning for Ongoing Operational Costs, you’ll want to get your budget as accurate as you can. As we said way back in Episode 3, budgeting for ongoing expenses is essential for financial sustainability. This includes salaries for additional staff, utility bills, insurance premiums, maintenance costs, and technology upgrades. Practices should also consider the cost of marketing the new location to build a patient base.

Now that we’ve given some serious consideration to the finances, we can shift our focus to Operational Considerations.

We’ll start with one of the more challenging parts: Staffing. Hiring qualified staff is a cornerstone of expanding your practice. This includes not only additional physicians and clinical staff, but also administrative and support staff. Training is crucial to ensure that all employees are aligned with the practice’s operational procedures and culture. Depending on the services offered, hiring specialists or staff with specific skills may be necessary.

Next up is Workflow Optimization: Efficient workflow is crucial for patient satisfaction and staff productivity. This involves designing patient flow from reception to consultation to check-out, ensuring minimal wait times and smooth transitions between different service points. Implementing standardized procedures across all locations ensures consistency in patient care and service quality. Which workflows do you already have in place that will work in the new location? Which ones will need to be modified?

Now we can focus on Technology Integration: Technological integration plays a vital role in modern healthcare. Implementing or expanding electronic medical records (EMR) systems ensures seamless information sharing between locations. Investing in telehealth capabilities can broaden the practice’s reach and offer convenient options for patients. Additionally, technology can aid in appointment scheduling, billing, and maintaining regulatory compliance.

Speaking of Regulatory Compliance, each location must comply with healthcare regulations, which can vary by region. Understanding and adhering to these regulations is essential to avoid legal complications. This includes privacy laws, licensing requirements, and health and safety standards. Regular training and audits can help maintain compliance. Consider if your new location will be in a different municipality, city or state. Are there different regulations to consider? If so, you’ll need to update your policies.

Now that we have considered finance and operations, we can give some thought to Geographical Considerations.

Before finalizing a new location, it’s critical to conduct a thorough market analysis. This involves understanding the demographic profile of the area, including age distribution, socioeconomic status, and prevalent health issues. Assessing the healthcare needs of the local population is key to determining the types of services that will be in demand. It’s also important to consider future demographic shifts and how they might affect healthcare needs. For example, an area with a growing elderly population may require more geriatric services. Your EMR can be helpful here too – you can run a report of your existing patients by zip code, which will let you know how many of your existing patients would make use of the new location. It’s also important to review census and growth data for any areas where you’re considering expanding.

We wouldn’t want to start anything new without a Competitive Analysis. Understanding the competitive landscape is essential. This includes identifying existing healthcare providers in the area and the services they offer. Assessing their strengths and weaknesses can help in positioning the new practice effectively. Consider how your practice can differentiate itself, whether through specialized services, superior patient care, innovative technology use, or better accessibility. It’s also useful to analyze how competitors have succeeded or failed in the area to learn from their experiences. And, it’s easy to assume that you won’t fail where others have. Beware of that thinking and be sure you’ve fully understood all the factors at play and have mitigated as much risk as possible before going into an area where another group has failed.

Next, we want to consider the new location from the standpoint of Accessibility: The location’s accessibility to potential patients is crucial. This includes ease of public and private transport access, parking availability, and proximity to major roads or residential areas. For urban locations, consider the proximity to public transit and walking access. In more suburban or rural areas, ample parking and easy driving access are important. Accessibility is not just physical; it also means being accessible in terms of insurance networks and affordability for the local population. You may want to check with the payers in the market to assure that your clinicians can be contracted in the new area, just to avoid any unpleasant surprises.

Community Engagement is the next factor to consider. Building a strong relationship with the community can significantly impact the success of the new location. This involves more than just opening a practice; it means becoming a part of the community. Engage with local events, health fairs, and schools. Collaborative efforts with local businesses, community centers, and religious organizations can help in establishing a presence and building trust. Consider outreach programs, health education seminars, and free health screening events to demonstrate commitment to community health and wellbeing. One of the physicians I worked with years ago understood this, and when he opened his new clinic, he had already made multiple connections with other leaders in the community. His practice grew extremely quickly as a result, and we had to move the group into a larger space within the first two years!

Now, let’s shift gears a bit to think about Local Regulations and Relationships. Understanding local regulations, including zoning laws, business taxes, and health codes, is essential. Building relationships with local healthcare regulators, hospitals, and other healthcare providers can facilitate smoother operations. These relationships can lead to referral networks, shared resources, and collaborative care opportunities, which can be crucial for patient management and business growth.

Lastly, let’s go over Environmental and Cultural Factors. Consider the environmental and cultural factors of the location. This includes understanding local health trends, cultural attitudes towards healthcare, and preferences for certain types of treatments or approaches. Being culturally sensitive and environmentally conscious can enhance the practice’s reputation and patient satisfaction.

Thanks for tuning in for this episode. We can see the importance of a well-thought-out strategy in expanding a medical practice. I encourage you to conduct thorough research and seek professional advice when considering such a significant step.
You can find start up templates and project plans and more at the Health e Practices website at

Join me for our next episode, where we’ll go over details to consider when selling your practice.

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