Expanding Practice? Considerations for Building Out Clinical and Office Space

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Thinking of expanding your medical practice’s office and clinical space? With interest rates still low, borrowing money to invest in a buildout may seem quite attractive. However, before you move ahead with an expansion plan, there are a few factors you should consider.

First, does a buildout make sense for your practice right now?

A major consideration is whether you plan to own or lease your new space. Owning your building offers benefits such as tax savings and opportunities to generate income through leasing. Moreover, any investments into improving the property will ultimately benefit you, not a landlord.

If you lease your space, keep in mind that any improvements you make to the space are ultimately benefiting the property owner. However, in some cases it may still make sense to expand. In a commercial property lease, the landlord provides a tenant-improvement (TI) allowance, which tenants can use to improve their space. A leaseholder can negotiate TI in their lease agreement terms or engage a qualified healthcare advisory professional to assist with the negotiations.  

Remember, it doesn’t always make sense to buildout your space, even if you can afford to do so. An expansion of your medical practice should be a strategic decision that takes into account several factors, including market opportunity. If the demand is not there, it may not make sense to invest in an expansion.   

So how do you know if the timing is right? There are several signs that a buildout might make sense for your medical practice, such as:

  1. Your ability to maximize revenue is capped by your existing space.
  2. Your existing space plan doesn’t allow for maximum patient flow and efficiency.
  3. Your existing space doesn’t allow for the technology you need to best serve your patients.
  4. You want to expand into a new geographic market.

If you decide to move ahead with an expansion, space planning should be a prime consideration. Keep in mind the important distinction between clinical space, which is revenue-producing, and administrative or “white” space, which is not revenue-producing (e.g., hallway, office, waiting room). Clinical space expansions can provide the greatest opportunity to add revenue, by enabling you to see more patients, offer more services or add providers.

An endless number of factors go into building out clinical and office space, from lease terms and vendor contract negotiations to system implementation and data drops. You have to think about everything from lighting and plumbing to windows and floors. Two important considerations from an efficiency standpoint are patient flow and equipment placement. You also have to consider patient demographics. For example, a pediatric practice may have designated play areas while a bariatric surgery center may have larger chairs in the waiting room.  

While there is certainly a lot to consider in planning a space expansion and there is a significant financial investment required, a strategic buildout can present tremendous benefits for your practice. Expanding your medical practice’s clinical and office space can help you to scale your practice with the ability to see more patients and drive better patient flow.

And you don’t have to do it all yourself. You can engage an outside firm to oversee the space expansion process, from start to finish. A healthcare advisory professional with experience assisting with medical practice expansions can help you with building out your space and growing your practice. 

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Kevin N. Fine, MHA, is a director of healthcare advisory services in the Miami office of Kaufman Rossin, one of the top accounting firms in the U.S. He can be reached at kfine@kaufmanrossin.com.


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