Best Practice Guidelines: Healthcare Practice Management & POPIA Compliance Framework
Best Practice Guidelines: Healthcare Practice Management
POPIA Compliance Framework
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2. How to Start your Practice
2.4. Renting vs Buying
As part of opening your new medical practice in South Africa, the question comes: Should I buy or lease my medical office space? How do you choose which is better? In this chapter, we will discuss the pros and cons of each option and leave the final decision to you. We will include the importance of the location where you choose to open your medical practice as well.
BUYING OR LEASING YOUR MEDICAL OFFICE SPACE
Before we begin, let’s define what medical office space is. For this blog specifically, medical office space can also be defined as your practice, your property, your business, etc.
A medical office/medical practice is where you as the healthcare professional will provide healthcare services to patients. It can include a reception, waiting room, consultation room/s, bathroom facility, storage of files, medicine, materials, etc.
In this chapter, we will split buying into two sub-categories:
1) building a new practice from scratch and
2) buying an existing medical practice.
Whether you choose to buy or to build, each will have its own pros and cons.
BUILDING A NEW MEDICAL PRACTICE
Building your own medical practice is an extremely rewarding opportunity to take on. It might be your dream to start clean and build your own practice where you can carve out your perfect career.
This must be one of the major benefits of buying your medical practice – you are in control of everything. You are independent in this venture and you make all the decisions; from financial decisions to deciding on the layout and style of your new practice.
Building a medical practice is a long-term commitment which might mean that you know exactly what you want and how you will utilise this investment. That’s exactly what your practice will become, an investment that can bring other opportunities.
Starting off with the biggest challenge of building your own practice is that you will require a large amount of capital. From loans, construction costs and the possibility of rising interest rates.
Building something from scratch will require a great amount of careful planning, research and preparation. It’s not easy for everyone to build something from nothing and even more so, making a great success out of it.
You might need to invest in equipment that you will require in order to effectively run your practice. From furniture, stationary and to technology – you need to be prepared for these extra resources’ costs.
Another area where you need to invest your time in is to ensure that you employ a capable and teachable team of office and/or medical staff. Next to your brand new medical practice, the people that will operate in it will become a valuable asset.
Starting new means that you will have to create a name/brand for yourself through marketing. This can prove to be a challenge, especially in the beginning, to create a loyal patient base.
BUYING INTO AN EXISTING MEDICAL PRACTICE
The one major benefit of buying into an existing medical practice is that you are ready to hit the ground running. There is less planning and designing involved when you take over from established medical practice.
The building itself is a valuable investment aside from the medical practice you have inside it. Owning builds equity and marketability. When the time comes, you can choose to sell or lease it out to the next healthcare professional.
Buying into an existing medical practice that is well located will also be a major benefit. The logistics of the location is already well planned out by being closely situated to other healthcare facilities such as pharmacies, hospitals, and other specialist healthcare providers.
Overall control. As the owner of the medical practice, you will have control in all the major areas such as space utilisation, aesthetic choices, expansion and growth.
Part of starting a new practice is building a strong patient base. When you buy into an existing medical practice, you will already have a patient base waiting for you. Patients in the area will already know where the medical office is located.
Together with the patient base, there will already be a team of staff members that are experienced with the necessary knowledge of how a medical practice operates. The staff will also be familiar with the patient load.
Buying a medical practice will be an expensive venture. A large down payment and other investments will require a big budget in the initial stages of buying into an existing medical practice. This includes normal monthly payments that accompany owning a building.
Even though you can sell or lease out your medical practice in the future, the target market for buyers will be focused only on other healthcare providers which might be a challenge as it is a single-use facility.
You run the risk of finding hidden problems and liabilities that you didn’t ask about or didn’t see at the time you bought the practice. This will, in turn, create unplanned expenses that you might not have budgeted for.
The staff can prove to be a double-edged sword. The risk stands of them resisting changes you might want to implement after the change of ownership. You might experience that the existing staff’s culture and work ethic can conflict with your own values.
The obvious advantage of leasing a medical practice is that there is less upfront cash required to open your doors. The only amount of money that you need to consider is a secure payment that is usually paid a month or two in advance.
Following the above, less budgeting is required for the necessary infrastructure and resources in order to operate a medical practice. You might want to adjust where needed but the costs will be considerably lower than buying or building a medical practice. The practice is well equipped.
The location of this building might have been already well planned and strategically selected to be near the patients, other specialists, hospitals, and pharmacies.
Leasing a medical practice makes it very convenient for the patients in the area that are familiar with this practice. You have a patient base basically waiting for you which will help you in the beginning to create a name for yourself.
When you are leasing a medical practice, it will offer greater flexibility than owning a medical practice. Leasing is a great option when you are unsure about owning or building a medical practice. Changing the commitment from long-term to short- or medium-term.
When you choose to lease, the market fluctuations will have an impact on each of your lease terms. You run the risk of an increased rent amount or even have the benefit of a lower rent amount as the market changes.
You have no equity – simply put, you are not investing when you are leasing a medical practice so there is no equity to build upon.
Less control over the property. Any changes or improvements that you wish to make will have to be reverted to and approved by the leaser. This includes the want for expansion of the practice.
We mentioned in one of our first blogs that the location of your medical practice will have a significant impact on the success of your practice/business. The phrase “location, location, location” comes to mind.
There are two major aspects to consider when choosing the location of your medical practice in order to grow your patient base:
- Foot Traffic: In simple terms, the location of your practice needs to be easily accessible and close to major public points such as other healthcare providers, hospitals, pharmacies, public transport points or even schools and other businesses. Any location where there is a concentrated amount of prospects.
- Referral Network: Together with foot traffic, a great healthcare service will provide a referral network. This network grows deeper when you consider that other healthcare service providers will refer their patients to you or vice versa, depending on your speciality. The closer you are to these networks, the more loyal and stable relationships you build.
Following the above, here’s a quick and simple list to help you with your practice’s location:
- Accessibility (easy to find),
- Close to other Healthcare Providers (complimentary),
- Close to Ancillary Services (hospitals, surgery centres, physical therapy, etc.),
- Parking facilities,
- Disability friendliness,
- Modern look and feel (to make your medical practice and office space welcoming).
WHICH IS BETTER?
If you were hoping for us to tell you which of these options you should choose, we’re sorry to disappoint – but in this process, one size does not fit all. Each and every medical practice/office and/or business is different, with different needs and requirements as well as challenges.
Whether you will be buying, building or leasing – each of them is a big commitment. Going through these pros and cons hopefully helped you in your decision-making process. In the next blog, we will focus on how you as a practitioner, should protect yourself and your practice by getting insured.