How location can make or break your practice

There's a science to selecting the right site for your office. Here's how the experts do it.

By Deborah A. Grandinetti
Senior Editor

About five years ago, Premier Medical Group, then a 24-physician multispecialty practice approximately 50 miles north of Nashville, decided to take a risk. Group leaders knew they needed better visibility if they were to increase their market share. So they moved two of their internists and one of their pediatricians out of their existing medical offices on a quiet side street in town, and into part of a 26,000-square-foot space they leased from Governor's Square Mall, the most heavily shopped mall in the area.

"It was a big decision," says Richard D. Hansen, a Palo Alto, CA-based consultant with the Medical Group Management Association who worked with the group on the move. The doctors were comfortable in their original location, a cluster of professional offices about a mile from the hospital, and the move to the mall seemed "a little crass. But they're doing very well there," Hansen says. "I think they were pretty smart docs."

Smart indeed. The group has grown to 40 physicians, and 17 of them—most in primary care—work in the mall clinic, which is open 365 days a year. "Patients really love the location," says Diane Miner, Premier's chief operations administrator. "Any doctor that we've put into that clinic instantly has a lot of new patients."

The location works for a number of reasons. One, it has high visibility. Hansen says a very high percentage of the people in town drive past the mall every week. (The mall developers had been banking on that, of course.) Two, the clinic is in a high-growth area. Three, the access is great. Buses make regular stops at the mall throughout the day. And four, there's plenty of parking.

This is a classic example of how doctors can use office location to help boost their practice. The trick is to approach the move strategically, rather than basing it on where your real estate holdings happen to be. Once you understand the steps involved, you can plot a great location yourself, whether you're contemplating a move across town, opening a satellite office, or looking to zero in on the best region to set up (or buy into) a practice.

Here's how another practice—a popular three-doctor primary care group in the Philadelphia area—planned a strategic move to expand its practice. After the group outgrew its downtown office, the doctors at first considered another downtown location. But when they considered the traffic-choked, one-way streets surrounding the practice, and looked at demographic trends, they decided against it. Instead, they found office space in a suburban setting no more than seven minutes from the majority of their patients. The drive was easier for most patients, and parking was readily available.

The doctors' calculations appeared to be right on. Today, the group has 12 physicians.

Zeroing in on the region is the first step

Before you settle on a specific city or town, make sure the area can support another physician in your specialty. Here's how one smart ophthalmologist (let's call him Mitchell James) positioned himself for maximum profitability after he left the Navy for private practice. Although he lived in southern California, he was willing to go wherever the conditions were right for him to succeed.

James was among the first wave of ophthalmologists trained in intraocular lens implantation. He knew that would give him an advantage over older colleagues who didn't know the technique. He also knew that the technique would be most in demand among senior citizens, but that sizable copays and deductibles could make the procedure prohibitive for the typical Medicare patient.

Using a number of sources, James looked for communities with a large, relatively affluent senior population. Once he identified them, he eliminated the ones oversupplied with physicians in his specialty. He then took the remaining communities, listed the ophthalmologists practicing in each, and looked up their graduation dates. James figured he could use the graduation date to deduce who had training in the intraocular lens technique.

His sleuthing led him to a small, historic town in Pennsylvania. At first, he figured he'd stay five years. But he was so successful, he's still in solo practice there some 15 years later.

To find your own prime location, start by asking a seasoned practice management consultant for a ratio you can apply to determine how large the population has to be to support a physician in your specialty. (Some specialty societies can provide this information, as well.) For instance, say it takes a population of 2,000 to support one primary care physician. If the area you're considering has a population of 10,000, and there are six FPs and internists there already, assume the community doesn't need you.

If you're an internist, FP, ob/gyn, or pediatrician, and want to know how many other physicians in your specialty are practicing in a certain metropolitan area, you may be able to find the answer in the AMA's reference book, Physician Characteristics and Distribution in the US. Table 4.14 lists the number of physicians in each of these specialties for over 300 metropolitan areas. You can also check with the local medical society.

Realize, however, that the physician-to-population ratio is not cast in stone; it's just an average. So an area with an unusually large number of young families, for example, can support more pediatricians than the formula suggests. On the other hand, a location with an ideal ratio won't do you any good if you are a specialist and aren't able to break into the referral network, warns David C. Scroggins, a practice management consultant with Cincinnati-based Clayton L. Scroggins Associates.

The local medical society may be able to give you a reading on how tight the referral network is. But you'd be smart to call physicians with whom you hope to develop referral relationships to see where they send patients now. If the same names keep coming up, and the referring doctors are satisfied, it may be a tough market to penetrate, says Michael J. Parshall, vice president of The Health Care Group, a consulting firm in Plymouth Meeting, PA.

If the referral market is tight, don't consider setting up practice in the area unless it has two to three times the recommended number of people per physician in your field, says Scroggins.

Here's one exception: If you're determined to practice in an area with at least 500,000 people, you may be able to set up a viable practice even if the ratios aren't in your favor. Your odds are better in a larger place because you can count on enough new people moving into the area and needing a doctor. "In a major metropolitan area, even if the ratios are saturated, one doctor can start a practice near another," says Scroggins. "The new one can still succeed if he provides good service." But taking a chance in a doctor-saturated area requires staying power, he cautions. It will take longer than usual to acquire enough patients to build the practice to capacity.

If you'd like to learn how much growth you can anticipate in an area, look to the local hospital for the most sophisticated demographic data, says Scroggins. (Ask for the physician relations liaison or the market planning department.) But make your own interpretation of the numbers. "Hospitals have a tendency to oversaturate by specialty," says Scroggins. "The hospital has nothing to lose if too many physicians set up shop in the community, but the docs do."

If you're willing to work in an underserved area, you can streamline your research. State and local health departments can tell you which communities have physician shortages. The dearth of physicians may reflect concern that high unemployment in the area means patients won't be able to pay their bills. If you specialize in elder care, though, that needn't concern you. "If your payer mix is driven by Medicare, it doesn't matter if there's high unemployment in the area," says Parshall. "Since you're being paid by the government, most likely you'll do very well."

The information you need to plot the right location

Once you've settled on a community, you need to pick a specific site. First, gather enough information to give you a full perspective on relevant trends in your practice and the location you've picked. Then analyze the data on paper, or, better yet, plug them into a site-selection software package designed to help you build an accurate profile of the area. Parshall says that some of the software is so good, "you can drill down to within a three-block radius" of the best practice location. He uses Microsoft's MapPoint, which retails for $249.

What information do you need to build a thorough profile?

If you are considering a move within the same general area, start by analyzing your current patient census. (If you're coming from out of town, you'll need to put together a desired or expected general profile. A practice management consultant familiar with the local area should be able to help you do that.) Determine how many are in each age group. Are they predominantly under 40? Over 50? It's also wise to determine how many of your patients depend on public transportation to get to your office, so you can factor this in when you consider the new location.

Next, determine where you're drawing most of your patients from. What's the breakdown by ZIP code? What neighborhoods are new patients coming from, and how far are they traveling? Look at population trends in your area. Which neighborhoods are stable? Which are losing population? Which are filling quickly? Is the community building schools or closing them? The county planning commission is likely to be the best source of information, although a seasoned local real estate agent may know the answers, as well.

If you visit the county planning commission, ask about any new commercial or residential development projects in the works, and about any new expressways or extensions of old ones. You may learn, for instance, that a proposed new residential development will create another 250 condominiums—and bring an expected population increase of 725 people—over the next three years.

If you skip this step, you may regret it. Parshall cites an ophthalmology group that is erecting a spacious new building in the "wrong spot." The physicians were apparently unaware of a new expressway slated for the area, he says. So they didn't know that the local exit planned for the freeway will miss their new building by about 2 miles, forcing patients to backtrack over slow-moving residential roads.

If you expect that a lot of patients will use subways, trains, or buses to get to your office, find out where the local routes are so you can plot them. Call the transit agencies to see whether they're planning to create new routes or add new stops on existing routes. For patients who'll drive to the office, study the relationship between the local highways and the neighborhoods that your patients live in. Figure out which highways and local roads offer the most convenient access for the majority of your patients.

Once you've gathered all this information, plot it out using a detailed map or site selection software. If you've been thorough in your research, the commercial zones best-suited to your practice should be evident. Before you make a final selection, however, find out the addresses of potential competitors. (To see who else contracts with the insurance plans you do, look in the provider directories.)

You don't want to go head to head with an established group, but you can take on a weak competitor, says Joan M. Roediger, an attorney with The Health Care Group. If you're a family physician or internist, you can get the lowdown on the strength of your competitors by asking medical subspecialists, especially cardiologists, whom they support and how satisfied they are with the relationship, says Parshall. Again, if the same names keep coming up and the specialists are satisfied, the practice is likely to be doing well. If you're an ob/gyn, ask internists or FPs who don't perform obstetrics. If you're a pediatrician, ask ob/gyns.

Another way to check is to pose as a patient, call your competitor and see how long before you can get a well-patient visit. In most cases—but not all—a long wait means that the practice is thriving and at capacity. Once you've assessed this information, note it on your map, as well. By this point, you should know enough to help your real estate agent zero right in.

When you're out scouting for the building or the land, be sure to select a site with "curb appeal," says Parshall. You want a building that can be seen from the road. Make sure the site affords ample parking, so there will be enough even after your practice grows. Before you finalize your choice, ask the local zoning officer how big a sign you can erect. If the answer doesn't satisfy you, look elsewhere. You'll need a large, prominent sign to help advertise your practice.

Generally, it's better to rent than buy, says Roediger. This way, you'll have more flexibility to relocate, if changes in your market require it. She says that physicians often get into trouble by letting their real estate holdings—rather than sound strategy—dictate office location.

Action list: before you shop for that new office

As explained in the accompanying article, you'll need to gather a fair amount of data in order to pinpoint a location that will serve you through the years. Sources include:

Resources to help pinpoint the right location

 

Deborah Grandinetti. How location can make or break your practice. Medical Economics 2000;12:107.