Office rents are one of a physicians biggest costs and biggest headaches. While leasing space means maximum flexibility and relatively little responsibility, it also puts physician-tenants at the mercy of a landlord and eliminates the benefits of equity ownership.
Small office or condominium ownership allows physicians to reap the tax advantages and other benefits of ownership, but either of these options brings its own headaches. How much time should practice managersor physicians themselvesreally spend on contracting with cleaning crews, calling the plumber, and gathering bids on landscaping? More and more physicians are discovering the middle ground of partnering with hospitals and developers to create innovative healthcare facilities where they can build equity, get a return on investment, and be a part of a larger project that focuses on customer-service features that drive patient satisfaction through the roof. The model starts with a limited partnership (LP) or limited liability corporation (LLC) that allows equity investment while limiting financial liability for physician-owners. Often, these are established by a hospital that wants to build a new physician office building; the hospital works with a real estate developer to create both the investment structure and the building itself. Physicians who want office space in the building contribute an investment stake and become part-owners of the holding company. They then pay rent to the company for their own space and receive a portion of the total revenues in return. A management company is retained to operate and lease the building on a day-to-day basis, alleviating physicians of the need to either manage their own space or sell it when they choose to leave. Unlike condos with fragmented ownership, the management company ensures that the entire property is well-maintained. These joint ownership arrangements allow physicians to enjoy both the ease of renting and the benefits of ownership. Those benefits are greater when physicians own part of a larger building, rather than simply their own offices. These arrangements are also a good way for physicians to diversify their income and investment portfolios, generating both cash flow and asset appreciation. In addition, lease-backs can offer attractive financial returns. The pro forma for a new physician office building created on this model by Anchor Health Properties and the Doylestown (Penn.) Hospital estimates that, at 95 percent occupancy, physician-owners will receive a return of at least 16 percent on their investment. How do facilities like this impact patient satisfaction? A professional developer can create larger-scale projects with service mix in mind. By creating a blend of primary care and specialists offices, plus an assortment of outpatient services such as imaging, fitness and wellness services, ambulatory surgery, physical rehabilitation, sports medicine, oncology treatment, womens health and others, professional developers create healthcare projects where patients can have direct, convenient access to multiple services under one roof. The addition of ancillary services such as health education, a medi-spa, a pharmacy, complementary therapies, healing gardens, and a healthy café creates an environment where patients feel more relaxed and actually want to spend time focusing on their entire health and well-being. These are things that small, physician-owned buildings and condos just cant deliver. Hospitals can also benefit from this model. Working with physicians to develop a joint-ownership property on its campus is a smart way for a hospital to strengthen physicians allegiance to the organization. Joint ownership development is a financial structure thats starting to surface in markets around the country, and it is becoming more common as the model becomes better understood. By combining the advantages of both ownership and renting along with a high level of patient satisfaction, this type of investment offers physicians smarter choices in healthcare real estate, creating both investment value and patient satisfaction.
