Conventional wisdom tells us that spending less money is the most effective approach to saving money. After all, a penny saved is a penny earned and the more you save, the more you have left over. That logic is hard to argue with, but it is not always fool proof. Saving money for your practice the wrong way can lead to diminished patient care, outdated equipment, the wrong location for your practice and additional negative results.
There are several critical factors often overlooked when a healthcare practice’s primary focus is paying the lowest rent vs. achieving the best combination of overall terms. Let’s look at three factors where paying higher rent could actually increase your profitability.
#1: The Cost to Build
Healthcare buildouts often cost two-to-three times more than a typical commercial real estate space. This is attributed to many factors that are unique to healthcare, including:
More durable finishes
Millwork and cabinetry
Plumbing and sinks in exam rooms, sterilization centers and laboratories
Increased electrical and HVAC requirements (heating, ventilation and air conditioning)
How do you handle a real estate negotiation if your landlord is also your patient?
Many healthcare tenants find themselves in this situation when approaching a lease renewal or relocation. Compounding the situation, is that most healthcare professionals are not prone to conflict or confrontation and would prefer to avoid them. This creates a scenario where tenants want to obtain the best terms possible for their practice without upsetting their landlord and losing them as a patient.
In an ideal world, you could tell people exactly what you hope to achieve and then expect to receive a fair response. Unfortunately, commercial real estate is not one of those worlds! The difference between a properly or poorly negotiated lease or purchase contract can benefit or cost you tens to hundreds of thousands of dollars over a ten-year period. Understanding how much is really at stake during a commercial real estate negotiation changes how you should approach every transaction.
To help your perspective, look at these foundational questions:
Health law is the federal, state, and local law, rules, regulations and other jurisprudence among providers, payers and vendors to the healthcare industry and its patient and delivery of health care services; all with an emphasis on operations, regulatory and transactional legal issues.