Medical Office Space Sharing: A Lean Approach to Modern Private Practice

The practice of medicine is always evolving. Currently. that evolution has resulted in a large proportion of doctors being employed by healthcare organizations, really for the first time ever. However, this pendulum may be swinging back towards a private practice model. Especially as more and more physicians, myself included, work to give doctors back more power in the practice of medicine. In this regard, I asked Dr. Mitra Sadhu, a physician, mom, change agent, and vocal champion, to share her experience and advice for “lean private practice.”

This is a really unique and great option. A nephrologist by training, Mitra has found a way to practice medicine on her own terms, successfully staving off burnout and rediscovering the joy in her profession. By establishing her own lean private practice, she cares for patients as she envisioned while still finding time for her family, travel, and personal interests.

And I’m going to let Mitra take it from here!

A lean private practice

I run a lean private practice. And I got there somewhat by accident. I always knew two things…

1. That I wanted to work part time, so I can save my best energy for my kids as well as my patients, and
2. That I wanted to be my own boss, so I wouldn’t need to get anyone’s
   permission to take vacation!

If I was going to run a practice, in this day and age, AND work part-time, I was going to have to get creative. So, I honed in on the two biggest expenses for a small practice, namely staff and office space.

For the former, I started off as a micropractice. And doing all of the tasks of the practice by myself, from answering the phone to doing my own billing.

For the latter, I ideally wanted to sublet space a couple of times a week from an established medical practice around the area. But I didn’t know where to look. I called up a few practices. And I came up with nothing.

A Solution: Link Medical Spaces

That is when I came up with the idea of Link Medical Spaces. Link Medical Spaces is an online platform, the only one of its kind specific for medical office space. It connects physicians and other healthcare professionals to available space.

The platform lets you list medical office space, whether the full office suite or part of it and whether available full-time or part-time. Office space-sharing is common in many industries but medicine has been slow to catch on. It was not needed until a few years back. Private practice actually did well enough that practice leaders could ignore wastes like that.

Not any more.

The days of waste and redundancy in medicine are gone. To thrive in private
practice in these challenging times, you have to be willing to think outside the box and go lean.

Who should sublease medical office space?

Anyone who has any unutilized or underutilized space in their office should consider subleasing the space.

For example, if you are a surgeon, and in the operating room two or three days a week- your office is lying unused during those days. It is perfect for you to sublet your office for those couple of days a week to someone looking for space on a part-time basis.

Or maybe you are an internist and you have space in your office that can be put to better use. Back in the glory days of medicine, it was okay to ignore these wastes. Like a couple of exam rooms at the end of the hallway that were languishing as storage rooms.

If you repurpose those rooms, you can sublet them out to a fellow physician or another healthcare worker. This way, you have an additional passive revenue stream for your practice.

This also lets you bring in a service that provides additional value to your patients. For example, a physical therapist or a mental health professional or a speech therapist for a pediatric practice or laboratory services.

It brings in additional foot traffic into your office and can translate into more business. You can also have a referral relationship with the other entity. We will talk in just a moment about how to do this right to protect both parties.

With all of these benefits, it is a no-brainer for anyone with additional available space

On Link Medical Spaces, you put your property right in front of your ideal audience of physicians and other healthcare workers because it is specific to medical office space. You’re not getting lost amongst thousands of listings for all kinds of commercial real estate.

Plus those sites do not gear towards space-sharing arrangements. Of course, if you are a commercial real estate investor and have medical office space to lease, you can list that as well on the site.

Another huge bonus with Link Medical Spaces is that there are no realtor commissions. You list your space for a nominal listing fee- that you can easily recoup within a month of subleasing your space.

Is this right for you?

Subleasing office space, instead of buying or leasing an entire office suite is smart business for many practitioners.

A startup medical practice

Unless you are starting off with a large patient base following you from your prior job, subletting space keeps your startup costs low and be the reason you do not have to take on a practice loan.

This is particularly helpful early in your career when you may still be paying off student loans. A low overhead practice lets you sleep better at night during those early months and years and the cashflow it allows may be the difference between closing shop or staying afloat.

For the same reasons, it also works well for:

• Part-time practices,
• Small volume practices, or
• A satellite location of an established practice
• If you want to explore a different part of town to set up an additional location, you can dip your toes without spending a big chunk of change in the beginning, by subleasing office space.

How do you price your Medical Office to sublease?

So you’ve decided to sublet part of your office. How do you decide what rent you will charge?

Because this is medicine, we have to be mindful that we do not run afoul of any regulations, such as Stark Law and anti-kickback statutes. Because often the entities sharing office space have a referral relationship, you want to ensure you are charging Fair Market Value (FMV) for all the involved parts:

• Space,
• Furniture or equipment,
• Amenities, and
• Expected premium for the small space or short duration of the lease
  essence, you should be able to prove “commercial reasonableness” of your deal.

And it should be clear that the agreement is not a compensation or an inducement to secure referrals in either direction.

For the space, you start off by comparing prices of similar medical office space available for lease in your area. Take into account the age and class of building (A/B/C) that you are in and if applicable, what kind of lease you have (Gross/Modified Gross/Net) as you come up with a number.

Specify exactly which areas (and square footage) will be for exclusive use by the tenant and which common areas they will have access to. Examples of shared common areas include the waiting room, restrooms, break room etc.

Additional questions to answer include:

• How often will the tenant be in the space?
• Full-time or part-time?
• How many half or full days of the work week?

That way, you can convert to an applicable daily rate.

Often, there is a premium for the ability to rent a smaller space and because sometimes these agreements have shorter duration than typical commercial real estate leases. You also want to include the cost of other amenities you will include in your lease terms, like utilities, internet access, cleaning services, basic exam room supplies, medical hazardous waste disposal, shredding services, etc. It is usual to include these since you already have them set up for your office anyway. The cost is usually prorated depending on what proportion of the office they are occupying.

Similarly, it is customary to include the furniture and equipment in the exam rooms for the use of the tenant. If there are any special services included, that is added on, too. Like the use of any equipment or if you decide to share staff members- such as a front office staff- you come up with an hourly rate for that.

Key elements of a medical office sharing agreement

First, you should make sure that you are permitted to sublet some of your space to others, as per the terms of your own lease or mortgage.

You also want to make sure that the individual or entity that you are subleasing to is in good standing to practice their profession, including all relevant professional and business licenses and any required insurances such as malpractice insurance.

You also want to ask a little bit about their practice patterns to ensure they are a good fit for you to share your workspace with. Shared workspace agreements should have some standard compliance checklists to ensure both parties are protected.

They should include:

• Details of the monthly rent
• Length of lease: The shorter the lease term, the more a premium for it
• Termination clause including notice of termination and fees, if any, associated with early termination
• Specify exactly which areas are for exclusive use of the tenant and which common areas they have access to
• Itemize what amenities are included in their lease agreement
• Indicate general liability insurance that the lessee needs to maintain
• Guidelines and rules to follow while using the shared space: such as HIPPAA considerations and all local laws and ordinances
• Specify clearly that the space is intended to be used for the practice of medicine
• Establish clear expectations for maintenance and repairs

It is wise to have a written agreement with these and other necessary items outlined, as per an attorney. This helps protect both parties in case of unforeseen circumstances. Without it, each party opens itself up to liabilities arising from the action of the other.

Change is here to stay

Jordan here again!

We are in challenging times in healthcare and we need innovative solutions for private practice to continue to thrive. This is one important way that doctors can take back control in medicine.

Of course, regardless of practice setting, financial freedom is another way doctors can do this!

Link Medical Spaces hopes to help offset some of the high cost of medical office space. This will allow doctors to establish a lean private practice model to continue providing optimal patient care.

The freedoms this has allowed Mitra to be an ardent advocate of lean private practice as a sustainable model for many physicians!

I thank Dr. Sadhu for offering her take here, If you are looking for more info, she shares her experiences and insights on Lean Private Practice Solutions and LinkMedicalSpaces.com!

If you are looking for more resources regarding optimizing your practice setting, check out these posts:

• Exploring an Exciting New Employment Option for Doctors
• Understanding the RVU Compensation Model for Physicians
• Will New FTC Ruling Cure Noncompete Woes for Doctors?
• How to Increase Your Compensation Both Clinically and Non-Clinically

What do you think? Is a lean private practice an alternative practice setting for you? Why or why not? What advantages or disadvantages do you see? Let me know in the comments below!