Around the Office: A Space Odyssey

Virginia Urology Center was quite literally all over the place. Over the course of 70 years of change and expansion, the practice had acquired 11 offices and 35 physicians that were spread hither and yon across 120 miles in the Richmond, Va., area. The practice had no center of operations, and patients often didn’t know which office to visit. Unnecessary duplication of processes and procedures drained the group’s cash flow. And its physician leaders were exploring the possibility of adding ancillary imaging and ambulatory services.

But where would such services best fit in such an unwieldy enterprise?

For Virginia Urology, the answer was to consolidate most of its business under one roof.

So four years ago, Virginia Urology partnered with a real estate developer to build a three-level, 55,000-square-foot all-purpose facility. The ground floor of the state-of-the-art structure now houses a welcome area and all ancillary services - diagnostic imaging and an ambulatory surgery center among them. The practice’s physicians see patients on the top two floors in rooms far more efficiently designed than before.

And not only are the majority of the practice’s operations in one tidy, modern edifice that has optimized the group’s work flow, but Virginia Urology was also able to cash in on a sizable appreciation of its commercial real estate when a real estate investment trust (REIT) purchased its building. (A REIT is a security that sells as a stock on the major exchanges and invests in real estate directly; people own pieces of REITs the way they own pieces of mutual funds.) Now the group has money in the bank and a comfortable long-term lease.

“We needed to reinvent the facility, and our strategic planning really paid off,” says Terry Coffey, the group’s practice administrator.

The cost of maintaining office space constitutes roughly 12 percent of a typical practice’s overhead - but it’s an exceedingly important 12 percent. The configuration of the physical space in which you and your staff work and treat patients can dramatically affect your overall operations - that is, how efficiently you work, how satisfied your patients are, and ultimately, how much revenue you take home at the end of the day.

Change in this realm is difficult to avoid these days; technology is altering how physicians work and the amount and type of space they need. At the same time, many doctors are feeling pressure to add services that can bring in more revenue - a move that can greatly affect space considerations.

Some, like the physicians at Virginia Urology, respond by taking a big plunge and erecting an entirely new building to suit their needs. Others who lease their space add to it or expand into an adjacent office, perhaps with the option to buy later. Still others simply stay put and reconfigure their space as their needs change. But experts agree that to avoid making any improvements in your office space in these days of changing healthcare delivery most likely means missing out on added revenue.

“It’s not just about good medicine anymore - to set your practice apart, you need to be concerned about where you practice, the office ambience, and the internal flow,” says Kenneth Hertz, a senior consultant with the Medical Group Management Association (MGMA). “And don’t be fooled: This is not just about ‘pretty.’ This is all about your bottom line. We have all too often seen highly productive physicians severely hampered by a poorly designed space.”

Walk the line

The MGMA keeps statistics on the median amount of office space practices in each specialty use. For primary-care practices, it’s 8,830 square feet. For urology practices, it’s 11,000 square feet. Others generalize that 1,200 to 1,500 square feet per provider works best for most specialties, with an additional 60 to 80 square feet for each nurse. Exam rooms average 9 by 12 feet.

But those who specialize in such matters say that determining the amount of space your specific practice requires - and what alterations you should make to enhance revenue is more a matter of art than of mathematical equations.

“There is no standard, accepted amount of office space needed for a physician’s practice,” says John Marasco, principal and owner of the Denver-based medical architecture firm Marasco and Associates Inc. “Each needs to be engineered around those particular physicians, how they work, and how they use their staff. But if their space - the number of exam rooms or waiting-room space - is limiting the number of patients they can see per hour, that’s a problem.”

How can you best assess where things stand in your office? Hertz advises beginning with simple observations.

“Just walk around and see what you have,” says Hertz. “Is the waiting room always full? Are you often overcrowded in the receiving area? Is a scheduling problem the culprit - or is the number of exam rooms you have inadequate?”

Marasco says answering such questions is not as simple as you may think. First, he advises, evaluate your patient work flow. When you are in an exam room with Patient A, are nurses prepping Patients B and C in other exam rooms? If so, and you end up spending a good amount of time with Patient A, are Patients B and C left waiting, occupying valuable exam room space that other physicians might use instead? If the answer is yes, space may not be your problem. Rather, you may need to re-evaluate how you process patients. Perhaps you should room them in a designated triage area or keep them in your waiting room until you know you are prepared to see them.

Often, practices that do need to expand misdiagnose where their space problems lie. Marasco recalls a client who was certain that his nine exam rooms weren’t sufficient and asked for help in adding more. But when Marasco inspected the practice, he concluded that it did have adequate exam rooms. The practice’s waiting room, however, was woefully small for the number of patients crowding in the front door. To relieve the waiting-room crush, staff responded by quickly ushering patients into exam rooms just to get them out of the tiny, crowded space.

This, of course, meant the practice’s exam rooms were brimming as well. Marasco recommended that the practice expand its waiting room by 20 percent and retain its existing number of exam rooms. Patient flow greatly eased as a result.

Techno-shrink

Rethinking your patient work flow is by no means the only factor that should drive the decision to reconfigure your office space, says Richard Peterson, principal of Richmond, Va.-based Cornerstone Architects, which focuses on designing hospitals and medical practices.

There’s also technology. Think electronic medical records and digital imaging.

“We used to design large rooms to store medical records, and we’d have to anticipate how many charts the practice would have in five years and 10 years,” recalls Peterson. “But now, with EMRs, that space is no longer needed. It can be converted into something else - ideally, revenue-producing space, like a treatment room.”

Marasco adds that many of his clients fret about the high cost of purchasing EMRs, but when he calculates for them the income that could be generated by rededicating the space they currently use to store paper records, many physicians begin to perceive the multiple ways the purchase could pay off. Physician practices accumulate so much paper; the space that now houses patient files can easily be reconfigured into additional exam rooms or space for ancillary services.

MGMA consultant Cynthia Dunn formerly worked as the practice administrator for Bluegrass Orthopaedics in Lexington, Ky. She says that after Bluegrass opted for digital X-ray technology, they converted their large X-ray storage space into another exam room. “It was fabulous,” says Dunn, “and the conversion was minimal from a construction standpoint.”

But where do I put pictures of my kids?

In lieu of physically expanding or purchasing space-saving technology, how can you squeeze additional square footage out of your existing practice? Try nixing your office.

“It used to be that every physician wanted a large office, a place to put all the diplomas, a suitable place to talk to patients,” says Peterson. Many of those offices, he says, were an impressive 10 by 12 square feet; surgeons often wanted 14 by 16 square feet.

But Peterson says those expansive offices are now going the way of the dinosaur as physicians look for new ways to economize. One emerging fashion is shared physician workrooms - that is, a designated space with cubicles for individual physicians, perhaps with a small medical library in the corner.

“It’s a trend now, for practices that are open to it,” says Peterson. “But I’ve also heard physicians say, ‘I went to medical school too long to not have an office.’”

Virginia Urology was open to it. The 25 doctors who work in the practice’s new building now use cubicles rather than offices. When they need to privately consult with patients and their families, physicians direct them to a comfortable conference room with access to a video monitor and an X-ray screen.

The caveat? Hertz says that some practices perceive expansive, well-appointed physician offices as an essential element of their marketing strategy. Patients like it, they say;
it makes them feel good about their doctor.

And practically speaking, some specialist physicians cannot go without individual offices. Oncologists, for example, must have comfortable, private places in which they can meet with patients and their families at any time.

When bigger is better

Often, modest space-saving measures are not adequate, and growing practices such as Virginia Urology face the reality that it’s time to physically expand - something that many doctors are deathly afraid of, says Marasco: “A lot of physicians are really hesitant to add space because it constitutes big numbers - multimillion dollars in construction costs sometimes. But when you look at it as a monthly expense amortized out across 20 or 30 years instead, it’s an affordable solution. When you say ‘$5 million’ to a doctor, they freak out; but when you explain that that equates to, say, $15,000 extra a year, it’s not so bad.”

Today, physicians who take the long view regarding financing their physical expansion do so to incorporate ancillary services such as outpatient surgical centers, laboratories, diagnostics, and cosmetic services. Marasco says many of his physician clients add these services as a “necessary evil” in order to shore up revenue in the face of steadily declining reimbursement levels. But to make money, you have to spend money. “It’s almost impossible to add these services and not add space,” says Marasco.

In Reno, Nev., Chaffin Eye Center has embraced expansion as an essential business strategy. The three-physician practice originally occupied 4,500 square feet, but when an eye center next door went out of business, Chaffin hopped on it, perceiving the acquisition as the group’s opportunity to open a Lasix surgical suite, explains practice administrator Michael Vance. That was almost three years ago. Since then, Chaffin has expanded beyond the 2,000 additional square feet their first purchase brought them. Vance says the practice is now working with architects to construct a surgery center across the hall from its existing location. It also plans to add new exam rooms and additional space to its medical offices.

The practice, which leases its space, is currently spending $210 per square foot to build out an additional 3,800 square feet, with the landlord subsidizing $30 per square foot. Vance says Chaffin’s landlord will give the practice first right of refusal should he decide to sell all or part of the two-story office building. Vance says Chaffin wants to buy.

The practice has already increased its revenue from its first expansion, and it expects to generate exponentially more when its surgery center opens. Vance notes that the practice hopes its new state-of-the-art facilities will attract additional physicians as well.

Eyes on the prize

When it comes to reconfiguring your practice’s work space - whether, like Chaffin, you’re expanding into new space, or, like Virginia Urology, you’re constructing a new building - experts say the most important factor is that your plans target the goals you hope to achieve in the distant future.

“If a practice plans for the way it’s configured today, designing space for that, they will be out of space by the time they move in,” says Peterson. “They need to plan based on where the practice is going to be in the next five or 10 years. Adding physicians? Adding ancillary services? They need to look at how that practice is going to grow.”

Dunn learned that lesson the hard way. She says it was only after Bluegrass Orthopaedics’ brand-new 30,000-square-foot facility was completed that its physicians realized they’d been too conservative in their planning. They decided to add another 4,000 square feet right away, which cost them almost half of what their original project ran, says Dunn. The practice took a big hit financially from its poor planning, and staff and patients were greatly inconvenienced by the commotion of continuing construction.

Of course, unanticipated events will always occur. Technology will introduce something new to your field that will make a whole room obsolete - or require you to add a series of rooms. Or the practice adjacent to yours will suddenly vacate, and you’ll have the unexpected opportunity to expand into it.

Hertz says that although you can’t always predict the precise ways in which your practice will grow, it still makes sense to maintain a solid business plan that incorporates your evolving use of office space as one of its key components: “You might change your direction, but having a plan will always let you know whether you’re off target or not.”

Suz Redfearn is a freelance writer with more than 10 years of experience writing about business and healthcare issues. She can be reached via editor@physicianspractice.com.

This article originally appeared in the May 2007 issue of Physicians Practice.