Benefits of Optimally Designed Office Space
By John K. McGill, MBA, JD, CPA of The McGill & Hill Group, Charlotte, NC
- Practices can increase production until they hit one of three barriers—doctor productivity, staff productivity, or inadequate facility.
- Benefits of effective office space include handling increased volume, providing patient convenience, offering physical attractiveness, incorporating new technologies and increasing staff effectiveness.
- Compare the expected additional increase in practice profit with the additional investment required to provide the doctor with an analysis of return on investment.
Many doctors fail to determine the true impact that a substandard office has on their practice profitability, as well as the potential available by moving to an optimally designed office space.
Most orthodontic practices can increase production until the practice hits one of three barriers – doctor productivity, staff productivity, or inadequate facility. Once the practice hits one of these barriers, doctors face very real, but rarely quantified, opportunity costs in terms of future lost profits and practice value. Doctors usually fail to calculate their potential total return (annual profit increase plus increase in practice value) from optimizing their office layout in a new space, because they focus solely on the costs involved.
The following factors can help you determine how much a maximally effective office space can benefit your practice through increased productivity and practice value:
- Handling increased volume. Moving to an expanded, and well-designed, office space can provide the obvious benefit of handling an increased patient flow facing more practices these days. In many cases, we’ve seen doctors increasing patient volume 30-40%, solely as a result of moving to new office space.
- Patient convenience. Good marketing requires making your practice consumer-responsive, including being located near where patients tend to travel. Increasing your practice’s visibility and convenience to current and potential patients can increase your practice’s new-patient flow for greater growth and profitability.
- Physical attractiveness. Patients assess quality of care based on several factors, including the physical attractiveness of the office facility. While you may well be a top-notch clinician, patients will not perceive this to be the case if your office facility is unattractive, “tired,” or shabby. Furthermore, proper alignment of your facility with other quality-of-care factors is a necessary prerequisite to adjusting your fees to coincide with the level of quality that you are providing. Accordingly, the increased annual investment required for a move to a new facility is often paid for through the related fee adjustments.
- New technologies. Implementing new cost-saving technologies in your orthodontic office space may well require moving to another facility. Installing computer terminals in the clinical area, adding digital X-ray equipment, patient education systems and other technological enhancements may require additional, or reconfigured, clinical space, while implementing the latest computer technology may require added front office space. Each of these enhancements will not only improve patient treatment, but also reduce labor costs, improve conversion rates, and increase billing and collections for greater profitability.
- Staff effectiveness. Both clerical and clinical staff can show significant gains in productivity from operating in well-designed space. Moreover, staff productivity gains are further enhanced from the usual morale boost which accompanies a move to new office space.
Consider the Cost
While these profit-boosting enhancements are intriguing, doctors should not make a decision on moving into new office space without a detailed look at the costs involved. Doctors must not only review the facility cost itself, but also the cost of new equipment and other hidden costs associated with a new office such as moving, new stationery, telephones, etc. As long as interest rates on real estate and commercial loans remain low, the financing costs associated with an office move are quite low.
Making the Decision
Comparing the expected additional increase in practice profit with the additional investment required will provide the doctor with an analysis of return on investment. Once this has been accomplished, the doctor can determine if moving to a new office space represents a cost-effective investment. If the return appears to be attractive, the doctor should move forward with the move to avoid further opportunity losses.