“Should we expand our practice?” That’s a question to be welcomed, not feared. It’s a good thing; it means your practice is thriving and growing. Unfortunately, this one seemingly simple query opens a floodgate of questions that need to be answered. Speak with any number of veteran ophthalmologists who have “grown” their practices and you will undoubtedly hear enough stories about success and failure, good preparation and poor planning to make your head spin. Expansion is a serious, time-consuming undertaking. In this article, I’m not going to show you how to plan, open, and run a successful satellite office. Rather, my goal is to help you ask (and answer!) the right questions before you proceed with the project. Proper due diligence should be Phase I of any expansion project; it will increase your chances for success in an expeditious, efficient manner.
Location, Location, Location
Of all the key components that play into opening a successful satellite office, the most important question to ask is also the most basic: Where is it going to be? The answer lies in asking more questions: How far should it be from the main office? Who is going to staff it? How far will staff have to travel from their homes? From the main office? Should doctors or staff members work split shifts at both locations?
After you answer these basic, practice-related questions, you can concentrate on five key location issues that will impact your decision: census data, competition, service line offerings, household income and home/industry growth.
#1: Census Data
By visiting the website of the U.S. Census Bureau (census.gov), you can retrieve census data by ZIP code. You want to see how many people live in the primary ZIP code areas surrounding your proposed location. Medicare utilization data reveals that a community of approximately 20,000 population can support one full-time medical-surgical ophthalmologist. It’s even possible to compare over-65 and under-65 age percentages. Total your service area ZIP codes to determine the number of patient lives you could potentially service. Analyze that data to determine if the breakdown of population by age fits with your proposed service offering. Be aware that more commercial lives may mean more private payers and perhaps lower reimbursement. You can also expect that surgical volume may be lower. However, such a demographic may present an opportunity for a more retail approach, e.g., refractive and cosmetic surgery or increased opportunity for optical sales. An older population (i.e., over 65) will be more suited to a traditional ophthalmic practice, with more cataracts, glaucoma and retinal disease. It’s important to understand which population you’re planning to target to help you decide if it’s the right move.
Once you have identified a community based on its proximity to your office and patient potential, it is important to find out if any of your colleagues (competitors) are already serving the area or contemplating such a course of action. Your best resource for this information is your local pharmaceutical and surgical representatives. They can provide insights into your competition’s schedules and patient volume, and may even be able to tell you if there is an opportunity based on a perceived lack of patient satisfaction or an unmet need.
Key questions you may want to ask are: What services do competitors provide now and potentially? What competitor services are superior to or distinct from your practice? What competitor’s services (if any) have distinct weaknesses?
(Note: Use the 20,000-population rule to determine if there is room for your practice in a new location.)
#3: Service Line Offering
As you survey the proposed community and competitive environment, one key factor may allow you to become an instant player in a new market—offering a unique service line, or one not yet provided. Refractive and cosmetics immediately come to mind, but don’t underestimate plastics, glaucoma, retina or even a retail optical offering.
Introducing a new service line as the “hook” to attract patients to your new office location likely will require allocating additional marketing and advertising. Plan for this potential financial impact in your budget. Also, understand that the age of the population in your new location will determine the relative success or failure of a unique service line. If perhaps, you are planning to introduce plastics into a community, middle-aged professionals may appreciate the availability of Botox; seniors may be attracted to blepharoplasty and other pathology-related procedures.
#4: Household Income
While most patients have health insurance (e.g., Medicare, private insurer or Medicaid), you will want to have some sense of the overall financial status of the community. Higher income may potentially bring added revenue to fee-for-service and retail product lines, while a lower average household income may bring higher ASC facility reimbursement for surgical procedures and greater pathology. Household income is not a deal-breaker when deciding on location, but it is a factor to consider.
#5: Home Growth/Industry Growth
Opening a satellite office in an area with little or no competition, a fairly large population, and close to your main location will be bolstered by new homes and commercial development. If you have friends or colleagues in real estate or local government, tap them for information about what lies ahead for the community. Find out if any new housing developments are going up in the near future. Are new retirement communities planned? How about nursing homes? Are new schools being built (think optical and pediatrics)? Are developers buying land in the area? Are any “big name” corporations coming in with new headquarters or regional offices?
The more accurate, detailed information you gather about opportunities for growth, the easier it will be to build a compelling argument to support adding a satellite location to your practice.
Mr. Rienzo is a senior eye care business advisor for Allergan, Inc. Contact him at Rienzo_James@allergan.com.