Growing Pains | Challenges for Growing Medical Practices

Going through a growth phase in your medical practice? Then you will be interested in how to identify and resolve any potential challenges that can occur with incremental, sudden or significant growth.

There are three main types of business growth that we see medical practices transition through:

Organic growth
Strategic growth
Opportunistic growth

You may be experiencing organic growth. That is, you did not anticipate an influx of new patients, however, due to community need, you are taking steps to accommodate the demand.

If not organic growth, then perhaps you have been strategic in driving growth. Your practice and team have been following a plan and rolling it out over time. The growth is anticipated and your team is prepared.

Alternatively, the growth your practice is experiencing may be opportunistic growth. That is, an unexpected opportunity has presented itself, and you and your team are running with it. For example, a building too good to pass by has come up for sale or for lease. This property will accommodate more patients, or you wish to sublease to other, complementary services.

How can you successfully navigate the growth of your medical practice?

However this growth eventuates for a medical practice, to ensure that it is a smooth process and the ‘growing pains’ can be reduced or minimised, there are some key considerations to be alert to.

Growing Pain 1: New team members

A number of issues can arise when the growth of a practice is unplanned or sudden. One of these is the need to hire staff quickly. Every practice owner or manager will realise that having the right team is absolutely crucial to a business and to staff morale in general. If you feel you need to hire someone urgently, you may shortcut your ordinary hiring processes. For instance, you may ignore or overlook any warning signs and find you have ended up with someone that does not complement your team.

Growing Pain 2: Space efficiency

It may also be that, in the rush to secure a new building or a new area of the practice set-up, you do not have the time to plan for the most effective way to utilise your space. When this is the case, it can be both costly and time-consuming to have to rearrange or reformat the practice later, to make better use of the space.

Growing Pain 3: Transitioning

It can be stressful and overwhelming to run a practice as it’s transitioning. Particularly if you or the Practice Manager has no previous experience or training in how to manage it. This can be especially difficult when you still need your patients to be the main focus. It is normal to feel a little out of your depth when going through the transition.

Given that the growth will mean you will be dealing with bigger expenses and having to consider an increasing number of factors, getting advice about how to best manage the growth is worthwhile, even if only for peace of mind that you are on track.

Growing Pain 4: Outgrowing your existing structure

Your business structure, like your business plan, may need to change in order to keep up with the growth of your practice and to minimise risks as well as minimise the tax you pay. Options to consider include setting up a Partnership or Company or creating a Unit Trust. Business structure is something you should discuss with your accountant, as they will advise what will be the right fit for your practice and future plans.

If you do make changes to the structure of your business, and you have more than one shareholder, you will need a Shareholder’s Agreement. This is the contract between your business entity and the shareholders or unitholders.

Growing Pain 5: Lease limitations

If you currently have a lease that you wish to renegotiate or terminate, or you have found a new location and are about to sign a new lease, it is important to understand the effect of the terms of the lease. To ensure your understanding, it is a good idea to have any lease reviewed by a specialist who can bring to your attention relevant dates, hidden costs and your obligations under the lease.

It is critical to be aware of the timing clauses in your lease, as there are often set periods to apply to extend a lease. It may be that if a landlord has other plans for the location, he or she may not alert you of your ability to obtain an extension to the lease before any deadline has passed. This can be an issue for practice owners when a certain location is essential to your plans for your practice.

Growing Pain 6: Lawful employee arrangements

You should make sure there are clear agreements in place for any staff. Initially, this may only include a receptionist or practice manager, but it may also include nurses and other doctors. You may wish to consider Individual Flexibility Arrangements for your nurses. These change the clauses in a registered employment agreement or Award to better match the needs of both employees and employer. Any such arrangement will need to be carefully drafted and clearly documented.

As your practice grows, you may wish to bring other doctors into the practice. At that point, you will need to consider whether you will be hiring these doctors as employees, or engaging them as independent contractors. It is important to be clear on the nature of the arrangement you have put in place and to ensure that it does not offend any tax laws, such as payroll tax.

Growing Pain 7: Subleasing space

If you have space, subleasing can be a way of increasing your revenue and regulating your growth. It has become common for medical practices to rent space to allied health practitioners or pathology services. You will need to check that your lease allows for subleasing and consider what other businesses will complement your practice.

Growing Pain 8: Advertising constraints

When you have plans to grow and expand, or you see a drop in business, advertising your practice is commonly part of the strategy to ensure the financial health of the practice.

As you may know, advertising of medical practices is regulated by the Australian Health Practitioner Regulation Agency (AHPRA) and the National Boards, and they take a proactive approach to ensuring compliance. It is therefore important that you carefully consider the implications of any advertising you do and ensure it complies with the legislation and guidelines. We have an Advertising Framework to assist your team with this.

These growing pains are just some considerations growing medical practices should be aware of. There are many elements that can have an impact on your practice, your people and your profitability. Growing too fast, or without the right plan, often puts high levels of pressure on staff and can cause damage to a practice’s reputation.

Regardless of the growth you are experiencing, or what stage your practice is at, it is always a smoother process when advice is sought early on, and a comprehensive plan can aid the growth you are experiencing or planning for.

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We are trusted advisors for many thriving medical practices. With experience in all aspects of growing medical practices, we assist practices that are navigating growth challenges as well as assist in developing a strategic plan for future growth. Arrange a time to meet with our advisors by connecting with us here.

Sarah BartholomeuszFebruary 13, 2022