Opening a second clinic? Here’s where most practices get it wrong
For many practice owners, opening a second clinic feels like the next logical step. The first location is operating well, patient demand is growing and expansion appears commercially sensible. In many cases, the second site is secured quickly once the right premises become available.
Many healthcare businesses underestimate that expansion changes the practice's legal and operational structure. A second clinic is rarely just “another location”. It often creates new governance issues, new financial risk exposure and new inconsistencies between how the practice operates and how its documentation is drafted.
One of the most common issues we see is practices simply replicating the structure used for their original practice without reassessing whether the arrangement is still appropriate. Existing Practitioner Services Agreements, governance processes, privacy frameworks and employment arrangements are often copied across sites without considering whether they still reflect operational reality.
This has become increasingly important in the current regulatory environment. State Revenue Offices continue to scrutinise healthcare practice structures following the Thomas and Naaz payroll tax decision, while Fair Work scrutiny around sham contracting and independent practitioner arrangements has also increased. At the same time, privacy reforms and growing expectations around healthcare governance mean multi-site practices are expected to operate with greater consistency and oversight.
Before opening a second clinic, practice owners should approach the expansion with the same level of planning and structural review that went into establishing the original practice; there are several areas worth reviewing carefully.
1. Review whether your practice structure still makes sense
A structure that worked well for one clinic may not be appropriate once multiple locations are involved.
Many practices expand using the same entity, same operational arrangements and same financial systems without considering whether the additional practice changes risk exposure. Over time, this can create unnecessary complexity around liability, ownership, taxation and governance.
Some of the issues practice owners should consider include:
- whether both clinics should operate through the same entity
- whether service entities and operating entities remain appropriate
- whether ownership structures still reflect the commercial intentions of the directors and /or shareholders
- whether there is adequate separation between operational risk across locations
This is particularly important where multiple owners are involved, where ownership differs across sites, or where future succession planning is likely. A second practice often accelerates conversations around equity, management responsibilities and long-term business strategy that were less pressing in a single-site practice.
Many clinics only realise their governance documentation is incomplete once expansion begins.
2. Don’t treat the lease as just a commercial negotiation
Commonly, practices enter into a lease agreement to secure exclusive rights to occupy their clinic premises. Commercial leases often impose significant operational and financial obligations and, once signed, typically commit the owners for a number of years.
There are also many practical considerations involved in establishing a new premises, including parking availability, patient flow, pathology arrangements, disability access, signage rights and neighbouring tenants. Each of these factors can materially impact both practice operations, the suitability and terms of the lease arrangement.
Where allied health providers, pathology providers or other practitioners will use part of, or a room in the premises, the practice should consider whether separate licence arrangements are implemented to properly document occupancy and facility use.
Healthcare leasing disputes are becoming more common, particularly where clinics expand quickly without carefully reviewing how the lease interacts with the operational model of the practice.
3. Reassess your Practitioner Services Agreements before copying them across sites
One of the most important steps when opening a second practice is reviewing how the practitioner arrangements are legally structured.
Many practices operating with an independent practitioner model simply duplicate their existing Practitioner Services Agreements for the new location. The difficulty is that business operations often evolve as start-up practices stabilise, while the agreements remain unchanged.
As practices expand, the gap between the written agreement and the actual working reality can become more obvious. This is particularly relevant following the changes to the Closing Loopholes Act No.2 2024 and the Thomas and Naaz payroll tax decision and ongoing State Revenue Office scrutiny of medical practice structures. While each practice agreement depends on its own circumstances, regulators are increasingly examining whether the operational reality aligns with the documented practitioner engagement structure.
Some warning signs include:
- centralised control across multiple sites
- practitioners working under highly standardised operational requirements
- inconsistent billing and fee collection processes
- restrictive rostering or leave approval processes
- agreements drafted several years ago without review
- practitioner arrangements varying significantly between locations
Practices should also remain conscious of broader Fair Work scrutiny around sham contracting risks. Clinics seeking to operate an independent practitioner model should ensure the structure is implemented consistently and supported by appropriate documentation and operational processes.
For many practices, expansion is the point where existing agreements need a comprehensive review rather than simple duplication.
4. Clarify who is actually managing the second clinic
Legal governance often becomes more complicated once there is more than one location.
In a single-site clinic, decision-making may be slightly more informal. Practice owners are physically present, operational issues are addressed quickly and staff understand reporting lines naturally.
That becomes harder once management responsibilities are spread across multiple clinics.
Without clear delegation structures and ownership agreements in place, practices can experience:
- inconsistent operational decisions
- unclear authority limits
- staff confusion between sites
- governance gaps around approvals and financial decisions
- increased director frustration and operational inefficiency
This is particularly important where practice managers, senior practitioners or operational leads are being given increased authority.
A second clinic is often the point where practices benefit from introducing more formal governance systems, including delegation frameworks, documented authority structures and clearer reporting processes.
5. Review how patient records and privacy systems operate across locations
Privacy compliance becomes significantly more important in a multi-site environment.
Many clinics assume that using the same clinical software across locations is sufficient. In reality, expansion often creates additional risk around staff access permissions, data sharing, remote access, device usage and inconsistent privacy procedures between clinics.
Recent privacy reforms and increasing regulatory focus mean practices should carefully assess whether their privacy documentation and operational systems remain appropriate as the business grows.
Practice owners should consider:
- who can access records across sites
- whether staff access levels are properly limited
- how patient information is shared internally
- whether remote work arrangements create additional risk
- Whether the Privacy Policy reflect actual operational practices
- how the clinic would respond to a notifiable data breach
Expansion frequently exposes privacy procedures that were previously managed informally rather than systematically.
6. Don’t overlook employment structure issues
Opening a second clinic often changes staffing arrangements significantly.
Some practices move from a relatively small team to layered management structures with multiple practice managers, practitioners and administrative staff across locations. Others introduce hybrid or remote work arrangements to support operations between clinics.
This can expose weaknesses in existing employment agreements and workplace policies.
Common issues include:
- outdated employment contracts
- inconsistent staff entitlements between locations
- unclear reporting structures
- inadequate confidentiality protections
- remote work arrangements without formal policies
- confusion between employee and independent practitioner roles
As staffing structures become more sophisticated, employment documentation needs to evolve to reflect it.
7. Consider whether your ownership and succession planning are still appropriate
Expansion often changes the long-term value and complexity of the business.
What begins as a founder-operated clinic may evolve into a larger healthcare enterprise with multiple directors, investors or future sale opportunities. Despite this, many practices still operate without updated shareholder arrangements or clear succession planning.
This can become problematic if:
- directors have different expectations around growth
- ownership contributions are unequal
- family succession is anticipated
- future investors may be introduced
- one owner intends to reduce involvement over time
Opening a second clinic is often the right time to revisit shareholder agreements and broader succession planning before future disputes arise.
Why periodic agreement reviews matter
For healthcare practices, agreements do far more than document legal relationships. They shape the operational structure of the clinic, influence financial flows and affect how regulators assess the practice.
As practices expand into multi-site operations, legal and operational review often fails to keep pace with growth. Documentation originally prepared for a single-site practice may no longer reflect how the business actually operates, particularly in relation to practitioner engagement arrangements, governance structures, employment models and privacy systems. Over time, this can create inconsistencies that increase payroll tax exposure, governance risk and operational inefficiencies across the practice.
Opening additional clinics is often a natural point to reassess whether the practice structure, ownership arrangements and operational systems remain fit for purpose. Taking the time to review these areas early can help create a stronger foundation for sustainable growth while strengthening the long-term value of the business.
If you are planning to open a second clinic, You Legal can assist with reviewing your commercial lease, practice structure, Employment agreements, Privacy Policy, Practitioner Services Agreements, governance arrangements and expansion documentation; contact us today. Many growing healthcare businesses also undertake a Practice Independent Practitioner Audit or Medical Practice Risk Audit before expanding into multiple locations.
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