• The Satellite Office: If You Build It, Will They Come?

    By Chris McDonagh, Associate Editor

    This article is from May 2006 and may contain outdated material.

    The launch of a satellite office could provide a welcome boost to your bottom line, or it might bring you nothing but worry lines—so what should your practice do?

    Start by Asking 10 Questions

    Why open a satellite office? “It is imperative that you have a clear understanding of your objectives,” said Ann Hulett, CMPE, COE, chairwoman of the AAOE’s board of directors. “For instance, if you want to increase practice volume, do you plan to do so by expanding into an underserved area? Or by attracting patients away from other providers? If you want to increase your personal surgical volume, do you plan to do that by increasing referrals for surgical evaluation from referring doctors in the area?” Without clear objectives, you won’t be able to make informed judgments on the questions below.

    Will there be enough patients? To find out how many people fall within a particular age or income range, you can go online and search the U.S. Census Bureau’s data (see “Demographics by Zip Code”). You can then compare this data to the existing number of eye care providers in the area. However, “in urban settings, it can be difficult to draw service area boundaries,” said Ms. Hulett, who works for an eye care group in Pueblo, Colo., that has eight satellite offices. You also may be able to get useful data from your local government. Some city and county governments have planning departments that publish population projections. These generally look five, 10 and 20 years into the future. The published data will probably take a city- or countywide perspective on growth, but you may be able to get Zip code–level information if you put a call in to the department’s data person. Some metropolitan areas also will have a transportation planning organization that has similar data.

    What expectations do these patients have? “Suppose, for instance, that your objective is to increase your surgical volume and you perform surgery at your own ASC, then you need to have an understanding of the patient’s willingness to travel to your facility for surgery,” said Ms. Hulett. “If the established pattern is for them to have their surgery in an already established location, you then have to decide if you are willing to operate at that place.”

    What about existing providers—will they thwart you or support you? “This gets back to your objectives,” said Ms. Hulett. “If you want to increase surgical referrals, then communications with the referral sources are important. If you want to have a full-service practice location that includes an optical shop, then you need to evaluate current referral patterns from optometrists for potential loss of referrals.” Ron Rosenberg, PA, MPH, a consultant based in Sausalito, Calif., suggested merging an existing provider into your practice as another strategic option for expanding your practice to an additional location. “This is particularly worth thinking about if the physician in that location is close to retirement,” he said.

    How will you staff the office? “Understanding what you most want to accomplish will enable you to determine what provider resources will be used to staff the office,” said Ms. Hulett. “Is the existing physician going to rotate to the new office on certain days? If so, how will you accommodate the patients that the physician is currently seeing on those days? This may, or may not, increase practice volume. If an optometrist is engaged to serve the office on a consistent basis, this might increase the profitability of your optical shop,” she said. If you already planned to add a new Eye M.D., Mr. Rosenberg said that, “one strategy is to combine the new office decision with the process of bringing that person on. A new location with additional patients could help to ‘kick start’ the new physician’s practice.”

    What about office hours—full-time or part-time? To minimize overhead, some practices initially staff the satellite office part-time with a view to going full-time if there are enough patients. This strategy might work if, say, you are rotating surgical services, but not for a full-service eye care office. “And if the office includes an optical shop, patient service will require the office to be open full-time, which means you may have downtime for the optician and a front desk staff person,” said Ms. Hulett. “In our practice, the most profitable satellite locations are the ones that can accommodate two physicians. This drives the efficiency of the office way up from the ones that are served only on a part-time basis. An office with a provider FTE [full-time equivalent] of between one and two and an optical shop can significantly enhance practice volume and physician bottom line.”

    What will the office cost? “You need to be realistic about what types of service you wish to provide in this location,” said Ms. Hulett. “The cost ramifications of specialty equipment and diagnostic instrumentation can greatly affect the viability of the office. A common mistake is to underestimate the equipment that you will find yourself wanting in order to provide the standard of care you are accustomed to.” And while some of the costs might be obvious—such as leasehold improvements, advertising and new equipment—unexpected expenditures may await down the line. As one example, Ms. Hulett warned that the trend toward electronic medical records will eventually make real-time connectivity a necessity for a functioning office. “This involves dedicated frame-relay, T-1 or, at a minimum, DSL lines, which can be $400/month, plus equipment such as card scanners and document scanners.”

    Can you expect to make a profit? “It is important to understand that your overhead percentage is likely to increase with the addition of satellite offices,” said Ms. Hulett. “This is because secondary locations do not normally run as efficiently as the main location—though this doesn’t necessarily mean that the bottom line will not be greatly enhanced. In estimating the proposed office’s likely income, the current revenue-per-encounter statistic should be applied to a realistic number of patient visits. My experience is that it takes a minimum of eight months for the new office to break even. This can vary depending on whether the provider is new or an existing one with a new location.”

    Are your management protocols ready for a satellite office? “Don’t underestimate the increased amount of administrative infrastructure that comes with multiple offices—which is huge,” said Ms. Hulett. To minimize, for instance, the risk of embezzlement, a formalized system of checks and balances becomes even more important once you have staff at more than one location.

    Where will you find the time? “How long will you as a physician be willing to travel to the secondary location? You may tire and find yourself left with an established business operation and not enough physician resources to support it,” warned Ms. Hulett. “Don’t underestimate the human toll on both the physician provider and staff.”

    Demographic by Zip Code

    For results of the 2000 national census, visit www.factfinder.census.gov and follow a nine-step process. To pull data on income levels, for instance, you would 1) select “Data Sets” from the left-hand column, 2) for income, select “Summary File 3” and “Quick Tables,” 3) from the “Geographic Type” pull-down menu, select the 5-digit Zip code option, 4) from the “Select a 3-digit Zip” pull-down menu, select the first three digits of your Zip code, 5) from the 5-digit Zip pull-down menu, highlight the appropriate Zip code, 6) select “Add,” 7) select “Next,” 8) select the appropriate table and 9) select “Add,” then “Show Results.” Other data are available in Summary Files 1 and 2.