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Maximising the return from your surgery premises

How can practices make sure their premises is performing well financially? Andrew Hues explains.

Investigate opportunities to rent surplus space (Picture: iStock)
Investigate opportunities to rent surplus space (Picture: iStock)

The return on investment for a property comes from the combination of income generation against costs. The income stream for most GP surgery owners is in essence through the rent reimbursement they receive in connection with their GMS or PMS contract.

The rent reimbursement will be subject to triennial reviews and consequently it is important to ensure that this is at the correct level.

However in the current climate rental growth has become limited and practices should consider other opportunities that their premises may provide.

Best use of surplus space

Where surplus space exists within the building that is excluded from rent reimbursement this may provide opportunities for providing additional services and generating extra income.

Where surplus land is available there may be scope for an extension or development, which could enhance the return from the property further.

Such opportunities may not only improve the income return from the property but also improve the range of services offered to patients and enhance the practice’s profile.

The range of complementary services is broad and commercially the most attractive opportunity is the possible co-location with a pharmacy operator.

Renting to a pharmacy

For a pharmacy, being in close proximity to a practice with the increased possibility of securing a high percentage of the prescriptions issued, is obviously very attractive. Consequently the rent that it may be willing to pay will be substantially higher than many other potential tenants.

The difficulty of accommodating a pharmacy may relate to obtaining the necessary pharmacy licence and in effect the ‘control of entry’ to the pharmacy market.

Therefore, relocation of an existing pharmacy potentially provides a greater opportunity if the premises and practice can meet the pharmacy’s needs.

Other potential tenants

In terms of other providers, dentistry could be an alternative. However, the relationship between a dentist and doctor is not as intrinsic as perhaps for other providers, such as physiotherapy, chiropody, osteopathy, where referral from the practice is more likely – and which also means the surgery is providing a more comprehensive care package for the patient.

Nevertheless there are various examples of GPs and dentists sharing premises, or even entering into partnership together.  

Demand for accommodation from some other services may not be sufficient for an individual provider to make a commitment to a lease, whereas a dentist is likely to be willing to take a lease on suitable accommodation.

Where another provider or service is unwilling to commit to a lease, practices could grant occupational licences to a range of providers taking various sessions during the surgery’s opening hours and possibly beyond. This would allow the practice to ensure the building was used to its full capacity all of the time.

Space already approved for reimbursement

Accommodation that is underused, but approved for reimbursement purposes, may provide opportunities for a practice to bid for additional NHS services. The opportunities in this respect are likely to increase as services move out of hospitals and into the community.

Cutting running costs

The above ideas all relate to potential income generation, but consideration should also be given to mitigating the running costs of your building.

Good management of the property can make a significant impact on returns. Minor repairs addressed at an early stage can mitigate substantial expenditure if more significant problems develop later. Therefore regular maintenance should be undertaken.

Other running costs, for example those relating to contracts with electrical and gas suppliers, should be regularly reviewed. Consideration should be given to installing energy saving equipment and the efficient use of heating and lighting.  

There may also be scope to consider alternative power sources, with the possibility of retro fitting solar panels or PV cells, green energy and rainwater harvesting, for example.

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