In today’s world your local medical centre looks a lot different than it did 20 or 30 years ago.  It is very rare to find a solo GP in private practice.  Today groups of GPs are choosing to work together and big business is now running many GP super clinics.  Some people find this fact very disheartening.  The purpose of this blog post is to explain the commercial realities of running a medical centre and attempt to explain this modern-day phenomenon.

How Much Does It Cost To Set-Up A Medical Centre?

The cost of setting up a medical centre will range from $200k-$250k if you want it to be a multi-GP practice and want it to be fully accredited.  I learnt this the hard way.  So what are some of the main costs.

(1) Fit Out ($80,000)

(2) Accreditation ($30,000)

(3) Computer/ Telephones ($20,000)

(4) Medical Equipment ($20,000)

(5) Advertising ($20,000)

(6) Recruitment of GPs ($15,000)

Medical practices are very strong businesses to be in once they are established but to set one up requires all of these steps before the GPs can start seeing any patients.  All of these costs need to be borne within about a 6-month period.  So unless you as the owner have significant savings, you are probably going to have to get a loan.  I personally was able to get a home equity loan of $175,000 and had a business partner who I was able to share costs with.  Some of these costs (e.g., accreditation I was able to spread over a 9-month period.  And I was able to avoid paying any recruitment costs because I met GPs at conferences.

With accreditation, it is worth spending the money because the Australian Government pays you significant amounts of money every year to be an Accredited General Practice.  We estimated that we will receive somewhere between $50,000-$100,000 every year from the government once we set up the business.

How Much Does It Cost To Run A Medical Centre?

Your local Medical Centre also costs a significant amount of money to run as well.  Here is a breakdown of some of the main costs

(1) Lease ($50,000-$100,000 PA)

(2) Wages ($150,000 PA)

(3) Marketing ($10,000 PA)

(4) Medical Equipment $10000 PA)

That is almost $250,000/ year for all the major expenses.  There are a lot of smaller expenses totalling at least $50,000 that hasn’t been computed.  This is why very few medical practices are solo GPs practices.  They simply can’t afford to be in business and provide a high level of service to their patients.  This is why most practices will have 3 or 4 GPs plus pathology plus allied health in the centre.  Suddenly a medical centre is no longer a small operation.  It is now a medium sized small business with between 5-10 people working in the business.

How Much Money Do Medical Centres Make?

The general rule of thumb is that 1 full time GP should be making the business $80,000/ year in fees.  This is based on the 70/30 % split.  A business will charge a GP 30% of their earnings to go towards the running of the business.  Some top earning GPs will make their medical centres up to $100,000/ year.  This is based on seeing 3-4 patients per hour and working a 5 day week and taking 6 weeks holiday every year.  If you have 4 full-time GPs working then the business should be generated somewhere between $300,000 and $400,000 per year in fees from GPs.

I set up a Medical practice about 1 year ago now and we currently have 1.5 full time GPs working.  We expect to grow to 4 full time GPs by the end of next year.  Rome definitely wasn’t built in a day and any good medical centre should expect to expand slowly because there is a lot of infrastructure and team work needed for every new GP that starts at a medical centre.

Once you have 3 or 4 full time GPs then you can attract a pathology company to rent out a room in the medical centre.  This will generate the medical centre approximately $50,000 in revenue, depending on how many patients get referred for blood tests.  Then you will be able to employ a practice nurse who will help the GPs to be more efficient.

The final step is attracting some good quality allied health practitioners to work in the medical centre as well.  Most medical centres will have between 1-2 rooms to be hired out to allied health.  Each individual room will attract $500/ week in rental payments depending on how many clients the allied health practitioners see.

All in all, once a medical centre is up and running it should expect to make approximately $500,000 in revenue and have expenses of no more than $250,000.  This leaves a profit of $250,000 for the owners to take home.  If done correctly from start up to reaching this goal should take approximately 3 years, assuming no major mistakes are made.

In summary, starting a medical centre is definitely a long-term plan and not for the faint hearted.  There are a lot of stressors in the early days.  However, once the centre gets established, with all the components in place, then it is a relatively easy business to run.  It is probably the most stable business to be in.  Why because the government literally pays your clients to come and to keep your door open.  And people will always get sick.  The decision to run a medical practice is also good for the community and society. If you need to see a doctor in Stafford Brisbane then visit this link.