An OB-GYN who has years of practice ownership experience spoke on "The White Coat Investor" podcast about what it takes to build an outpatient surgical center from the ground up.
Dr. L, whose full name wasn't disclosed to maintain anonymity, discussed four topics:
1. Variable and fixed expenses. "One variable that's regional is the real estate. The more fixed costs are the equipment because those are more national types of costs," Dr. L said. "Depending on the specialty of the center, that also impacts the type of equipment you're going to use. If you have a lot of orthopedists and neurosurgeons, a lot of their equipment and hardware is pricier than [what] the [OB-GYNs] are going to use."
2. Single-specialty startup costs. "We initially were a single-specialty GYN, and our startup cost just for the equipment [was] upwards of $200,000 to $300,000. The physical shell [was] upwards of $200,000, and depending on how much you want to make your surgery center look like a spa, the facelift costs could be significant. For ours, it was approximately $2 million [for the] renovation. Adding that all together, that's [around] $2.5 million for a single-specialty."
3. Adding specialties. "Since we've been in practice, we've introduced other specialties — general surgery, urogynecology and urology — and, luckily, a lot of instruments they use are similar to what we already have," Dr. L said. "That [enabled] easier integration. As more specialties are introduced and equipment needs change, costs are going to go up."
4. Securing funding. "We had a small business loan that we applied for. The rates might be different than what they were 10 years ago. I believe at the time when we first did the original renovation, our rate was [around] 5 to 6 percent, but it was a variable rate, so it did change with time," he said. "All of the partners individually had to sign for the loan to guarantee it."