You're Picking Your Location With the Wrong Data

Most physician groups negotiate hard on rent. They push back on the tenant improvement allowance. They argue over parking ratios and signage rights.

Then they sign a lease based on rooftop counts and median household income. The same inputs a coffee chain uses to pick a corner.

For a medical practice, that's a problem.

What demographics actually tell you

Population density tells you people live nearby. Traffic counts tell you cars pass by. Median household income tells you what the neighborhood earns.

None of it tells you whether anyone in that ZIP code needs what you do. Or whether six other physicians in your specialty are already serving them.

Real estate is the second-largest cost in most practices, right behind payroll. It's one of the few costs you can control without touching patient care. Getting it wrong is expensive in a way that compounds over a three-to-five year lease term.

Medicine has a better dataset yet most practices never use it for real estate

CPT, DRG, and ICD-10 codes show what a population actually needs and uses. They show what's being treated at every address in your market, and where demand is going unserved.

That's the data that should drive a location decision.

A cardiology group doesn't need foot traffic. It needs to know how much cardiovascular procedure volume sits within a 20-minute drive of a candidate address, and how many cardiologists are already billing for it. A dermatology practice doesn't need a shiny building. It needs to know whether the market around that building is already saturated, or whether patients are driving 45 minutes because nobody closer is serving them.

Rent is only half the question. The other half is whether the right patients are close enough to fill the schedule.

The information gap is real and it's widening

The share of physicians in private practice fell from 60.1% in 2012 to 42.2% in 2024, according to the American Medical Association. That's not a coincidence. Every time a non-hospital-affiliated practice signs a lease without reading the market, or expands into a location that looked good on a demographic report, the odds shift a little further toward the buyers and health systems working from the full picture.

Private equity sees the billing data for the entire market before it makes an offer. It knows what's being treated across every address, where demand is going unserved, and what the competitive landscape looks like at the procedure level. The practice on the other side of the table is working from its own numbers alone.

That gap shows up in lease negotiations, in expansion decisions, and in exit multiples.

Three questions your location decision should answer

Before you sign, you should know:

1. How much unmet demand for your specific procedures sits within your draw area? Not population. Actual procedure volume against actual supply.

2. How many competitors in your specialty are already billing those codes within a realistic drive time? Not specialty headcounts. Code-level competitive density.

3. Does the payer mix around that address support your model? Volume means nothing if the underlying payer distribution doesn't work for how you practice.

Most non-hospital-affiliated practices go into a lease without any of this. MedRECalc was built to change that.

Author

David Rutson

Founder & Principal Advisor • Globe Medical Realty Advisors

Represented independent physicians and non-hospital-owned groups exclusively for over 25 years across 48 states.