Renting Rooms vs GP Income Split
So you have either already purchased, set up, or are thinking of purchasing a medical practice with more rooms than you can fill.
You would like to make the best use of these rooms however you’re not sure which direction to take. Should you:
- Rent out the rooms to other health professionals and secure some rental agreements, or
- Try to get a GP tenant doctor who will pay you a service fee on a fee-split basis?
The Best Option
In the vast majority of cases getting a GP tenant doctor in on a fee-split basis will be the most beneficial option for you and your practice.
Why is this the case when you could simply receive rent for your rooms for relatively ‘easy money’?
Having a GP tenant doctor on a fee-split basis means just that. The tenant doctor pays you a service fee for utilising the premises and the support staff which is based on their gross billings for a period.
How Does A Fee-Split Arrangement Work?
A common fee-split arrangement is 70/30 which means the GP tenant doctor pays 30% of their gross billings (plus GST) to your medical practice service entity. By way of example, if the GP tenant doctor bills $10,000 in gross medical fees, from that $10,000 the medical practice service entity will bill the GP tenant doctor 30% ie. $3,000 plus GST, with the remainder to be kept by the GP tenant doctor.
So if a GP tenant doctor bills $400,000 in a year, the service fee payable will be $120,000.
Contrast this to an allied health professional renting one of your rooms. They will probably pay at the most $500 per week, or $26,000 per year.
So you can see there is quite a difference between the two options.
Obviously an analysis between the two is not as straight-forward as just comparing the income, as the fee-split arrangement involves more management and staff resource than just renting a room to a health professional. However, given that you have a medical practice, you already have the infrastructure and support staff in place. You may have the capacity to include the additional work from the GP tenant doctor within your current infrastructure, or you may need to add some support staff, however the cost of that additional support will generally be lower than the additional income you will receive from the fee-split arrangement.
Discover personalised strategies to create the best outcomes for your medical practice. With a number of medical clients who have been with us for many years, our team at BLG Business Advisers have the experience to assist you in your industry. Take the next step and get in touch with our team online or by calling (02) 4229 2211 today.