Managing Your Practice: Answers to your questions about. . .

February 1, 2007
Scott D. Hayworth, MD

DR. HAYWORTH is President and Chief Executive Officer, Mount Kisco Medical Group, Mount Kisco, NY, and Clinical Assistant Professor of Obstetrics, Gynecology and Reproductive Sciences, Mount Sinai School of Medicine, New York, NY. He is also Consultant, V

Hiring a staff member's relatives; Should we purchase or rent office space?

Hiring a staff member's relatives

A This is a situation that arises commonly and is fraught with potential difficulties. One obvious question is what happens if the daughter's on-the-job performance is disappointing. If you have to dismiss her, your relationship with her mother will likely be permanently damaged. But if you decide instead to preserve your relationship with her mother (particularly if she has an important position within your staff, and you would like to retain her), then tolerating her daughter's deficiencies will play poorly with the rest of the staff. And for good reason. Even if the daughter does her job well, coworkers may feel she's received special treatment because of her mother's position within the practice.

On the other hand, if you have a large group practice with multiple departments, perhaps you can set a more liberal policy and hire children into departments that are completely independent from those of the parents. But if so, make sure that your employees understand from the outset what the rules are, and counsel them to be sensitive to the concerns of management and other staff members should their children be hired.

Should we purchase or rent office space?

Q My practice needs to move into a new office. Should we purchase a property or rent?

A Depending upon the particular situation, both options present potential advantages. First, think about the amount of space you need: Consider not only your current requirements but also what staff and services you plan to add in the future. Also keep in mind how long you plan to use the office space. If you'll only need it for 5 years or less, leasing is preferable. Unlike leasing, ownership of a facility allows you to control what is done with it; it provides you with equity; and it can also offer certain tax benefits. Your accountant can advise you regarding the tax ramifications of leasing versus purchasing, and this may influence your decision as well.

For the longer term, deciding to lease or purchase depends first upon whether or not you can afford to have a mortgage on a property of appropriate size. If you have the resources to cover a down payment, be sure to evaluate the local market to ensure that an investment in real estate will be wise. Key questions to answer include:

If the answers to these questions favor purchasing, consider establishing a separate financial entity to own the property; this will protect the investment if your practice is penalized in a lawsuit. Having a separate real-estate corporation also enables you to determine whether or not you want physicians who join your practice in the future to buy into the real estate.