Make your office work for you

Rent or own? Solo or group? You can't put a price on the right choice

Deciding where to set up your practice — and with whom — is never easy. But do it right and you'll set yourself on the road to providing good, efficient care, avoiding burnout and jacking up your earning potential. And don't worry: if you didn't get it right the first time, it's never too late to shake things up and get your practice running as smoothly as it should.

RENT vs OWN
An overwhelming majority of our readers have opted to lease rather than buy their office space. Fully 75% of GPs and 80% of specialists are renters.

For Dr Alina Constantin, a GP who recently relocated to Canmore, AB, from Saskatchewan, the decision was easy. "It would be one thing if I could afford a whole building, but buying an office just wouldn't make sense. There isn't a whole lot of equity buildup," she says. And when you work in group practice as she does, being a property owner can be just one more potential source of conflict.

Renting has another huge benefit: as far as most landlords are concerned you're a primo tenant, so you're in a position to negotiate a great lease (for more, see "How to get the most out of a landlord," October 30, 2005, Vol 2, No 18).

Of course, that doesn't mean nothing good can come of investing in real estate. Take Dr William Potvin, a GP from Carleton Place, ON. Three years ago, he was offered a deal on an office condo that he just couldn't refuse. "I hadn't really considered the possibility before, it just sort of happened," he said. Though he was a little overwhelmed at first by the cost of commercial ownership — not to mention the $12,500 in renovations he had to put in — it turned out to be a great financial decision for him. "My mortgage payment ended up being lower than my rent, and when I retire I'll have some equity," he says. And by putting the office in his wife's name and paying rent to her, he lowers his income and saves money on his taxes.

The vast majority of GPs have opted to practise in a stand-alone clinic or one in a medical centre, while specialists are more likely to be based in a hospital. A further 15% of specialists have their offices at home, compared to only 5% of GPs.

DOCTORS, INC
"Physicians are allowed to incorporate in every province but Quebec," says Michel P Laliberté, an accountant who consults for MD Management Ltd, the financial arm of the CMA.

Final restrictions on physician incorporation were lifted in Ontario in January, bringing rules there in line with the rest of the country.

But so far, Canada's physicians are treading carefully when it comes to putting Inc after their names. Our survey shows that only 2% of GPs have so far taken the plunge. Specialists are jumping on board much faster, with an incorporation rate of 14%. Mr Laliberté says most doctors who opt for incorporation will see significant tax savings almost immediately. Take Dr John Vu, a GP from Ajax, ON, who incorporated six months ago. He couldn't be happier. "The bottom line is that there's more money coming in. It took a few thousand to set up, but I've already come into that money and then some."

The key is taxation, says Mr Laliberté. "In BC for example, the top rate of personal income tax is 43.7%," he explains. "In a corporation, you pay 22.02% on the first $300,000, as long as it stays in the company." He adds that all money taken out of the firm for personal use is taxed at the personal rate.

Exactly how much you save depends on how much you manage to leave in the corporation — which could explain why more high-earning specialists are choosing this route. If you're considering incorporating your practice, Mr Laliberté says the key is to consult with a lawyer and an accountant who know what they're doing.

GROUP vs SOLO
Despite the provinces' best efforts to urge you into group practice, solo numbers remained virtually unchanged from last year: 36% of this year's GP respondents are in solo practice, compared to 34% in 2005. Specialists are even more likely to go it alone, with 53% in solo practice. It seems that avoiding the potential conflict and frustration of group practice still mean more to many physicians than sharing expenses and splitting on-calls.

Rural GP Dr Bev Karras is one doc who's decided there's strength in numbers. "Some might prefer to have more control of their practice but for me, the collaboration is comfortable and gives me more flexibility," she says. In smaller communities like hers (Nipawyn, SK, population 5,000) being a team player is practically a must.

RURAL vs URBAN
Dr Karras isn't alone. According to our survey, 27% of Canadian doctors (including GPs and specialists) work in rural communities of less than 50,000, and most of them are in groups, says Dr Michael Jong, a Labrador GP and president of the Society of Rural Physicians of Canada.

Even though they tend to congregate, the greatest challenge facing rural docs is still that there are just too few of them to go around. Dr Jong says that despite the financial incentives many rural areas are now offering to attract physicians, the doctor/patient ratio hasn't budged since 1998. Canadian towns with populations under 10,000 account for 22% of the population, but they're served by just 10% of our physicians.