Why independent practices need to see their market before signing another lease

Site neutrality is about to raise the stakes for every specialty.

When private equity firms buy primary care practices, those practices bill for about 30% more services, add staff and see more patients. This isn't anecdotal. Researchers at Brown University documented the pattern in a Health Affairs study this May, tracking 225 practices acquired between 2016 and 2022. The study looked mainly at primary care, but the conclusion holds for any independent practice a private equity firm buys. Whether it's a GI group, a dermatology office or an orthopedic practice, understanding a market the way private equity buyers do is becoming critical for any group that wants to stay independent or exit at a better multiple.

The Brown study has limits, and it overlooks one of the most basic factors in any brick-and-mortar business. It draws only on Medicare claims, not the private-pay side. And it covers 2016 through 2022, the years when the facility-fee premium still let hospitals buy up independent practices. That era is closing now, and site neutrality is what's closing it. What the study never weighed is the bricks themselves — the location.

In the 25 years I've represented physicians, the biggest edge buyers hold is information. A private equity firm sees the billing data for the entire market, not just one practice's books. It knows what's being treated across every address, and where demand is going unserved. The practice on the other side of the table is working from its numbers alone.

The wrong numbers

Real estate is the second-largest cost in most practices, right behind payroll. It's also one of the few costs that can be controlled without affecting patient care, which is exactly why getting it wrong is so expensive. Most physician groups push hard on the rent but overlook the one thing that decides whether the location even stands a chance: real demand at the address. Often that's not for lack of foresight. So, practices end up working from rooftops, traffic counts, and median household income, the same inputs a coffee chain would use to pick a corner. For a medical practice, that's a problem.

Fortunately, medicine has a far better dataset to draw from, one that's underused for real estate. CPT, DRG and ICD-10 codes show what a population actually needs and uses, the income-producing factors that site selection should be built on. Rent is only half the question. The other half is whether the right patients, and the referrals that feed them, are close enough to keep the schedule full.

Standard real estate metrics are not wrong. They're just too blunt for medicine. Foot traffic is not medical demand. A shiny new building means nothing if the market around it is already flooded with your specialty, while a plain building three miles down the road might be surrounded by patients no one is serving.

Counting rooftops will not show a cardiology group, an ophthalmologist or a urology practice the demand for their specific procedures. Signing a long lease on demographics alone puts the practice itself at risk.

The blind spot for independent practices is widespread. The share of physicians in private practice fell from 60.1% in 2012 to 42.2% in 2024, according to the American Medical Association. Sign a lease, expand or take on a partner without reading the market, and you're betting seven figures on a hunch while the health systems and private equity groups that may buy you out are working from data on the entire market.

What site neutrality opens

The ground is shifting. Under the CMS 2026 outpatient payment rule, site neutrality has begun to pull back the extra payments hospitals have long collected at their off-campus sites, and it cuts two ways. On-campus and hospital-adjacent space gets more expensive, while out in the community, second-generation off-campus space, already built out for clinical use, starts coming open as hospitals consolidate back toward campus. There is real opportunity in that. The opening for an independent is on the community side, and physicians will need to take a hard look at their referral patterns, especially those currently on a hospital campus.

So, before you sign a new lease, get three answers most practices never pull: how much unmet demand for your procedures sits within a defined radius, whether the payer mix around that address supports your model and how many competitors in your specialty are already performing those procedures? A corner that looks open on a population map can be saturated for your specialty. Your lease likely renews every three to five years, so you should have all of this in hand before you negotiate.

Your numbers only tell you half the story. The other half is what the competition around you is doing, and that's the part most physicians never get to see. Go into your next lease or sale without it, and you'll overpay for the space, end up without a procedure room you need or undersell the practice when you exit. For many of you, that practice is your retirement. Don't let it slip away on a decision you made half-blind. The other side of the table never makes that mistake.

David Rutson is the founder of Globe Medical Realty Advisors, a medical tenant representation firm that has represented only independent physicians and non-hospital-owned groups for more than 25 years.