Private Surgeon with Questions - Tell me what I don't Know?
Hello, So the quick and dirty answer to my post is that I don't even know half of what I don't know.

My background is in Civil and Mechanical Engineering and I am currently a practicing surgeon on the East Coast (it gets cold in the winter). We are a small single specialty group, and looking to both expand but also avoid the increased costs of renovating (building is about 20 years old, definitely not up to current code).

I would need to buy out the other two tenants in the current building (there are three units, we own our unit, the other two are owned by a doc and another practice), re-zone the present use (or obtain a variance, which our business guy wasn't around 20 years ago when the OR was opened so they don't know if we actually got one, because our current zoning does not allow for an ASC), and since we are single story I want to increase to at least two or three stories. Part of that is I want to make sure I have real-estate income that I can use to support my practice in the long-term as I see the writing on the wall that my reimbursement will only continue to get cut.

The plan is to be at least 2-3 OR ASC on an upper floor, across the hall from our practice, then have another separate floor for more medical office space or others, and then retail or others on the first floor. With COVID there definitely was a lot of patient's family members waiting out in their cars, but during surgery they have no place to go and we have fairly busy schedules so there is a business opportunity there).

Further, I would like to bring in surgeons from other specialties who will either rent office space or join me, and potentially open a third operating room (We have two right now, one is only used for certain cases). I have fielded calls from 1-2 colleague surgeons asking me if I will be expanding, so there is a need.

A few specific questions:

 \- When should I be starting an LLC to handle the real estate stuff?

 \- Should I be formally engaging with an engineer right now (My suspicion is yes, and I've reached out to a couple today before also deciding to ask you all for input).

 \- I have a backup building that I plan to acquire in the next year or so which is where I plan to move our practice temporarily, as I estimate it will take 1-2 years to build the new building.

 \- I don't like spending money I don't really need, but I feel like I need to at least speak with an Attorney (or experts who understand taxes and real estate, etc) to help me avoid things that could land me in jail (like Medicare Fraud; I want to do this by the book).

I am completely open to PMs or any general guidance to this post, or if this isn't the correct forum, would love to learn. I simply just don't know what I don't know!
[{"id": "izb579i", "text": "If you\u2019re already worried about doing something illegal, you should just go purchase the building you want through the typical channels.", "replies": [{"id": "izcplsm", "text": "It's not that. It's that I am aware of the fact that I shouldn't do something without proper guidance and setting things up by people who know what they are doing so that I can AVOID things like the anti-kickback and Stark laws.\n\nBasically, it's like saying \"I need to transport something with a big-rig, so I'm going to hire someone with a CDL (or a shipping company) instead of doing it myself\". I know that I could get in trouble without help!", "replies": [], "depth": 2}], "depth": 1}, {"id": "izbdtd3", "text": "&gt; &gt; - I don't like spending money I don't really need, but I feel like I need to at least speak with an Attorney (or experts who understand taxes and real estate, etc) to help me avoid things that could land me in jail (like Medicare Fraud; I want to do this by the book).\n\nYou are about to spend a boat load of money.  Hire an architect that does doctor offices (particularly surgery centers).  Hire a good CRE consultant (probably an appraisal firm or broker who specializes in healthcare).  You will have a CRE lawyer in here somewhere who can help on the contracts and handle the org structure/tax stuff.\n\nI'm saying this as nicely as I can, but you sound like you want to wear a lot of hats and I'm sure you are a pretty smart guy.  Pay the people who are smart about this particularly thing so you don't make bad decisions.", "replies": [{"id": "izconsv", "text": "Sorry, that should read \"I don't like spending money when I don't really need to\".\n\nTo your point, that's exactly what I am trying to avoid. I know that this is going to cost beaucoup $$$, so am trying to be judicious with signing up consultants.\n\nI appreciate your comment, and no need to sugar-coat things. I do NOT want to wear lots of hats, and that is precisely why I want to hire the appropriate people to cover all of the bases!", "replies": [{"id": "izcvgpb", "text": "It\u2019s not about intelligence, rather it\u2019s about *experience* in that field. \nI want the surgeon who\u2019s successfully completed 1,000 of xyz procedures before working on me, not 3.  \nSame goes for the brokers, attorneys, engineers you hire.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "izbke3v", "text": "Oh man you had me at first. Begin in of your post reads like you\u2019re a surgeon who has no idea what he\u2019s doing as a surgeon and wants us to advise!\n\nThanks for that!", "replies": [{"id": "izcpdka", "text": "Haha, I like this. Had to read it twice, but nah, there are youtube videos to teach you surgery! (kidding....).", "replies": [], "depth": 2}], "depth": 1}, {"id": "izbzdr8", "text": "Until you know the other tenants will sell to you, I wouldn\u2019t spend anything.\n\nCommercial Real Estate is not passive income when you own it, so if you don\u2019t know about leases, triple nets, expenses, common area maintenance fees. lease violations or that commercial buildings are allowed to not be to code today if the current owners were gray d fathered in and you may or may not be required update upon purchase.", "replies": [{"id": "izcpb6t", "text": "Exactly. I haven't spent any money yet, and will be having a colleague approach the current tenants anonymously, with the proposal that I buy them now, they pay similar rent (no increase) and have 1-2 years to move, then once the building is finished they can come back to same location if they want.", "replies": [], "depth": 2}], "depth": 1}, {"id": "izcd82w", "text": "\n1. Adding floors usually means tearing down to rebuild unless there was a very forward thinking designer/builder.\n2. Building up costs more - you will need elevators for ADA and large ones if you may be hauling someone out on a stretcher in an emergency.\n3. This is a major project.\n\nI would find a new property that you can finish out how you like.  Look for someone else who will go in - another surgery group, etc.  Plan on building out enough to cover your costs but your practice should still pay rent - then the property business will pay out the owners.  Your partners should pay rent as well.  I have a client in a similar situation and their partner in the building has actually grown so much that they now rent 3/4 of the building and my client downsized that location because they make so much on the rent it is better to do their actual work elsewhere.", "replies": [{"id": "izcp41u", "text": "Thank you!\n\n1. It also costs 1.5-2x more to renovate older buildings, especially when it comes to ASCs and the like, so I was just anticipating tearing down anyways.\n2. This is also reasonable; I was planning on having a ramp up the back of the building for true \"emergencies\", but yes an elevator will be necessary.\n3. Yes, yes it is!\n4. With regards to \"new properties\", the real estate market is quite restrictive and there really aren't any \"new properties\" in this area. We are in a prime location, and I would rather not move locations.", "replies": [], "depth": 2}], "depth": 1}, {"id": "izdch8k", "text": "Stop! First and foremost you need to clear up the 'is my ASC even legal in this building issue\". Hire a very good attorney with direct experience dealing with zoning and well connected in your city.  Prepare a back up plan in case you discover not only are you not legal the city wants you to stop all business of this type immediately.  Zoning changes can take years, be complex efforts and are ultimately subjective, political decisions often made or approved by elected officials (usually City Council or sub committees appointed by them) hence you want someone politcally connected to help ease the way forward. You should not do anything until you have this issue sorted out.  You won't get an occupancy or building permit without the right zoning. You will want to get the property zoned correctly if it is not and then make your plans. I wouldn't even buy the other owners out if this wasn't resolved. Any offer should be subject to successful re-zoning. Since you have been operating for X years already you may be able to get some sort of temporary waiver pending final zoning or even a grandfather exemption that lets you continue even w/o the zoning.  But that might go away if you tear the building down. Your attorney should know more.  If rezoning is required you may want to seek a higher level zoning or changes to the allowed use, if possible, to allow for larger building as more sqft would mean more rental options.", "replies": [{"id": "izm9suu", "text": "Thanks for your input.\n\nDo you have any suggestions for where something like a \"zoning history\" or a zoning exemption may be located? Nothing of this sort seems to have been documented and digitized, or be readily available on the town's website (based on what is online so far). I particularly appreciate the \"wouldn't even buy the other owners out if this wasn't resolved\" comment, as that was an initial worry of mine but mostly out of inexperience initially.\n\nWhat about buying out the existing practice if the other surgeon(s) want(s) to retire? Would you consider that? I kind of don't want to end up working for someone else, so there is a little bit of self-preservation to that at least as long as no one is policing our zoning and OR permit.\n\nI am trying to locate the original plans for the building, as well as any permits. I have seen them before, and it clearly shows \"Operating Room\" on the footprint. They (and the permits) were all done on paper in the 90s, so do not appear to have been digitized.\n\nThere also have not been any major updates to the building itself (added solar panels in about 2015, re-paved the parking lot in last two years) since it was first constructed, to the best of my knowledge.", "replies": [{"id": "izmd1xn", "text": "The town/city ordinances pertaining to zoning and permitted uses would contain any statues that might include some sort of waiver or grandfathering of violations. A good attorney familiar with the zoning process should know what the options are if it proves out that you are not properly zoned for the use. I would not try to navigate this without an attorney who is well connected and familar with zoning. Your city may have a development office you can go to and seek historical zoning/building permit records that may not be online if you want to try to find the history before hiring someone. Someone has the paperwork if a permit was filed with the city and certainly a record of the zoning history and changes made by the city itself should be available somewhere offline in the City. Many places don't digitized all records due to cost but they have them somewhere still on microfiche or paper. I would not spend a nickle on the property or anyone's practice until you get this cleared up. Banks are not going to lend you money to rebuild an unpermitted use and the City can't just turn a blind eye if they learn the use isn't correct.  If you can find an approved, city stamped site plan showing the OR you might have been granted a site plan exemption and could be operating (pun intended) in that fashion but this is getting into the weeds legally and you need someone who knows your city ordinances and the specifics of development, building, permits, etc then and now.  You also need to know if you tear the building down do you lose any grandfathering or site plan exemption since you'd be doing all new? If so that means you have to follow all current ordinances and regs when building new and you may not get another site plan exemption or the zoing needed. A well connected, experience dvelopment attorney would be able to advise you on the chances of obtaining a rezoning. Large cities usually have a handful of consultants and attorneys who do this specific kind of work. Any moeny soent on them willb e well worth it as far as helping you chart out the best path forward. Even if you find out you do have what you need for an OR they can still advise you on the complexities of up zoning or just rebuilding.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ize5b7t", "text": "Or consider \n\n1. Buy vacant land and build new.\n\n2. Buy an existing, up to code facility.", "replies": [{"id": "izmc3uj", "text": "&gt;1. Buy vacant land and build new.\n\nHonestly, I wish this was an option, with the same proximity to both an interstate highway and the nearby hospital (where I already have privileges). \n\n&amp;#x200B;\n\n&gt;Buy an existing, up to code facility.\n\nThat's essentially what I'm talking about doing.... there aren't exactly existing ASC's with in-house office space sitting around in the same region, and we have a fairly large patient base with established referral patterns who know the practice, which is significant value in and of itself.", "replies": [], "depth": 2}], "depth": 1}, {"id": "iznp3i3", "text": "Buy a different building that as-is would meet 90% of your needs, this would eliminate 90% of the efforts and risk of your current plan. A person only has so much energy and time, focus what you\u2019re good at - surgery.   The rehab / rebuild project you are considering sounds like a full-time job for three people and you\u2019d be managing them and the project. My grand pappy would say, you\u2019re biting off more than you can chew", "replies": [{"id": "izq6zns", "text": "Okay, but what do I do if there are no such buildings? I don't live in the MidWest or another area where you can drive for 10-20 miles and find wide open spaces. We're pretty crowded here as-is....", "replies": [{"id": "izqjy2d", "text": "Is build to suit an option? Ideally, you have a known developer or one with excellent referrals.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "izsnqe1", "text": "I have opinions on some of this. I'll PM you.", "replies": [], "depth": 1}]