In the near future, the surgical and nonsurgical aesthetic medical services and products industry around the world could exceed $70 billion in sales. Traditionally, a physician enters the beauty business by adding aesthetic services to his or her practice or by opening a stand-alone medical spa or aesthetic practice. However, other unique business models are emerging.
One such model is the newly dubbed cosmetic medical center, which is essentially an attractive, contemporary stand-alone building that houses a broad spectrum of independently owned elective medical providers and entities under one roof. They are separated through condominium or office units, or they may share space in certain units.
The benefits to a physician or tenant are multifold. Cross-referrals, synergies, surgical suites, cross-marketing, sharing resources and staff, attractive real estate, and visibility are just some of them.
Physicians and tenant entities can retain their identities while operating under the umbrella of a large facility that could have the blessing or affiliation of a reputable, local academic medical center or hospital. Furthermore, physicians or tenant entities can either rent space or possibly buy a condo unit in such a facility. This way, the physician or tenant has the potential for capital appreciation from real estate as well as business ownership.
There are also financial benefits for the patients and the business entities. Patients who secure funding from financing companies can use it to seek services from the diverse wellness and aesthetic practices housed within the cosmetic medical center. This increases the potential business flow to the various service providers, because ability to pay may no longer be a barrier to receiving services.
A One-Stop Shop
A typical cosmetic medical center could house a day spa, a medical spa, an aesthetic surgery practice, a vein clinic, a hair-restoration clinic, an age-management practice, a bioidentical hormone therapy practice, a holistic center, a wellness center, a men’s clinic, or another aesthetic medical practice or entity within one large facility.
Ideally, a cosmetic medical center would have only one type of each service provider to avoid overlaps and competitive conflicts. It could be designed as an atrium with easy access and visibility from one practice or business to the others, common waiting and reception areas, a cafeteria, and other amenities. Such a facility can range from 30,000 to 60,000 square feet, depending on the market, potential tenants, and other factors.
Administrative support services such as a call center or answering service, and a photocopying, fax, Internet, or cable infrastructure, could be shared as well. The center could also have certified ORs and minor-procedure suites that could be accessed and used by tenant providers for a reasonable fee.
A management entity could provide strategic oversight and facilities management as well as perform key marketing services such as advertising, seminars, and direct marketing campaigns.
A New Frontier
A cosmetic medical center is an ideal investment for a hospital or institutional investor such as a venture capital or private equity investment, or a real estate investment trust (REIT) that desires scalability and size in its investment. It also offers a hospital diversification, particularly in noninsurance areas.
Given the success of medical office space real estate investments and hospital REITs, cosmetic medical centers represent the new frontier in medical real estate investment and entrepreneurship. This trend is the result of the growing demand from a large proportion of the population that desires both invasive and noninvasive aesthetic medical services. A few hospitals in the southern and midwestern United States have taken the initiative of exploring the development of such cosmetic medical centers, and the interest from institutional and professional investor groups is strong.
For individual providers, including aesthetic surgeons and other physicians entering the beauty business, investing in a cosmetic medical center offers a far superior locale and host site compared to a stand-alone center or practice setting. Doing so offers them the potential opportunity to take their aesthetic practices or centers to a higher level.
Such an effort needs to be carefully planned and executed. There must be potential anchor tenants, an indication of physician interest and participation, available capital, an undervalued commercial real estate market, reasonable construction costs, a capable management entity, and other attributes—all of which represent critical success factors and prerequisites for such a project. Needless to say, institutional participation is probably a key to such an endeavor.
From a physician standpoint, a cosmetic medical center could represent a haven for a new or existing aesthetic practice in a friendly, amenable and like-minded host environment that offers potential for cross-referrals, cross-marketing, capital appreciation, and other benefits with minimal downside.
Cheryl Whitman is the founder and CEO of Beautiful Forever, where she spearheads a successful team of medical-spa consultants and business professionals. For more information, call (877) SPA-MEDI or go to www.medicalspaconsultant.com.
Mac Fadra, MBA, MPH, is executive consultant at Beautiful Forever, where he advises many medical spas, elective practices, and related entities.