Medical Office Feasibility Study in Pennsylvania

Pennsylvania physician lending runs light

Pennsylvania doctors use SBA less than their counterparts nationally. A location quotient of 0.51x says physician offices carry well under their national weight in Pennsylvania's SBA book, and the 129 approvals worth $69.6 million logged from FY2017 to FY2026 rank Pennsylvania 17 of 53, with the class 14 of 39 on the state's list. Typical tickets are small too. A Pennsylvania practice loan has a median of $200,000, 0.58x the national physician median, though our screen, which also weighs the state's all-class median, leaves the cell unflagged.

A wide spread of practice loans

From $75,000 at the lower quartile to $600,000 at the upper, Pennsylvania practice loans cover equipment, working capital, acquisitions and some property. The 7(a) program carries 115 of them and 504 carries 14, and 5.4% involve a franchise. Manufacturers and Traders Trust Company holds 13 loans for $3.2 million, The Huntington National Bank 12 for $2.9 million, Citizens Bank, National Association 9 for $1.4 million, United Community Bank 8 for $7.9 million and Quaint Oak Bank 6 for $3.5 million; Empire State Certified Development Corporation holds 7 of the 504 loans, together worth $10.1 million. Montgomery County leads with 20, then Allegheny with 18, Philadelphia 16 and Bucks 12.

Late losses and a thin recent pipeline

Pennsylvania practices funded during FY2017 to FY2021 number 70. Their charge-off floor is 5.7%, yet only 1.4% failed inside the first five years, which places most of the damage in later years of repayment. The state's cancellation floor for FY2017 to FY2024 practice approvals is 11.8%, and its ceiling 12.7%. Activity has thinned: 22 approvals worth $13.0 million in FY2017, but just 3 worth $158,900 in FY2023 and 9 worth $2.5 million in FY2026.

Late defaults in medicine tend to follow change rather than a bad start: a partner retires, a payer contract is lost, a referral base moves to a hospital system. A feasibility study for a Pennsylvania physician practice should therefore look at durability as hard as at opening demand. Patient volume should be traced to the referring doctors and the insurers the practice bills, and compared with hospital-employed and independent groups nearby. Build-out and equipment cost belong in contractor and vendor quotes. Coverage should be tested on collections net of payer adjustments across the full term, including a case where a key physician leaves. If 504 money buys the building, the appraisal should rest on what other healthcare tenants would pay to occupy it.

Pennsylvania's figures are limited to SBA-guaranteed loans whose borrowers are coded as physician offices; dentists, therapists and other clinicians appear on their own pages, and each rate is a minimum.