Medical Office Reimbursement Gap Calculator

Medicare reimbursement changes directly affect medical office tenant rent affordability.

Practice annual revenue

Current rent % of revenue

Reimbursement change %

Volume change %

Target rent %

New affordable rent

$246,884

Revenue gap

-$8,884

Current rent

$238,000

How the math works

New revenue = revenue × (1+reimbChange) × (1+volumeChange). Affordable = new × target %.

$2.8M × 0.97 × 1.01 = $2.74M × 9% = $247k affordable vs $238k current = ($9k) cushion.

How to Use

Enter practice annual revenue.
Enter current rent as % of revenue.
Enter expected reimbursement change %.
Enter expected volume change %.
Read affordable rent % and dollar gap.

Frequently Asked Questions

How reimbursement affects rent?

Medical practice profit margin: 12-22% of revenue. Rent is typically 6-10% of revenue (affordable). Medicare reimbursement cuts (e.g., -3% physician fee schedule): reduce revenue 1.5-2.5% (Medicare + other payers match). Practice absorbs some, passes some back to rent affordability. Physicians with 40%+ Medicare: can afford 10-15% less rent when -3% rate cut.

Reimbursement trend?

Medicare Physician Fee Schedule: flat or declining 1-3% annually recent years. Commercial payers: often indexed to Medicare, but with 120-180% multipliers. Hospital-employed physician compensation tied to wRVUs (work Relative Value Units). Independent practices squeezed: rising costs + declining reimbursement = margin compression = rent sensitivity. Hospital systems (buying practices) pay higher effective rents.

Payer mix matters?

Medicare-heavy practice (70%+): sensitive to CMS changes. Commercial-heavy (70%+ BCBS/Aetna/United): sensitive to commercial rate negotiations. Medicaid-heavy (40%+): Medicaid reimbursement 50-70% of Medicare — lowest rent capacity. Concierge/cash-pay: 100-250% Medicare rates — highest rent capacity. Specialty matters: surgery strong reimbursement; primary care, geriatrics, psychiatry squeezed.

Rent stress indicators?

Rent >15% of revenue: high stress, likely renegotiation needed. Rent 12-15%: elevated stress. 8-12%: healthy. <8%: understated rent, landlord upside at renewal. Rent-to-EBITDA >0.5x: distressed. Collection rate <85%: practice financial trouble. Bankruptcy risk indicator: rent >10% + collection rate <80% + AR >60 days. Landlord due diligence: review practice financials annually during MOB underwriting.