Medical Office Building Feasibility Study: Demand, Tenants and Financing

A medical office building feasibility study tells a lender whether one specific building, with one specific set of physician owners and tenants, can pay its debt at the coverage the capital source requires, meet the program's occupancy and health care lease rules, and keep its value if the main practice leaves. The rent comes from medical practices, so the study tests the practices as closely as it tests the property.

Three facts shape almost every medical office loan file:

• Patients are getting older. The U.S. population age 65 and older grew 16.2% from April 2020 to July 2025, to 64,617,088, while the population under 65 grew 0.5% [1].
• Payer risk sits with the tenant. Medicare fee for service paid 20.4% of the receipts of physician offices in 2022 [2], and 50.9% of Medicare beneficiaries were in Medicare Advantage and other health plans in 2025 [3].
• Occupancy decides SBA eligibility. An owner-occupant financed with SBA 7(a) or 504 must use at least 51% of an existing building or 60% of a new one [4][5].

This page sets out what the study must prove and how each financing program reads the file. Three model studies, illustrative analyses built on public data, apply the method: an owner-occupied medical office building under SBA 504, a dental practice acquisition under SBA 7(a) and a rural health clinic under a USDA Community Facilities loan. For questions about the practice itself rather than the building, see medical and dental practice feasibility studies.

Every study ends in one of three conclusions: feasible as proposed; feasible with stated conditions, such as a smaller building, a signed lease for the third-party space or a larger equity contribution; or not feasible as proposed, with the changes that would make it work.

What is a medical office building feasibility study?

It is an independent analysis, written for the lender's file, of whether a proposed or existing medical office building can support its financing. It covers the market for the practices' services, the tenants and their leases, the building and its cost, the financing structure, and the cash flow that pays the debt.

The tenants show up in federal statistics under several codes: offices of physicians (NAICS 621111), offices of dentists (621210), freestanding ambulatory surgical and emergency centers (621493) and other outpatient care centers (621498) [6]. The building owner, when it is not the practice, is a lessor of nonresidential buildings (531120) [6]. Three building types cover most loan requests:

1. Owner-occupied practice building. A physician or dental group buys or builds its own space, often leasing the rest to other practices.
2. Multi-tenant medical office building. An investor or developer leases suites to physician groups, health systems and outpatient operators.
3. Specialty facility. A surgery center, imaging center or clinic whose design follows a regulated use.

A hospital itself needs a different study; this page covers buildings leased to practices and outpatient operators. A feasibility study is not an appraisal: an appraisal estimates value at a date, while a study tests whether the project works and what would have to change. SBA may require a feasibility study on any business loan [4], and its procedures name the triggers: market saturation by industry type and location, a highly specialized project property, and a project size disproportionate to the community it will serve [5]. Its 504 procedures also say independent reports, feasibility studies among them, "may be beneficial in mitigating any weaknesses identified in the credit analysis" [5]. USDA requires one, prepared by an independent qualified consultant, for guaranteed loans above $1,000,000 to a new entity or new activity [7]. For what separates a study a lender can rely on from one it cannot, see what makes a feasibility study bankable.

What does a lender need the study to prove?

A lender needs proof that the occupant's cash flow repays the loan under the program's rules, and that the leases, the occupancy and the building do not break those rules. SBA's regulation states the standard: "Loans must be so sound as to reasonably assure repayment" [4].

Exhibit 1. What the lender asks and what the study shows

Source: 13 CFR Parts 120 and 121; SBA SOP 50 10 8.1; 42 CFR 411.357 and 1001.952, as cited in each row.

How large is the outpatient and physician office sector?

It is large and fragmented. County Business Patterns counted 701,862 employer establishments in ambulatory health care services in 2023, and offices of physicians were the largest group [10].

Exhibit 2. Ambulatory health care establishments, 2023

Source: U.S. Census Bureau, County Business Patterns 2023, U.S. file (cbp23us), all legal forms [10].

The 2022 Economic Census adds revenue. Offices of physicians reported receipts of $640.4 billion from 213,772 establishments run by 149,963 firms, about 1.43 establishments per firm [11]. Freestanding ambulatory surgical and emergency centers reported $44.1 billion from 10,119 establishments, about $4.4 million each, against about $3.0 million per physician office (calculated from [11]). Outpatient care centers reported $222.5 billion from 57,177 establishments [11].

Census counts establishments, not square feet. No federal series publishes medical office inventory, vacancy or rent, so the study surveys the local buildings itself: rentable area, tenants, asking and achieved rents, lease terms and space under construction.

Where does demand for medical office space come from?

Demand comes from patients, and the patient base is aging faster than it is growing. From April 2020 to July 2025 the U.S. added 10,268,744 residents, and 8,988,997 of them, 87.5%, were age 65 or older [1].

Exhibit 3. U.S. resident population by age, 2020 and 2025

Source: U.S. Census Bureau, Vintage 2025 Population Estimates, NC-EST2025-AGESEX-RES [1]. Age groups summed, changes calculated by FSC.

The share of residents age 65 and older rose from 16.8% to 18.9% [1]. Census projections carry the trend forward, with the fastest growth in the oldest groups. The study turns those counts into demand with visit rates by age taken from the practices' own patient records.

Exhibit 4. Projected U.S. population age 65 and older, 2025 to 2050

Source: U.S. Census Bureau, 2023 National Population Projections, middle series, np2023_d1_mid [12]. Age groups summed and shares calculated by FSC. The projections were released in 2023, so their 2025 values differ from the Vintage 2025 estimates in Exhibit 3.

From 2025 to 2035 the projections add 19.7% to the population age 65 and older, 42.1% to the population 75 and older and 58.6% to the population 85 and older [12]. A building financed on a 25-year term will spend most of its loan life in that market.

Demand is local, and establishment counts are not capacity

National growth does not fill a particular building. The study measures the service area: residents by age, the practices and outpatient centers already there, the hospitals that anchor referrals, and the drive time patients accept for each specialty.

Exhibit 5. Ten states with the most residents age 65 and older

Source: U.S. Census Bureau, Vintage 2025 Population Estimates, SC-EST2025-ALLDATA6 [13], and County Business Patterns 2023, state file, NAICS 621111 [14]. Residents per office calculated by FSC; the two counts are from different years.

The last column is a screen, not a measure of shortage. Minnesota had 745 residents age 65 and older per office of physicians and North Dakota 862, against 219 in Texas [13][14]. A state where care runs through large clinic systems can show fewer, larger establishments. The study therefore counts providers and square feet in the service area rather than relying on establishment ratios.

How much new medical office space is being built?

Less than in 2023. Private spending on medical buildings, the Census category that covers clinics, medical offices, medical labs and doctor and dentist offices [46], was $23.2 billion in 2025, 8.0% below the $25.2 billion of 2023 [44].

Exhibit 6. Value of private construction put in place ($ millions)

Source: U.S. Census Bureau, Value of Construction Put in Place, annual private construction 2022 to 2025 [44]; category definitions [46].

The monthly series shows the slowdown continuing. At a seasonally adjusted annual rate, medical building spending was $21.6 billion in September 2026 (preliminary), against $22.9 billion in September 2025 and $22.8 billion in September 2024 [45]. Hospital spending rose from $27.3 billion to $31.2 billion over the same two years [45], so more of the health care construction dollar is going to hospitals.

National spending is context only. The supply survey counts local medical buildings, space under construction, permits and site plan approvals, health system capital plans and certificate-of-need filings.

Why is payer mix an operating-company risk?

Because the practices pay the rent from patient revenue, and insurers and government programs paid 71.2% of physician office receipts in 2022 [2]. The building's debt service is fixed; the practice's revenue moves with payment rules, payer contracts and patient volume. The Economic Census shows how different tenant types are paid.

Exhibit 7. Where outpatient revenue came from, 2022 (share of receipts)

Source: U.S. Census Bureau, 2022 Economic Census, EC2262TYPEPAYER [2]. Shares of total receipts calculated by FSC; "all other" combines workers' compensation, property and casualty insurance and other patient and non-patient revenue. Reported lines cover 94.9% of outpatient care center receipts.

Two points follow. First, government programs paid 28.9% of physician office receipts through fee-for-service lines alone [2], and the Census Medicare line excludes Part C, so Medicare Advantage revenue sits in other lines. Second, dental tenants carry a different risk: 39.6% of their receipts came from patients' own pockets and 1.5% from Medicare fee for service [2]. A building leased to both needs a credit view of each.

Exhibit 8. Medicare beneficiaries by type of coverage

Source: Centers for Medicare & Medicaid Services, Medicare Monthly Enrollment, national rows (annual rows for 2015 to 2025; July 2026 monthly row) [3]. Shares calculated by FSC.

Medicare enrollment grew 25.2% from 2015 to 2025, and the Advantage and other plan share passed half in 2024 [3]. More of a practice's older patients are now paid under plan contracts it negotiates, and fewer under the federal fee schedule. The study reads the practice's payer contracts, not only its payer percentages.

Where the federal fee schedule applies, its updates have been small. The statute sets the annual update to the conversion factor, and Congress has added temporary increases in some years.

Exhibit 9. Medicare physician fee schedule: statutory updates, 2016 to 2027

Source: 42 U.S.C. 1395w-4(d) and (t), United States Code 2024 edition [15]; Public Law 119-21, section 71202, approved July 4, 2025 [16].

The study takes the payment rates from the CY 2027 final rule, published on November 9, 2026 and effective January 1, 2027 [17], prices the practice's own procedure mix under it, and runs a downside case with lower fee schedule revenue. Rural health clinics are paid differently: an all-inclusive rate per visit, subject to a limit of $165 in 2026, $178 in 2027 and $190 in 2028 for clinics under the general limit [18].

How do physician groups and health systems differ as tenants?

A physician group's credit is the practice's cash flow and the physicians who produce it; a health system's credit is a much larger balance sheet. Most physician tenants are small businesses. In 2023, 52.7% of physician offices had fewer than five employees and 86.1% had fewer than 20 [10].

Exhibit 10. Offices of physicians by number of employees, 2023

Source: U.S. Census Bureau, County Business Patterns 2023, cbp23us, NAICS 621111 [10]. Shares calculated by FSC; the 250 or more class combines three published classes (606, 212 and 129).

The average office had 13.2 employees [10]. A small practice can be a strong tenant, but its credit rests on a few physicians, so the study reviews each tenant the same way:

1. The entity and its owners. Who signs the lease, who guarantees it, and whether the physicians are owners or employees.
2. Production and payers. Revenue by physician and by payer for three years, and contracts up for renewal.
3. Succession. The ages of the physicians who produce most of the revenue, and any recruitment plan.
4. The lease. Term, renewal options, termination and relocation rights, assignment, expense recoveries and the rent schedule.
5. Affiliation. Whether a health system employs or contracts with the group, which can strengthen credit and also raise the fair market value questions below.

A health system or a large outpatient operator can carry a long lease on its own balance sheet. Under SBA, though, it cannot be the occupying borrower unless it is a small business: the size standard is $16.0 million for physician offices, $19.0 million for freestanding surgical and emergency centers and $47.0 million for general hospitals [6]. In an SBA-financed building a large tenant fits inside the share the borrower may lease to third parties.

What changes when a hospital department is the tenant?

The credit behind the lease improves, but the tenant's revenue at the site depends on Medicare's provider-based and site-neutral rules [36][37].

The campus is the area next to the main buildings plus areas within 250 yards of them [36]. An off-campus department must be 100 percent owned by the main provider, share its governing body and, with narrow exceptions, sit within a 35-mile radius of the campus [36]. It must be held out to the public as part of the hospital [36].

Since January 1, 2017, departments on the campus and off-campus departments that billed under the hospital outpatient system before November 2, 2015 are excepted; other off-campus services are generally paid under the physician fee schedule [37]. A department keeps excepted status only if it has not impermissibly relocated or changed ownership [37]. So an excepted department has a reason to stay, and a landlord who asks it to move may be asking it to give up revenue.

Exhibit 11. Hospital-affiliated and independent medical tenants compared

Source: 42 CFR 413.65 and 419.48 [36][37]; 13 CFR 120 and 121.201 [4][6]; 42 CFR 411.357 and 1001.952 [8][9]; 42 U.S.C. 1395w-4 [15].

For any hospital tenant the study asks for written confirmation of whether its department is excepted, when it began billing, and whether a relocation or change of ownership would change that.

What do Stark and the anti-kickback statute require of a medical office lease?

They require rent set in advance at fair market value, for a term of at least one year, not tied to referrals. The physician self-referral law (Stark) has an exception for office space rentals [19][8], and the anti-kickback statute has a matching safe harbor for space rental [9]. Any lease between parties in a position to refer patients to each other should meet both.

Exhibit 12. Lease tests under Stark and the anti-kickback safe harbor

Source: 42 CFR 411.357(a) and 411.351 [8][20]; 42 CFR 1001.952(b) [9]; 42 U.S.C. 1395nn(e)(1)(A) [19].

The stakes are high for both parties. The statute makes a knowing kickback a felony with fines of up to $100,000 and prison of up to 10 years [21]. The Stark statute sets civil money penalties of up to $15,000 for each service billed in violation and up to $100,000 for each circumvention scheme [19].

For the lender, the rules matter in three ways.

1. Rent above fair market value overstates the building. If a hospital pays physician landlords more than general commercial rent, the excess is not durable income, and it can disappear when the lease is reviewed. The study's rent conclusion follows the regulatory definition: value "for general commercial purposes," without adjustment for proximity to a referral source [20].
2. Percentage and per-click rent is not allowed. A rent tied to the tenant's revenue or to services for patients the landlord refers fails the Stark exception [8], so the study models fixed rent only.
3. Short or informal leases are a credit problem. A tenant on a handshake or a month-to-month arrangement fails the one-year test in both rules [8][9], and the study treats that space as vacant until a written lease is signed.

The study is not a legal opinion. It flags every lease where landlord and tenant can refer to each other and tells the lender which ones need health care counsel's sign-off.

Worked examples: how the rent rules change the numbers

Each row uses illustrative facts, not market rents, to show what the study counts as durable rent.

Exhibit 13. Rent rule examples (illustrative model)

Source: 42 CFR 411.351 and 411.357 [20][8]; 42 CFR 1001.952 [9]. Facts and dollar amounts are FSC assumptions.

Above-range hospital rent lowers confidence in the lease rather than raising the building's value. The Stark fair market value exception also covers office space leases [8], with the same fixed-rent tests.

How does SBA count owner occupancy in a medical office building?

By rentable square feet, under the same test in 7(a) and 504. In an existing building the borrower must occupy at least 51% and may lease up to 49%. In new construction it must occupy at least 60%, may permanently lease up to 20%, and may temporarily lease another 20%, using some of it within 3 years and all of it within 10 [4][5].

Exhibit 14. SBA occupancy rules for 7(a) and 504

Source: 13 CFR 120.131 and 120.871 [4]; SBA SOP 50 10 8.1, occupancy and leasing requirements and the 7(a) and 504 repayment analysis [5].

How medical tenants count

The occupancy test counts only the borrower, or the Operating Companies in a passive company structure. Every other practice is a third-party tenant inside the 49% or 20%, however closely it works with the owners. That decides how a multi-practice building is structured:

• Several practices can count together. SBA permits multiple separately owned Operating Companies in one structure, with only one Eligible Passive Company [5], and the regulation applies the occupancy rule to "the Operating Company, or Operating Companies together" [4].
• Counting has a price. Each Operating Company must be a guarantor or co-borrower, and each owner of 20% or more of the passive company or any Operating Company must guarantee the loan [4].
• Each must be small. The passive company and each Operating Company must meet a size standard; affiliated companies are combined [4][5]. The standards are $16.0 million for physician offices, $9.0 million for dentists and $25.5 million for other outpatient care centers [6].

The eligible passive company structure

Most physician-owned buildings are held by a real estate company owned by the physicians and leased to their practice. SBA allows this Eligible Passive Company structure as an exception to its bar on financing passive investments, and "each condition is interpreted strictly" [5]:

1. The passive company leases 100% of the building to the Operating Companies, which must occupy 51% of an existing building or 60% of new construction and may sublease the rest within the same limits [4][5].
2. The lease is written, subordinate to the lender's lien, and runs, with renewal options only the Operating Company can exercise, at least as long as the loan [4][5].
3. The passive company assigns the rents to the lender [4][5].
4. The rent "cannot exceed the amount necessary to make the loan payment to the lender," plus the passive company's direct holding costs such as maintenance, insurance and property taxes [4][5].
5. The lender must find that the Operating Company's cash flow covers the loan payment and the holding costs [5].

The rent cap and the fair market value rules can pull in different directions. When the passive company's owners and a tenant can refer patients to each other, the lease has to satisfy both, so the study shows the SBA cap and the fair market value range side by side.

The calculator below runs these tests. One rule surprises many owners. In 504, rent from tenants in the project property "may be included in the global cash flow analysis" but "must not be included in the repayment ability analysis," and 7(a) leaves it out of projected coverage [5]. The calculator's third case shows the effect: coverage of 1.38 with tenant rent and 1.05 without it, a failure at 1.15, and practice EBITDA of $310,046 before occupancy costs needed to pass. Those are model results from illustrative inputs, not market facts.

Worked example: an owner-occupied building under SBA 504 (model)

This example runs the tests in order on one hypothetical project. Every input is an FSC assumption, not a market figure; the rules are cited. A physician group plans a new two-story building of 14,000 rentable square feet, with an elevator, keeps 7,600 square feet for its own suites, and leases the rest to other practices.

Exhibit 15. Worked example: occupancy, sources and coverage (model)

Source: FSC model; rules from 13 CFR 120 [4] and SBA SOP 50 10 8.1 [5]; rates from the Federal Reserve H.15 release [29].

Exhibit 16. Worked example under stress (model)

Source: FSC model results from the assumptions in Exhibit 15.

In an SBA building the practice carries the debt. Losing every tenant leaves the repayment ratio where it was; a 10% fall in the practice's earnings fails it. So the study spends most of its effort on the practice's production, payers and succession.

How much space does each specialty need?

No federal source used here sets the size of a private practice suite, so the study builds each suite from the tenant's own schedule: providers, clinic sessions, rooms per provider and support space. The ratios in the second column are FSC planning assumptions, used until the tenant's architect confirms a program. The rules and data in the last column are sourced.

Exhibit 17. Space programs and build-out drivers by tenant type

Source: FSC planning assumptions (second column); 42 CFR 491, 411.357, 410.33, 416.44, 494.60 and 40 CFR 441; CMS Provider of Services File, as cited.

For scale, the 2018 Commercial Buildings Energy Consumption Survey found 129,000 outpatient health care buildings averaging 13,700 square feet [47], and CMS listed 7,522 active dialysis facilities in the third quarter of 2026 [54]. Surgery and dialysis suites load plumbing, power and structure far more than exam rooms, so the study prices the tenant mix before the shell.

What tenant improvements and building specifications does the study test?

The study tests whether the building fits the services the tenants will deliver, and whether the budget prices that fit. No federal source publishes medical office construction or tenant improvement cost, so every cost line is a labeled assumption until it is replaced by a contractor's bid. Service mix is the starting point.

Exhibit 18. Patient care revenue by type of service, 2022

Source: U.S. Census Bureau, 2022 Economic Census, EC2262PATIENT, share of patient care revenue [22]. Laboratory and imaging combine the published lines for services paid by patients, insurers or government and services paid by other providers (summed by FSC).

A building for visit-based practices is mostly exam rooms, offices and waiting areas. Freestanding surgical and emergency centers earned 52.0% of patient care revenue from surgery [22], and a surgery center is built around operating rooms, recovery and sterile processing under the rules in Exhibit 19. SBA lists surgery centers among its examples of limited or special purpose property [5], so the tenant mix drives both the budget and the collateral case.

Exhibit 19. Federal rules that shape a medical office building

Source: 28 CFR 36.404; 45 CFR 84.92; 42 CFR 416.44; 42 CFR 491.5; 13 CFR 120.160 and 120.882, as cited in each row.

The study then checks the specifications that decide whether the space works for these tenants and the next ones, as labeled assumptions until the architect and contractor confirm them:

• Structure: column spacing and floor-to-floor height that allow exam room modules and later reconfiguration; slab capacity and shielding for imaging.
• Plumbing and mechanical: sinks in exam rooms, exhaust and pressure control for procedure and sterile areas, and zoned heating and cooling.
• Power and life safety: emergency power for procedure areas and drug refrigeration; sprinklers and alarms matched to the occupancy class.
• Access and parking: an elevator for multi-story medical space (the ADA alterations exemption does not reach health care offices [23]), drop-off canopies, parking set by local zoning and patient volumes, and access tested against the state transportation department's traffic counts.
• Tenant improvement split: what the landlord builds in the shell and what each tenant funds. SBA loan proceeds may not improve space subleased to a third party [5], so an SBA borrower funds third-party improvements from other sources.

Bids should be current.

Which operating assumptions move coverage most?

Five assumptions move a multi-tenant building's coverage most: the rent basis, vacancy and credit loss, the cost of refitting suites when leases roll, reserves for building systems, and utilities. Utilities are the one with a federal benchmark used here.

• Rent basis. A lease in which tenants reimburse operating costs yields more net income at the same quoted rent than a gross lease, so the study models each lease as written.
• Vacancy and credit loss. Lease-up comes from the local survey, by month, with the month coverage first reaches the lender's ratio.
• Refitting at rollover. Medical suites are built around plumbing and room layouts, so re-leasing reserves are priced from bids, not a general office allowance.
• Building systems. Reserves for heating and cooling, emergency power and elevators follow the property condition report.
• Utilities. Outpatient buildings use more energy than offices.

Exhibit 20. Energy use and cost by building type, 2018

Source: U.S. Energy Information Administration, 2018 Commercial Buildings Energy Consumption Survey, Tables C3 and C4 [47][48]. Costs are 2018 dollars for the sum of major fuels.

Outpatient buildings used 25.0% more energy per square foot than offices and paid 28.2% more for it (calculated from [48]), so the study escalates utilities separately and reads the leases to see who pays.

What rules govern a surgery center in a medical office building?

Medicare's conditions for coverage. A certified ambulatory surgery center (ASC) must be a distinct entity that operates exclusively to provide surgical services to patients who do not need hospitalization, with an expected stay of no more than 24 hours [35]. In a medical office building that means its own suite, its own governance and its own certification, even when the surgeons own the building.

Exhibit 21. Medicare conditions that shape a surgery center suite

Source: 42 CFR Part 416, revised as of October 1, 2025 [35][25].

CMS's provider file for the third quarter of 2026 lists 6,665 active certified ASCs [31][32]. Of those reporting ownership, 95.3% were proprietary; 6.3% of those with an urban or rural code were rural [31]. Most are small: of 6,223 reporting operating rooms, 19.0% had one, 33.5% had two and 30.9% had three or four, a median of two [31]. One record lists 5,112 operating rooms, an entry error, so the study uses medians.

Exhibit 22. Surgical specialties offered at certified ASCs, third quarter 2026

Source: CMS, Provider of Services File, iQIES, quarter ending September 30, 2026, active ASCs [31][32]. A center can offer several specialties; 52.6% reported exactly one. Shares calculated by FSC.

Across the 50 states and DC there was one certified ASC for every 9,746 residents age 65 and older, from one per 3,185 in Maryland to one per 20,003 in New York (calculated from [31][13]). A low ratio can mean a crowded market or a long habit of freestanding surgery, so the study reads it with local surgeons' case volumes.

Which certificate-of-need and imaging rules can stop a project?

In some states a surgery center or scanner needs a state certificate of need, so the study confirms the rule before it models revenue. The table covers five states whose official sources state it.

Exhibit 23. Certificate-of-need rules in five states

Source: KRS 216B.061 [49]; Georgia Department of Community Health notice of April 1, 2026 [50]; N.C.G.S. 131E-176 [51]; Code of Virginia 32.1-102.1:3 [52]; Iowa HHS certificate of need program page [53]; CMS Provider of Services File [31].

A certificate-of-need law does not always mean few centers: Georgia had 414, the fourth most of any state [31]. It changes timing and risk. Kentucky prohibits obligating a capital expenditure above the statutory minimum without a certificate [49], so the study shows the approval path and a denial case, and treats surgery or imaging revenue as unproven until approval.

Federal rules for imaging tenants

Imaging is either part of a physician practice or a separately enrolled independent diagnostic testing facility (IDTF), and the rules differ.

Exhibit 24. Federal rules that shape an imaging tenant

Source: 42 CFR 410.33, 411.355, 411.351 and 411.357 [38][39][20][8].

For tests that need direct supervision, the physician must be present in the office suite and immediately available [40], so those rooms sit near physician offices.

What does a dental tenant change?

Payers, plumbing and practice size. Dental offices are smaller than physician offices: in 2023 they averaged 7.6 employees against 13.2, and 73.1% had fewer than 10 employees [10].

Exhibit 25. Offices of dentists and physicians by number of employees, 2023

Source: U.S. Census Bureau, County Business Patterns 2023, cbp23us, NAICS 621210 and 621111 [10]. Shares calculated by FSC; 50 or more combines published classes.

1. Payers. Patients paid 39.6% of dental receipts from their own pockets in 2022 and private insurance 44.0% [2], so the study tests fees against local household income rather than Medicare rules.
2. Plumbing. A dental office that places or removes amalgam and discharges to a sewer must capture amalgam with separators, or equivalent devices, rated at 95% removal efficiency or better, file a one-time compliance report (within 90 days of first discharge for a new office) and keep inspection records for three years [41]. Offices that practice only certain specialties, such as orthodontics or periodontics, are outside the rule [41].
3. Acquisition rules. A 7(a) practice purchase is a change of ownership: coverage of 1.25 for an initial acquisition, an independent business valuation unless the price is $350,000 or less with no close buyer and seller relationship, and a quality of earnings report at $3 million or more [5]. The size standard for dentists is $9.0 million in receipts [6]. The dental practice acquisition model study works through that structure.

What must a rural health clinic prove?

Location, staffing and payment. A rural health clinic must sit in a non-urbanized area designated as a shortage area, must have a nurse practitioner, physician assistant or certified nurse-midwife available at least 50 percent of the time it operates, and is paid an all-inclusive rate per visit subject to a limit [42][26][18].

Exhibit 26. Rural health clinic rules that shape the building and the loan

Source: 42 CFR Part 491 and 491.5 [42][26]; 42 CFR 405.2462 [18]; 7 CFR 5001 and 1942.17 [7][27].

A hospital-owned clinic is read on its own terms, since the provider-based definition of a hospital department excludes an RHC [36]. Of the 5,626 rural health clinics enrolled in Medicare in the September 29, 2026 file, 3,581 (63.7%) were registered with the IRS as nonprofits and 2,034 (36.2%) as proprietary [33][34].

The split varies by state. In Tennessee 284 of 328 clinics were proprietary, owners who would look to Business and Industry guarantees; in Iowa 197 of 217 were nonprofit, the borrowers Community Facilities serves [33][7][27]. The rural health clinic model study applies these rules.

What happens to the collateral if the main practice leaves?

The building is then worth what another medical user, or a general office user, would pay for it after the cost of refitting. SBA's procedures list "Hospitals, surgery centers, urgent care centers, and other health or medical facilities" among examples of limited or special purpose property [5], defined as "a limited-market property with a unique physical design, special construction materials, or a layout that restricts its utility" to its original use [5]. The CDC must address the question in its credit memorandum and explain its conclusion [5].

The classification has direct financial effects:

• More equity in 504. A limited or special purpose project requires a borrower contribution of at least 15%, with the debenture at no more than 35%; a new business in such a property contributes at least 20% [5].
• A specialist appraiser. When the collateral is special purpose property, the appraiser must be experienced in the particular industry [5].
• Longer terms on some acquisitions. A 7(a) loan for a change of ownership is generally amortized over no more than 10 years [5], but where an owner-occupied special purpose property is integral to the business, the maturity can reach 25 years if 85% or more of project costs are real estate [5].

The study's re-leasing case answers four questions. How long would the owner's space take to re-lease to another practice, and at what rent and improvement cost? Could it convert to general office, and what would conversion cost, including elevator and accessibility work in alterations [23]? Do the remaining tenants' leases survive the owner's departure? And who in the market leases space of this type and size? In the calculator's first case, the third-party tenants' rent covers 28.9% of debt service and building costs if the owner practice leaves; that is a model result, and it is why the guarantees and the practice's succession plan matter as much as the real estate.

Which financing paths fit a medical office building?

Five paths cover most loans: SBA 504, SBA 7(a), USDA Business and Industry guarantees, USDA Community Facilities loans for public and nonprofit clinics, and conventional loans from banks or insurance companies. The right one depends on who occupies the building, where it is, and how much of it the owner uses.

Exhibit 27. Financing paths compared

Source: 13 CFR Part 120 (revised as of January 1, 2026); SBA SOP 50 10 8.1; SBA 504 loans page; 7 CFR Part 5001 (revised as of January 1, 2026); 7 CFR 1942.17 (revised as of January 1, 2025).

SBA 504

The 504 loan fits an owner-occupant buying or building its own space. A third-party lender provides 50% or more of the financing, a Certified Development Company provides up to 40% through a debenture, and the borrower contributes at least 10% [5]. Because health and medical facilities appear on SBA's special purpose list, a medical project the CDC classes as special purpose contributes at least 15%, and the debenture falls to 35% [5]. SBA's page cites a $5.5 million maximum [28]; under the regulation that figure applies to small manufacturers and certain energy projects, and $5,000,000 applies otherwise [4]. The debenture rate is "pegged to an increment above the current market rate for 10-year U.S. Treasury issues" [28]; the 10-year yield was 4.88% on November 9, 2026 [29].

Coverage must be at least 1.15 on historical cash flow, measured as EBITDA over the combined debt service after the loan, and repayment ability rests on the operating company's cash flow [5]. Rent payments are among the adjustments the CDC must justify [5], which is how a practice leaving leased space shows the rent it will stop paying. Rent from other tenants in the building stays out of the repayment test [5]. If history falls short, the CDC analyzes at least 2 years of projections, and if repayment works in Year 2 but not Year 1, the borrower must show liquidity for the Year 1 shortfall [5]. The Minnesota medical office model study works through a 504 structure in full.

SBA 7(a)

The 7(a) loan is more flexible: SBA lists uses from acquiring, refinancing or improving real estate and buildings to working capital [30]. The maximum loan is $5,000,000 and SBA's guaranty to one borrower is capped at $3,750,000 [4]; real estate terms run up to 25 years [4]. Coverage must be at least 1.15, with global coverage of 1:1, and projected coverage "may not include anticipated cash flow from rental income from the Project Property" [5]. In a multi-tenant building financed with 7(a), the owner practice has to carry the debt largely on its own cash flow.

7(a) also covers a physician or dentist buying a practice together with its building. The general change of ownership rule limits amortization to 10 years, with the special purpose exception described above. Appendix 15 of the SOP sets coverage at 1.25 for an initial acquisition and 1.15 for a business expansion, and lenders may add back rent payments "when the owner-occupied commercial real estate is part of the transaction" [5]. The dental practice acquisition model study shows that structure. The prime rate, one of two acceptable base rates for variable 7(a) loans [5], was 7.00% on November 9, 2026 [29].

USDA Business and Industry and Community Facilities for rural clinics

USDA has two paths, set by who owns the clinic. A for-profit practice in a rural area can use a Business and Industry guarantee. "Rural" excludes any city or town of more than 50,000 inhabitants and the urbanized area next to it, and "applications cannot be approved subject to meeting rural area requirements" [7], so location is confirmed first. Guaranteed loans to one borrower are limited to $25 million, equity runs from 10% to 25%, terms follow the useful life of the assets up to 40 years, and a feasibility study is required above $1,000,000 for a new entity or activity [7].

A public body, nonprofit or tribe can use Community Facilities, because "Health care facilities and services" are essential community facilities [7]. Direct loans are not made to a city or town of more than 20,000 inhabitants, run up to 40 years, require the applicant to show it cannot get credit elsewhere at reasonable rates and terms, and must be supported by revenues sufficient for operation, maintenance, a reserve and debt payment [27]. A nonprofit medical building can lease less than 25% of its floor space for ineligible uses; the rule's own example is "a pharmacy in a medical facility" [7]. Clinics seeking Rural Health Clinic status must also be located in a rural area designated as a shortage area [26]. The rural health clinic model study applies these rules.

Conventional and insurance company loans

Without a federal guarantee, each lender sets its own coverage, loan-to-value and lease requirements, and investor-owned multi-tenant buildings are financed this way. The evidence those lenders need is the same: a rent roll at fair market value, the credit of each tenant, lease terms against the loan term, and a re-leasing case.

What will each lender ask?

Each capital source starts from a different question, set by its own rules.

Exhibit 28. Lender questions by program

Source: SBA SOP 50 10 8.1 and Appendix 15 [5]; 7 CFR 5001 [7]; 7 CFR 1942.17 [27].

USDA also tells lenders to weigh the "alternative uses" of collateral [7], the same question as SBA's special purpose review.

What must a medical office feasibility study contain?

1. The conclusion first, with any conditions or required changes spelled out.
2. The project defined: rentable square feet, users, suites, specialties, services and phasing.
3. Program fit: the occupancy test in rentable square feet, the passive company structure if used, size standards and the special purpose question.
4. The service area by specialty and drive time, with residents by age today and projected.
5. Supply: competing medical buildings and outpatient centers, with rentable area, tenants, rents, terms and space under construction.
6. Demand by specialty, tied to the practices' own patient data and referral sources.
7. Tenant credit for each practice: owners, production by physician, payer mix and contracts, and succession.
8. A lease review: term against loan term, renewal and termination rights, expense recoveries and assignment.
9. A fair market value rent conclusion for each lease between parties who can refer to each other, on general commercial terms.
10. A building review: shell, tenant improvements by suite, accessibility, life safety for regulated uses and parking.
11. The regulatory path for regulated tenants: ASC certification, certificate of need, IDTF enrollment, a hospital tenant's provider-based status and RHC certification.
12. A development or acquisition budget with sources and uses, contingency, interest during construction and working capital, every line cited to a bid, a quote or a labeled assumption.
13. Practice cash flow before occupancy costs, building operating costs and debt service, with coverage on the program's basis, with and without tenant rent.
14. Downside cases: a fee schedule cut, the loss of the largest third-party tenant, a physician departure and a construction delay.
15. A collateral and re-leasing case for the owner's space and for conversion to general office.
16. Every source and assumption listed, with model outputs labeled as such.

What does the study cost and how long does it take?

The fee and delivery date are confirmed when the scope is set; the feasibility study cost page explains how fees are structured. Four things decide how long a medical office study takes:

1. Whether the practice's financial statements, tax returns and payer and production reports arrive complete.
2. Whether signed leases or letters of intent exist for the third-party space.
3. Whether a regulatory question comes first: a certificate of need, ASC certification, IDTF enrollment or a hospital tenant's provider-based status.
4. Whether plans and a contractor's budget exist, or the study must start from a space program.

After closing, the model is a baseline: the lender can compare actual practice earnings, tenant rent and building costs with the study's cases each year.

How the study runs

1. Scoping: confirm the capital source, program, loan size, occupancy plan and the tests that apply.
2. Document intake: practice financial statements and tax returns, payer and production reports, leases, plans, budget and any purchase contract, plus certificate-of-need filings, certification or enrollment status and provider-based status for regulated tenants.
3. Field and market research: site inspection, building and rent survey, service area demographics and referral sources.
4. Model: occupancy test, practice cash flow, building operating budget, debt service, base and downside cases.
5. Review: the draft is checked against the lender's questions and revised only for new facts.
6. Final report: signed by Sarrah Allen, MAI, with written answers to the lender's follow-up questions. More about who prepares the study is on the about page.

Download the evidence behind this page's exhibits (CSV, 545 data points with sources)