Lease considerations in retail urgent care centers

Health care consumers are increasingly seeking convenience in addition to quality care at a reasonable cost for primary care physician and emergency care visits. At the same time, demand for health care services has continued despite the current economy. Retail urgent medical care centers have, therefore, become a growth area in the current retail real estate market and are being targeted by retail shopping center owners and developers.

The concept of a retail urgent medical care center is to provide medical services to consumers who need primary care outside of customary primary care physician office hours or have minor illness or injuries that would otherwise be handled in hospital emergency rooms. The urgent care center typically is staffed by a physician, has weekend and evening business hours, and leases a business premises in a retail center that is conveniently located for health care consumers. The patient’s co-pay cost of an urgent care center visit is generally comparable to that of a primary care physician - and less than an emergency room visit co-payment.

When negotiating and preparing the urgent care center lease, the urgent care center tenant and shopping center landlord should consider the unique nature of this tenant and be certain to address the tenant’s use of the premises, anchor tenant use restrictions and urgent care center tenant competing use restrictions.

Use of premises

A retail urgent care center tenant should negotiate a use clause that does not merely identify its primary use as an urgent medical care center. Instead, the use clause should be broad enough to allow for existing and future uses related to this primary urgent care center use.

For example, weight loss and weight management services, occupational medicine/workers compensation services and/or the dispensing and sale of medication in connection with the services rendered on the premises may be essential to the profitability of the tenant’s business, and the lease use clause must contain language that is broad enough to allow such secondary uses.

In addition, if the secondary uses are operated in the premises by tenant affiliates or other entities, the lease should confirm the landlord’s consent to the use of the premises by such affiliate or other entity.

Similar to other medical tenants, in order to avoid a breach of the landlord’s hazardous materials lease provisions, the urgent medical care center tenant should also confirm the landlord’s consent to the lawful, ordinary and necessary storage and disposal of certain medical waste in connection with its use of the premises.

A retail landlord will endeavor to limit the tenant’s use by specifically identifying the primary urgent medical center use and any secondary uses. This enhances the landlord’s ability to market and lease other shopping center space - including outparcels to other medical related tenants that do not directly compete with the retail urgent medical care center such as dental, chiropractic or surgery centers. This limitation may be acceptable to the tenant if the primary urgent care use and all secondary uses are sufficiently identified in the lease use clause.

Since convenience is an essential component of the retail urgent care center business, sufficient and convenient patient parking should also be confirmed in the lease. If possible, this should include exclusive parking immediately in front of or adjacent to the premises and nearby disabled/handicapped parking for patient use.

Anchor tenant use restrictions

The urgent care center tenant typically leases a premises in a shopping center that is conveniently located for health care consumers and has maximum vehicular and pedestrian traffic exposure. The landlord’s shopping center is, therefore, often anchored by a regional or national grocer and/or drugstore.

The anchor drugstore or grocer lease will undoubtedly include shopping center use restrictions that prohibit at least some of the urgent medical care center tenant’s use. For example, to limit competition with its pharmacy, the anchor tenant lease may prohibit any dispensing of medicinal drugs for a fee. At the same time, the dispensing and sale of medication in connection with the services rendered on the premises may be an essential component of the urgent care center tenant’s business since it allows the patient to conveniently obtain certain medication in connection with the urgent care center visit.

In order to enable the urgent care tenant to retain the medication sales use, while avoiding a violation of the anchor tenant’s medication sales restriction, the tenant and shopping center landlord should obtain consent to the urgent care center tenant’s use from the anchor grocer and/or drugstore. The anchor tenant consent may require a medication sales revenue limitation or percentage of total revenue limitation to prevent the urgent care center from operating a competing pharmacy.

However, the anchor drugstore and/or grocer may ultimately be persuaded that the benefits of an urgent care center that draws health care consumers to the shopping center outweighs any sales revenue reduction resulting from the urgent care center’s limited medication sales competition.

Competing use restrictions

Similar to other retail tenants, the retail urgent care center tenant should include shopping center use restrictions that prohibit other tenants from competing with the urgent care center’s primary and secondary uses. These competing use restrictions should include terms and conditions that provide for incorporation of the use restriction into the lease of future shopping center tenants, landlord enforcement of the use restrictions and contain specific remedies such as rent reduction, injunction rights and lease termination rights in the event that another shopping center tenant operates a competing use in its premises.

If the landlord is not prohibited from leasing other shopping center space to other medical related tenants that do not directly compete with the retail urgent medical care center (for example, dental, chiropractic or surgery centers), the landlord will typically agree to such competing use restrictions.

Retail medical clinics have become increasingly common in national drugstores. While a retail clinic is typically staffed by a nurse practitioner and provides more limited services than an urgent medical care center, the retail clinic has weekend and evening business hours and is conveniently in the drugstore tenant premises. The urgent medical center tenant should therefore address this retail clinic competing use as part of the competing use restrictions in its lease. The landlord may not have the negotiating leverage to prohibit the anchor drugstore tenant from operating a retail medical clinic in its premises. However, the urgent care center medical tenant should at least confirm lease termination rights in the event the drugstore tenant elects to operate a retail clinic in its premises.

Conclusion

With the continued demand for health care services and health care consumers increasingly seeking convenience in medical care, retail urgent medical care centers have become a common shopping center tenant. When negotiating and preparing the retail lease, the urgent care center tenant and landlord should be certain to carefully address the tenant’s use of the premises, anchor tenant use restrictions and urgent care center competing use restrictions.

A partner in the Tampa law firm of Williams Schifino Mangione & Steady PA (www.wsmslaw.com), attorney Blake D. Bringgold is a member of the firm’s real estate and business practice group. He centers his practice on real estate and business transactions, workouts and bankruptcy.