Several Clients have mentioned that Southern California is not looking so good as the place to purchase or to start-up a practice.
Watch the video here:
A Note from Scott McDonald on This Week’s Episode
Back “in the day,” growth (and glamour) seemed eternal in the five mega-counties found in the area (Orange, San Diego, Riverside, San Bernardino, and Los Angeles Counties). For the first time EVER, the area is losing population. Among demographers, this has been known as the “California Exodus.” True, the birth rate has declined (it has lost at least one Congressional Seat) but there are some other things going on.
This episode defines some of the trends. The Governor and the State Legislature are agreeing to raise taxes, restrict water distribution, and the raise the prices on land development.
Doctor Demographics is there for you, no matter what type of practice you are considering.
Read the Transcript Here:
Scott McDonald: [00:00:14] Hello, I’m Scott McDonald and this is Dr. Demographics. Now, the idea of this podcast, this webinar, is really to say where should you consider practicing and what places you avoid? Now, in order to do this, I’m actually taking one part of the country at a time. But I want to deal with enough specificity that I can say why this particular place has promise or not, and what the dangers or benefits of that site might be. And today we’re talking about Southern California, an area I know personally very, very well, and I’ll explain why in just a minute. But I wanted to say at the beginning, each location in the country has a potential, but there are dangers and they’re unique to the site that you’re considering. Southern California consists of five very large counties. And yes, I know you can say Santa Barbara County and Ventura County with their potential. We’ll talk about those later when we talk about the Central Coast. But for now, I want to talk to about the very five mega counties in Southern California. Some people are saying, should we go there or not? Now, there’s a large number of practices for sale in this region of the country, and some of them are reasonably well priced. Some, however, are not. And the thing also you should know is there is the opportunity to do a scratch practice in several of these. So I’m going to go through these. Please stick with me and we’ll talk about the demographics of each.
Scott McDonald: [00:01:59] Now, ultimately, the question is, is practicing health care in Southern California a dead option? And there are lots and lots of people that are saying, oh, there’s just too many doctors in the area. It’s not growing, yadda, yadda, yadda. Look, the area has potential. You just have to be very, very careful about what parts of this area are going to be good for you to go to. And I’ll talk a little bit about some of these things about the region and also about specific locations. Now, last week we discussed Chicago as a potential site for practice. The feedback I received and I do heed the feedback it was that I was a little overoptimistic about Chicago Lions potential. And I did say if we have a large population of immigrants from Eastern Europe, it’s going to do great. However, there is some doubt as to whether that can happen. But I’m trying to tell you that’s what demographers and business developers are saying about Chicagoland. I’ll try not to be so Pollyannish about things this week. Northern and Southern California may be bleeding residents for different reasons. Now I want you to understand they’re not growing. California has lost a congressional seat and some people are saying the reality is they may lose two, but I don’t know that. But I’m saying for sure the area is in trouble because it’s not really growing and that’s for the north and the south.
Scott McDonald: [00:03:35] Now, this is poorly documented that there are really different reasons, and that’s kind of important for our discussion today. But they all share the same governor and legislature. So the problems in the north and the problems in the south are going to be related and they’re entirely manmade. And I’m saying by that there’s nothing in the north of the south or southern of California that is inherently bad. I mean, the weather isn’t going to change. Yeah, they’ve got problems in water. But the problem is water and energy costs are primarily manmade. They’re not things that are inherent in the area. Nevertheless, unless they get a handle on these things, it’s going to strongly affect the development of what’s going on. And I’ll be more specific as we go. Now, the background on my take on Southern California is real. I think it’s interesting. I’m from Los Angeles, so I grew up in greater Los Angeles. My dad was born there. My grandparents live there. We have a long term perspective on what is happening in in California, particularly in Southern California. I’ve got a real handle on the place. I’ve done demographic reports. I have helped practices there. Well, I was the marketing manager for the California Dental Association and other state wide associations. I have been. To every large and small neighborhood within Southern California and Northern California as well. I left the area about eight years ago, specifically because of the changes in demographics and culture and politics and economics I saw on the horizon.
Scott McDonald: [00:05:28] I’ll give details in a moment, but for the most part, let’s kind of summarize it this way. The property values in California are doing badly and are not likely to do well. Employment participation in the employment job participation is not going to look good. The types of jobs are not looking good. I think the governor and the legislature do not want California to grow. You may say, well, how could they do that? Well. They take this global warming thing like a religion and they believe that any increase in the population density is a bad thing. I’m not making that up. I’ve. I’ve read. And heard so much about it that I can give you chapter and verse, but I’m saying the government doesn’t want to grow and that’s going to be bad for practices. Thinking about going to California, particularly Southern California. Now I have helped practices in all regions and I know that there are some places that are not very large, that are not doing well, and I know others that are kind of surprising everybody. So they’re reversing trends. Trust me, I know where they are. And we can help you at Doctor Demographics to examine whether or not your investment in a practice or in a property is going to be a good idea or a bad one. But it is not enough to go to a generic demographic company.
Scott McDonald: [00:07:05] You have to find people who are specialists in health care. That’s going to be very important for you to do. Not all parts of Southern California are doomed. I want to repeat that not by a long shot. But there are some places that show much more growth, affluence and business potential than others. The pandemic was not kind to California and largely B because of manmade reasons. They are self inflicted challenges. And there is some good news as well. Still, you have to know the trends in California to identify what parts of the area are doing or are going to do well and which parts are not. There are five counties or these are really mega counties, including San Diego, Orange, Riverside, San Bernardino and Los Angeles. Geographically and in terms of population, these are five of the biggest counties in the nation. Yes, I know. Cook County. Yes, I know greater New York. Certainly the five boroughs in Long Island have potential. But in terms of the number of people living in an area, Southern California has got a huge impact on the nation. And you’ve got to know these trends. Right now, San Bernardino and Riverside counties are showing the most affordability and therefore the most growth in California. Now, Riverside County is beyond a doubt. The place I’d go. But look, Sandy. San Bernardino is really kind of surprising, everybody with how well it is doing.
Scott McDonald: [00:08:59] It’s turned a negative situation around and I think it can continue to do that. However, there is a lot of movement in the state that is trying to to counter that. Thing that is going on in San Bernardino, Orange County’s Riverside Counties. Orange County, on the other hand, once was the golden child and San Diego was the middle class heaven for California. But there’s a lot of movement away from that. They’re taking water and development rights away from people who might otherwise want to take something and make it really a growing place. But another thing I want you to keep in mind is affluence. Affluence is found in all areas, but some people go, oh, but look how much the median household income is. They’re all rich. Look, that is a very deceptive statistic. So, yes, property values, cost of living, those things are very good, or at least they’re high. And that may not be the best thing for you, for a doctor who’s trying to develop a practice or purchase a practice in this area. So when we look at it, the cost of living and the cost of housing is going to matter to you long term. It. The cost of living is really high, and some people consider that to be automatically good. I don’t because we have seen that if you price the people out of a market and make it so that they can afford to build or to develop a home site and the state of California does not want to have that.
Scott McDonald: [00:10:54] It’s going to hurt you not only in your practice, but also in your living condition. Now the median age is a big division between the five counties in this area. Age is not universally distributed. So in other words, some of these places have got a population that is older, and I’m talking about over 55 years of age. And that is really affecting some things now. It’s a reflection of birth rate. When the birth rate is down, practices cannot grow, even if there are really geriatric practices. And there are some of them in San Bernardino and Riverside counties. Populations that are trying to appeal to the elderly. There are some, like in Los Angeles County, that are really going after the young folks, the single people saying, yeah, we really want the young, beautiful people to be part of our practice. There’s a danger in that, too. Now, demographers usually like a median age that is on the lower side, and I’m talking about 30 to 33 years of age. And when the population gets up into the fifties, it means that, yes, there’s going to be a demand for health care because older people want and need a lot of health care. But it is having an effect upon the people who move in. Younger families are the ones that are growing in an area. Older people don’t help an area grow and develop, but they’ve got the money to be able to afford a lot of care.
Scott McDonald: [00:12:35] Family formation is something to track in southern California did over new home construction. When I talk about family formation, I’m talking about a couple that will get married and stick together. And I’m not talking about living either. I mean, literally, they are in it for the long haul. So marriage counts. And in Southern California, family formation has been going down. Ditto for new home construction when no new home construction is going on. It is not a positive indicator. And that is what made Southern California so successful. It was a place people could go in the post-World War two years by a piece of property, develop a bit of land, and they would stay for 20 years. Right now, the rental movement is really supplanted the construction of single family dwellings and Southern California is going to suffer as a result. The cost of living has to be contrasted with the median household income and also the cost or price of housing. In California, the cost of new home construction has been really, really high because they’ve made it almost impossible to make the purchases of building materials in Southern California, and therefore it’s much higher, much more expensive. That’s intentional because the state legislature and the governor want rental units. They don’t want ownership of homes when rental units are the primary growth and what people are investing in.
Scott McDonald: [00:14:24] It just means that people are not going to be there as long and therefore practices are going to suffer because they don’t have the ability to build a relationship with the patient base. I hope that all makes sense. We can talk about it if you ever want to have a conversation on the telephone. Now population growth is open to interpretation. Just because there are a lot of new residents in an area. Doesn’t necessarily mean the area is growing. It means a lot of people are moving in, but often a lot of people are moving out. San Diego County has been an example of this. Lots of new homes were built, especially in the northern part of the county, but they’ve become rental houses and rentals are not as valuable because they do not create wealth for the people who live there. They’re an expense and that is a problem that they’re having in Orange County. But Northern San Diego was a perfect poster child of this idea that lots of people are moving in, but they’re moving out to. Immigration has caused an effect. Now, you already know this, that a lot of people from Mexico and other South American and Central American countries have moved here. And they’ve sort of assumed, well, there’s always going to be jobs. The problem is traditionally in California, particularly Southern California, agriculture was the primary hirer of the migrant labor market. But that’s not what people want to do.
Scott McDonald: [00:16:09] They want to have more money and they want to be able to send it back to Mexico or El Salvador, Guatemala. And that is making people less long term stable. That has been a difficulty. Now, the area has been the Bracero movement, which was those people who would come seasonally from Mexico were able to send their money back and they themselves weren’t long term residents. They were migratory. But the problem is the Bracero movement became very unpopular. And therefore it didn’t really take root or is not taking root in Southern California as it once did. Some people are assuming that manufacturing the fabrics that are going into the area are going to save them. But I’m afraid that isn’t really going on. Now, this gets kind of deep, and I know it’s not what most doctors want to talk about, but it is the basis of the economy in Southern California and something you need to know about. Here’s the problem. The citizenship in Southern California. And this goes true for northern California are lined up at the gates to leave the state. There are so many people and they’ve lost, well, more than 100,000 people in the last 50 years. And that just means the stability that one is counting on to build a patient base is tending to be lacking and it is getting smaller. Now let’s talk about this, because they refer to it as the Southern California exodus.
Scott McDonald: [00:17:57] Now what is the exodus? Covid 19 really didn’t cause it, but it certainly exacerbated it. And it’s not just residents. It’s businesses, too, that are taking up and moving to other states, particularly Texas and Florida. But don’t think for a minute that the Nevada and Arizona aren’t benefiting from people who are leaving California. They’re moving. The cause and existence of this migration has been debated and the term became popular during the COVID 19 pandemic. I’m not saying it is going to change. I’m just saying they associated the pandemic with people leaving. The California exodus is a disputed mass immigration of residents and businesses. The problem is employers are picking up and leaving and they’re moving to places that are more tax friendly for their employment. That means Texas, Florida, Arizona, Oklahoma, by the way, significant. So Georgia. And this is having an effect upon what would normally have been Southern California’s strength. While the media has mostly focused on the wealthy people in California, the people who are actually left the state are typically lower and middle class people and tend to be under the age of 65. The people who are staying are older. That is going to be an issue if you’re a doctor. Now, from 2010 to 2020. Over 1.3 million Californians left the state with 500,000 people leaving in 2019 and 20. Now, you may say, well, why are they going? I can say I don’t know, but it’s really taxation and cost of living.
Scott McDonald: [00:20:00] It’s expensive to live in California, and that has been a motivation for people to leave. But with those, people want the jobs and therefore Southern California, California overall is going to have a hard time replacing the population that has left. Texas and Florida are going to be the beneficiaries. Now. I don’t need to really make too much a point of this. And there are some disputes that are saying why people left. I believe, though, that it’s undeniable that residents and businesses are the ones leaving. The cost of hiring a person in California is extremely high and in Southern California is exceptionally high. That’s due to the prices of housing, taxation and just generally getting people to locate. The pandemic caused an exodus because people could transfer to other states and still work online, and therefore people were earning the same wages that they had working for their employer in Southern California, but they could live in a cheaper place, and that is not lost on residents. Now ultimately it’s going to resolve itself. But that may be 20 years. And I don’t know how the state politicians are going to resolve this. Now it matters to health care practices. Who is coming and who is going? It’s not just the raw numbers of bodies that are being there. But. Southern California used to have a large number of children born. The median population. The birth rate was quite high. But what’s happening is people are going out of state to have their children.
Scott McDonald: [00:22:01] And this has made those other states that California doesn’t seem to want a little unhappy. Now there are some stories about businesses. You know, one of the largest law firms in the United States was located in San Diego, and they had several hundred lawyers who are working for them in a national law firm. Well, they asked the state of California for a tax exemption in order to retain the workers in the state. And the state of California said, don’t let the door hit you on the way out. The state lost all those hundreds of attorneys who are of high paid and well-educated. And they’re out of there. The same thing has happened in high tech firms. So the state has sort of said, we don’t need you, we don’t want you leave. And that attitude, as much as anything else, has made doctors suffer because they’re the ones who are making the money on who has come and who’s going. Keep it in mind. It isn’t a vacuum that is determining the success or failure of California. Now, I want to go through some different parts of Southern California. The Asians have always been a large part of Orange County, and that will continue. But they only and I’m talking about the patients only want Asian doctors, even if they’re fluent in English. It used to be that they would want someone who spoke an Asian language.
Scott McDonald: [00:23:42] But it turns out there’s a cultural imperative that in Orange County has been quite significant. If you are an Asian doctor, terrific. But you’ve got to be Chinese or Japanese or Hmong or whatever that that flavor of Asian there might be in order to satisfy the population and have them want to come to you. People are becoming pickier when it comes to who they’re going to. Now, Hispanics in Riverside County and San Bernardino Counties are getting pickier as well. It isn’t, though. Hey, I speak Spanish. They want to know that you’re Mexican or Salvadorian or a Guatemalan or Honduran. They want to know that you’re Argentinean. It matters to them that you have a cultural association with their people. So it’s becoming a problem. You got to be what the people want you to be. The middle class doctor used to be the king in San Diego and Los Angeles. But those days are gone. What has happened is there are still doctors practicing in San Diego and Los Angeles, but they’ve raised the rates and they’re becoming much more exclusive. Now, that works fine if you’re rich. But what about being middle class? So the middle class doctor is not easily found in San by San Diego and Los Angeles, at least not as it once did. Target marketing, and this is important for you to know, is the new concept that you’re going to need to know. It’s not just competition ratio, because when I first started doctor demographics many years ago.
Scott McDonald: [00:25:30] It became a big deal was just saying how many doctors are there or providers per population? Rather, it is per population of a particular demographic, character or cultural group or language group. And that’s what matters most to local people. Now next week, I want to talk about Northern California and we’re going to talk about a specific aspect of it, and that is ice across the the distance that a person has to travel to get care. And it matters more and more in northern California. We’ll talk about it as we go along. Now, if you want to give us a call, it’s 808 490499. If you’ll go to doctor, demographics dot com. We’ve got all the different reports we offer. And if you’ll look at the drop down menu, it shows the price. It is a real value. I think you’re going to find it very useful. But our job is not to nickel and dime you. It’s to give you the information you needed to reasonable price. But we’re trying to think more like consumers than the doctors that serve them. So if we can help you, a doctor to demographics, please give us a call. Mike Green is on the phone and is talking to people every day. Don’t make a mistake and cheap out. You can get the answers to what is a good place, a perfect place to practice. Take care.