Real Estate as an Enhanced Strategy for Health Systems

Even in an age of increasing virtual reality in business, health systems are considering the opportunities to serve their markets through improving health and offering services. Yet the fact remains that much of the programs, administration, and services must be housed in buildings developed to provide the proper environments for business, clinical operations, and functional support. So real estate remains a necessary consideration in strategies vital to support a systems’ vision and mission.

From the traditional development of hospitals to support a population in a region, to the outgrowth of outpatient programs and medical support businesses nearby, to the full-scale development of medical office buildings, ambulatory surgery centers, and various neighborhood market outreach facilities, it is apparent that a lot of money is poured into the real estate component of a health systems’ business. Strategies vary from an effort to fulfill the workload needs to efforts to capture market share and compete with other systems. The latter can include tactics geared toward improving system reputation and professional recruitment.

In an age of political confusion and diversity of opinion over health coverage, to the average patient there may not be any apparent strategy they can take advantage of to lower their personal costs or best meet their medical needs. Do they go to an urgent care center? Do they stop into a retail center? Do they end up in a hospital emergency room seeking care? Systems may struggle as well as to what are the right things to do and how best to provide care in cost effective yet medically appropriate environments. With the large capital dollars allocated to real estate strategies on systems financial health should clearly include those which elevate the value and importance of real estate to gain returns in fulfillment of those goals. They can also be used in the overall vision to provide a message of clarity about those programs and services to the public, becoming part of the message of quality and convenience of the system to their patients.

We see in our North Texas health systems tiered investments including main hospital campuses, real estate products for neighborhood convenience, ambulatory clinics and surgery centers, branded physician practices, or urgent care and emergency centers. The recent trend of developing micro-hospitals as a component of a system’s strategy cannot be ignored either. Whatever multiplicity of combinations of facilities employed to deliver care it is also important to consider the administrative and support functions that may serve the system in facilities that may not be on the main campus as well. Coordinating this compliment of properties and spaces into a portfolio of value complimentary to financial objectives is a planning operation in its own right.

Facilities as an asset enhancement rather than a necessary evil all point to a conclusion that the importance of a strategy for facilities that align with a system’s outreach, growth, and financial strategies can be a powerful advantage, especially when planning for functional appropriateness, flexibility, and growth potential are master-planned into real estate decisions. Matching function with building type yet allowing flexibility for growth or change is a planning solution. Administrative and service functions are also workplace environments and can be designed to contribute to employee retention and lower personnel costs. Flexible design for infrastructure is important especially in technically complex environments like surgical centers or remote ED’s where renovation may be necessary for future change. Re-purposing existing properties to maximize their advantage could allow for some low-cost improvements to be included in a master plan. As environments of care leave the towers of the past and move closer to the home, the old real estate adage “location, location, location” offers real visual and convenience opportunities in the strategy. Placing the right healthcare services to meet the right demographic need involves the right design for the right operational support for the care provided.

Experienced qualified master-planning professionals can perform the services in creating decision support tools needed by health system administrators and boards in development of a facility strategy. Market analysis, demographic needs, volume projection, space programming, real estate valuation, feasibility study, land use planning, cost of lease, construction costs, and cost of financing, and more are all components of a comprehensive strategic facility plan. For many systems this process never slows down in spite of the threat of changes to value-based reimbursement, repeal of ACA, and changes in lease rules, tax exemption status, as well as the ever-present environment of regulatory scrutiny. While facing an environment of change, one thing that can remain consistent is maintaining real estate assets as a financial value proposition in healthcare systems’ overall strategic plans.

Dan Killebrew is an associate principal at Page as well as a member of the board of directors of the newly formed HealthCare Institute of North Texas.

Posted in Expert Opinions.