May 30, 2018
Hospitals and healthcare systems share a common challenge when it comes to including real estate considerations in corporate planning. After all, real estate administrators typically come from careers in property management, leasing or facilities operations, without direct experience in the delivery of patient care.
Likewise, the top leaders in a given hospital system likely ascended the ranks on the healthcare side, with little exposure to real estate contracts, maintenance or property management. Both groups are strongly dedicated to the healthcare mission, but are not always able to create the proper alignment between business strategy and real estate.
This common state of affairs puts the healthcare organization at a disadvantage, however. Real estate has the potential to increase patient access, generate cash flow, increase efficiency and drive growth. A key to unlocking that potential is managing real estate as a portfolio rather than a series of individual properties.
With the right processes and technology, the real estate team can provide valuable insight on a per-property and per-square-foot basis. For example, tracking may reveal that a fully occupied clinic has half as many physicians per square foot as other assets in the portfolio. This hidden vacancy is an opportunity to add doctors – and business – without the expense of acquiring new space, or disposing of costly excess space.
When an organization decides to buy, lease or construct new space, the real estate team may be called in after business planning is far along. However, by including real estate experts in strategy meetings before a site search begins, healthcare executives can make a more informed site selection, especially in regard to patient access, and more accurately project its construction and operating costs, which are significant components of the overall business case for the expansion. Property managers also can help determine whether existing building teams can handle the new location, or if additional managers, engineers and housekeeping staff will be required.
More broadly, the real estate team can address the property component of planning hospital mergers or acquisitions of physician practices. Too often, the team inherits these properties with no idea why a site was acquired, its long-term role, or how to service it with existing resources.
Engineers can predict whether existing utilities, HVAC and parking will adequately serve a new building on campus, or be prone to failure by the added strain. And if the organization is correlating its real estate to its tracking of physicians, patients and other indicators of hospital operations, it will have a clearer understanding of whether it really needs a new building, or if there is already capacity in the portfolio to serve its needs.
When a healthcare system integrates real estate in measuring overall operational performance, the need for including portfolio management in business planning quickly becomes apparent. And the data and analyses generated through this inclusive approach will provide a common ground that speaks to both real estate managers and hospital executives, bridging the gap that all too often divides them.
Jay Johnson is Managing Director of Healthcare Advisory Services at Transwestern.