Better Manage Hospital Real Estate
Among the myriad of responsibilities healthcare executives face every day, real estate administration is easy to overlook and, as a result, many hospitals and health systems do precisely that. But real estate is a multi-billion dollar industry; and many healthcare institutions are missing the chance to monetize all or part of these hard assets in ways that can add capital, support the organization’s overall strategic plan, and provide much-needed dollars that can be reinvested into other areas of their business and community need.
Typically, real estate issues tend to slip under the hospital’s radar until it is often too late to achieve their maximum value. But in truth, the astute use, management, acquisition and disposition of real estate holdings – from the hospital itself to medical office buildings, outpatient clinics, imaging centers, and other investments on or off a hospital campus – should be a critical part of any hospital’s strategic plan. As such it needs constant feeding and not just episodic attention.
While hospitals may do periodic audits on their real estate portfolio, many have undetected savings and cost inefficiencies. It takes the right methodology to unearth these. Fortunately sophisticated real estate management software programs exist today that can inventory every lease and property holding into a comprehensive database with detailed summaries, photographs and advanced mapping programs. Such software alerts the user in ample time on upcoming events that require executive action. For example, the system can notify the user of a looming lease renewal long before the renewal date, thus allowing for the kind of adequate preparation and planning that often results in enhanced terms and additional bottom-line revenue for the healthcare organization (new rates, improvements, changes in amount of common area, etc.).
Careful monitoring of real estate holdings also helps to highlight underperforming properties. When such is the case it may be time to consider alternative ways to place those investments so as to ensure their highest and best use from a strategic, financial and service delivery perspective. Can a medical office building benefit from the addition of a retail operation on the ground floor? Should the building itself be converted to an entirely different use? Is it time for the hospital to cut its losses by selling the property and deploying that capital elsewhere?
None of these questions can be answered fully without information and expertise. Often the best place to find both is through a real estate professional with a deep experience in a variety of healthcare settings and markets. Similar to a primary care physician who turns to a specialist when a higher level of medical proficiency is required, hospitals more and more are recognizing that a specialist is needed to augment their in-house general practitioner (often the finance and/or legal department) when it comes to real estate holdings. Just like the clinical specialist, the healthcare real estate specialist can diagnose the situation and help cure the ailment.
Real estate professionals who stay abreast of the ever evolving relationships in healthcare can add immediate value simply by performing a focused strategic assessment. Hospitals are often surprised that outsourcing this function is virtually risk free as compensation is generally derived from closing fees assessed when a transaction occurs and are often paid by the other party. That’s why an increasing number of hospitals today are making independent real estate professionals part of their ongoing strategic development team.
Do you know exactly how many leases you have across your entire organization? Do you know what they represent in terms of square footage or annual occupancy costs? Have you considered ways to maximize the financial return on these hard asset investments? Are you taking your real estate holdings for granted?
Real estate can dramatically impact a hospital’s or health system’s bottom line. Don’t wait until you have a defined need to give this area of your business the attention it requires and the focus it deserves.
Thomas Brosseau is Senior Vice President/Principal/Director of Healthcare Services at Swearingen Realty Group in Dallas.
