Five real estate
questions healthcare professionals should
Creative strategies to reduce costs and enhance revenue
Even before the pandemic, U.S. healthcare providers were finding themselves fiscally challenged. Once the coronavirus struck, the loss of elective services, the higher costs of caring for COVID-19 patients and additional personal protective equipment (PPE) resulted in an immense loss of revenue for the entire industry.
While those elective services have started to return, healthcare organizations are still trying to recover. It’s more critical than ever for health administrators and professionals to find ways to cut costs and generate revenue. One answer could be something that might have been previously overlooked — leveraging their buildings and facilities.
Here are five questions healthcare providers and administrators should consider asking about their real estate so that they can continue doing what they do best — caring for their patients:
- How should I rethink my portfolio in a post-pandemic future?
In order to continue to thrive, you’ll need to start viewing your healthcare systems and facilities as not only a fundamental part of patient services, but also a vehicle for cost savings and revenue generation. By implementing creative approaches and strategies to your real estate portfolio, you can offer your patients the best possible care while reducing your expenses and boosting your margins.
These include increasing the efficiency of your outpatient facilities by grouping primary care and specialty care in consolidated locations; modifying the functions of existing spaces for specialized care, or maximizing revenue in a single location by leasing out unused spaces to other medical or retail tenants.
- How can I maximize utilization of our space and benchmark against competitors?
Your first step should be to gather as much data as possible about your healthcare systems’ facilities so you can optimize their potential. Analyzing your portfolio will help you uncover buildings and facilities that are under-performing, which locations are best for serving your patient population, where your competitors are and what type of services they are offering. Having this kind of data at your fingertips will help guide your real estate decisions — such as whether you should eliminate less-productive sites or revitalize them by adding a new mix of health services or reconfiguring them for better patient flow to narrow your competition.
You can leverage technology and expertise to look at space utilization within your facilities, as you determine which employees should work from home and how many patients you see. A strong portfolio optimization strategy will help you eliminate waste and boost your healthcare systems’ revenue potential.
- Why should I reimagine how I manage and operate healthcare facilities?
In these uncertain times, it’s crucial that your facilities are managed more efficiently. Many hospitals and healthcare systems’ have decentralized facilities management programs, which can lead to counterproductive actions and conflicting processes. With an interconnected, centralized system of facilities management (FM), processes and technology, you’ll be able to drive much more efficiency in your operations and position them for long-term growth.
Partnering with a third-party facilities management (FM) service is one of the best ways to achieve that centralized “systemness.” By doing so, you’ll reduce expenses through operational efficiencies in workflow, supply chain management and workforce administration, driving savings of 5% to as much as 30%. Your FM partner can also help to reduce energy waste — a considerable operating expense — by switching to LED lighting and/or installing smart building systems. Reducing energy costs could also provide another bonus — bringing you a step closer to your sustainability goals.
- How can I pursue capital projects while experiencing financial pressures?
Your healthcare facilities are always going to need reinvestment to remain functional, safe and compliant. In today’s financial climate, your capital might be limited so you’ll need to prioritize projects to make sure that your money is being well spent. With a facilities assessment, you’ll be able to collect information about the condition of your facilities, building systems, and maintenance needs. Once you’ve captured those details, you’ll be able to create a data-driven capital plan that focuses on the investments you need to make now to avoid costly repairs and unexpected expenses.
When it comes to labor for those priority capital projects, outsourcing your project management to an external service provider will help avoid the expense of having excess staff on site. They’ll provide you with a core team now, and once spending begins to rise, your project manager can expand your staff as needed. They can also help to access sourcing with preferred vendors and discounted rates, negotiate fees, and manage change orders with architects, engineers and contractors. Project managers should be optimizing spending so that any service fees are outweighed by the cost savings they provide.
- What is the best way to extract capital from my existing and unused facilities?
There are several ways to do this. If you own a lot of medical office buildings in a particular region or even nationwide, it’s highly likely you have space that’s unused or being underutilized. You could start by consolidating your organization’s space to create vacancies for third-party tenants, including timeshare offices for physicians, surgery suites, or even retail to generate capital. Leasing rooftops to telecommunication partners that need antenna locations or energy providers that want to install solar panels to power the surrounding communities can also be a way to generate immediate and long-term revenue.
If your hospital sits on a large campus, you probably have excess land that’s not being put to use. Leasing the land to a third-party will generate long-term revenue for your organization. Many healthcare providers have used ground lease arrangements to support outpatient programs like surgery centers, cancer treatment, rehab and behavioral services.
For underutilized properties in strong locations, you can boost productivity and generate revenue with changes to your mix of services, adding physicians, reconfiguring space to better accommodate patients and extending hours of operation.
These are just a few of the key strategies you can apply now to unlock hidden savings and start recapturing lost revenue for your healthcare organization.
Want to learn more? Read 15 real estate strategies that boost healthcare margins.