Yes, it pays to outsource real estate in health care

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From house calls to HMOs to HCAHPS, health care continues to evolve, and it can be difficult for administrators to keep all the balls in the air. And with obvious priorities like infection rates and patient satisfaction, it’s all too easy to let the myriad of other processes keep running status quo—even if there’s an opportunity to be more efficient.

One example is real estate. In fact, the medical real estate market is valued at $1.5 trillion, and the costs of occupancy for all of those assets is a staggering 8 to 12 percent of a hospital or health system’s total expenses.

The typical model involves a hospital or health system collecting rent from the doctors who lease space in the owned medical building. However, that means the full risk of vacancies – as well as the cost of upgrades and maintenance – now fall on the hospital.

More and more businesses – including hospitals and health systems – are now realizing the benefits and efficiencies that come with outsourcing lease management and other real estate needs—which means you can go back to worrying about patient care.

Add an expert to your team

I know YouTube could help me figure out how to work on my car when it breaks down, but instead, it makes more sense to take it to a mechanic—and for me to stick to real estate. It’s about playing to your strengths.

Leasing a medical office building can be a challenging beast, especially with the unique requirements of health practices and the services they provide, including clinical, lab, diagnostic, radiology, etc. That’s even more reason why finding a real estate professional with specific medical experience can be so valuable.

The broker you choose will not only need to be adept at the best ways of communicating with physicians and marketing to health care professionals but also experienced with negotiating complex lease terms and tenant improvements (including navigation of the tenant improvement allowance [TIA]). A qualified broker can help you streamline the whole process and lease negotiation to ensure the match is beneficial for not only the health system or hospital but also the provider. Plus, he or she can provide you with a fair market analysis to help you navigate the often-confusing aspects of (and exceptions to) Stark Law, ensuring you’re following the specifics of these federal regulations as you move forward with a new lease agreement.

For many of our clients, it’s also about ensuring that the tenants moving into the medical office building complement each other. As Modern Healthcare reports, this not only boosts your bottom line but can also drive patient satisfaction:

“During the past decade, physician integration has continued to improve with an increased focus on collaboration. The patient experience also improves through the convenience of having multiple specialties in the same building, which often provides more cost-effective settings. That’s especially important with shrinking reimbursements … Work spaces are getting smaller as providers push for efficiency. Physicians from different practices share more waiting rooms, back-office space and nursing stations.”

By working with a real estate professional who can evaluate the local market and also juggle these multiple priorities, you’ll benefit from new tenants that contribute more to your health system than just a monthly rent check.

It pays to partner

Like many industries, health care is composed of providers of all shapes and sizes, so you need to determine what type of lease administration scenario works best for you.

By working with your internal team and gathering cost estimates, you can identify what processes make the most sense to outsource. Then, your internal staff can focus on more of a strategic role and spend less time on the day-to-day processes. And as CoStar explains, an outside partner is crucial to stay competitive:

“It’s a serious mistake to think one person can do it all, no matter the number of leases being managed. One person cannot and should not be the sole keeper of all of this critical information, which represents one of the top financial expenses for your company.”

I’ve been honored to assist so many of our local health care partners, including Olathe Health, Shawnee Mission Health, Truman Medical Center, Sabates Eye Centers and many others. Our knowledge of the local real estate market and experience with regional medical providers mean we have the instinct and know-how to do better deals for you.

It’s hard to know what the next evolution in health care will be, but at least you’ll know one aspect of your business is in good hands.

Molly Crawford Munninghoff is a sales and leasing associate at Copaken Brooks, a full-service commercial real estate firm headquartered in Kansas City and serving the Midwest. The company’s full suite of services includes: leasing (office, medical, retail and industrial), investment acquisition and sales, tenant representation and HQ relocations, condo management, property management, asset management, development, and construction management. Share your thoughts on our Facebook page or on Twitter @CopakenBrooks.

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