As hospitals and physician groups look for ways to expand into new markets while keeping costs down, building off the hospital campus has become a popular and growing trend.
Historically, on-campus was the ideal place to build. Within walking distance of a hospital and a great tenant referral source, physician groups were setting up shop and doing well. However, in past years, there has been an intense scrutiny for demonstrating a return on investment with new medical office development and with on-campus facilities more costly than off-campus medical office buildings, off-campus development has become a common route.
Building on the hospital’s campus is more expensive for a variety of reasons. Constructing on-campus means that the building needs to match similar architecture styles as the hospital’s, and comply to the aesthetics of the campus; a labor intensive and costly task. Operating expenses are increased as well as there is a greater need for seasonal attention, driveway, ground, common and green areas. Integration with the main hospital may also play a role as spending increases with attached technology systems and coordinated utilities.
Smaller and more local facilities seem to be the trend as 16% of hospital executives indicated outpatient facilities in neighborhood settings as future construction projects according to the HFA/ASHE 2012 Construction Survey. These off-campus facilities offer a closer, first point of care for patients, helping provide hospital and health systems the ability to expand their geographic footprint.
3 Reasons Why Off Campus Facilities Are Beneficial:
Grab Market Share:
Positioning satellite facilities in neighborhood settings or in medical parks can help attract patients and increase hospital referrals. Medical parks or medical malls help curb costs by focusing efforts around an outpatient model, as well as create a revenue stream by offering new opportunities including:
• One-stop healthcare for patients
• Allows physicians to increase their services
• Fosters hospitals’ outpatient market share
• Enables health systems to better serve the community
Hospital officials see them as a way to conveniently combine specialties in one location while they may better market themselves with increased signage.
Boosting the Bottom Line:
As I mentioned earlier, on-campus facilities are more costly than off-campus. Physician groups may use off-campus outpatient facilities for diagnosing and treating more patients. However, physician commute time needs be evaluated as well. While shorter walking distance makes seeing multiple patients in the hospital setting and in adjacent facilities easier, off-campus requires travel time that inhibits the physician’s ability to treat as many patients.
Caters to a Specific Market:
As consumers demand enhanced convenience, location in an off-campus facility may be desirable to serve a specific market. A market that caters toward more elective procedures with patients not covered by low reimbursing medical coverage can be a financial boon. On-campus facilities are not as easily demographically targeted, providing care to a wider population with a range of insurance types.
As one hospital’s vice president of facilities put it, “We're trying more and more to move things off the hospital campus that don't absolutely need to be here, both to reduce congestion in the area and to allow the hospital to be used . . . . more for the technology of modern equipment that require this kind of setting.”
James Ellis, CEO, Health Care Realty Development Company, is a nationally recognized successful real estate investor and developer of medical office properties with a comprehensive knowledge of sophisticated real estate transactions, cost effective designs, and efficient property management.
Aaron Razavi is Associate Marketing Director at Health Care Realty Development.
Visit their blog at http://www.hcrealty.com/medicalrealestatedevelopment/