What is the most cost efficient method of expansion for a hospital: adding or renovating facilities? Return on investment is key to this question as hospital executives plan to add to their medical real estate portfolio or focus on enhancing their current assets.
Faced with outdated boilers, chillers and heating and ventilation systems along with inefficient department designs, growing patient volume and a limited budget to boot, hospitals systems across the country are evaluating if upgrading or building a new facility is right. There is no question that renovating existing facilities in most circumstances is more cost effective as a short term solution to more expensive new construction. However, building new facilities offers a wide range of opportunities and preparedness that many renovations cannot.
3 ways for hospitals to decide to construct new facilities or renovate existing ones:
1. Use a comparative strategy when assessing the situation: The hospital should assess their present situation while also comparing with local and national trends. Gauging how similar sized hospitals in geographically similar areas expanded is a good comparison when considering future development. If the hospital building doesn’t work well with the way care is being delivered today, be it too small exam rooms or too narrow hallways, the decision to upgrade can be overweighed by bringing a new facility to the market instead.
2. Conduct interviews: Who would have better input of ways to improve existing facilities than hospital employees who work in them every day? One-on-one interviews with departmental directors, key staff members as well as physicians can prove very useful when wanting new insight on strategy overview. Integrating and involving perceptions of medical staff and senior management offers guidance and new lines of thinking and in a project of this scale these considerations are exactly what are needed to carefully analyze renovating or new construction. I think it also is a great way to build team morale as hospital members are encouraged to contribute ideas and collaborate in a process they wouldn’t normally involved in.
3. Run department tests: One method is to test and review each service and department for size and need and convert it to net square feet, department gross square feet and building gross square feet. This helps build a foundation for how to develop a complete picture for space requirements. Some factors to consider are: staff activity and efficiency, equipment settings coupled with space functionality now and for future growth, hospital room adaptability and of course, patient flow.
Overall, renovation in many situations may be the only choice. New construction is often considerably more expensive, but renovation is a short term solution. When considering these options remember to review the Mission Statement and Strategic Plan to more completely consider the health organization’s goals.
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/