When the group reconvened in February 2015, we took the discussion a step further, getting into the nitty gritty details of site selection. Delving into this topic with perspectives from a versatile group offered valuable insight in an hour and a half’s time, which can have long-lasting benefits (as evidenced by the participants strategizing to find ways to help one another!)
The following sections summarize our second session:
SITE SELECTION CONSIDERATIONS
- The overall system strategy and business plan needs to be considered during all ambulatory decisions.
- What competition is nearby and is it a positive or a negative.
- Site location and assessment evaluation:
- Physical condition
- Branding opportunity/exposure
- ADA Compliance
- Sprinkler, fire alarms, emergency lighting
- Space – exam/office capacity
- Upgraded infrastructure/emergency generator
- Considerations for a detailed analysis:
- Examples of team organization and engaging the right folks:
- In order to initiate a request, it must go through a regional director.
- Strategic meetings to understand the direction of where that region/system is going.
- Real Estate and Operations report to the same person and/or capital committee.
- Designate a person responsible for primary care and a person for ambulatory care, and ensure they are strategically aligned.
- One central location for initiatives across the health system.
- A major group that manages all ambulatory services.
- Real Estate Team asses the site for visibility; Facility Team determines whether the physical space fits the program and how much it will cost to renovate the space; then Service Line Users look at the space, with the person holding the capital making the ultimate decision.
- Engage developers in the evaluation process, and ask clinical leaders if their volumes will merit going to a new site. ROI has to be there, volume has to be there.
- High visibility is more important now than it has ever been.
- Good access
- parking or mass transit
- located in the center of town
- located off of main roads or highways
- Good signage
- Consider market saturation and market coverage to determine which service lines go in what locations
- Payer mix being served
- From a developer’s perspective, their goal is to:
- Meet the demands that the facility leaders have, and meet their space requirements.
- Develop medical use space with long-term flexibility.
- Look for pockets of areas in urban settings that need a demographic they require, physical envelope they require, infrastructure they require, streetscape that enables you to serve populations, building reuse such as retail.
- Realize that New York City is different from the outer boroughs. Cost is different and criteria are different. (i.e. mass transit vs. parking)
- A best practice – refine down to two or three sites, do test fits and get MEP on board, all before getting cost estimates.
DETERMINATIONS WHEN LOOKING AT REAL ESTATE PROPERTIES
- A good property manager who understands your needs
- Determine length of time you plan to be in the building
- Ceiling heights
- Generator hookup
- Dedicated ventilation
- Appropriate floor plates
- Transportation – parking and mass transit
- Urban business model vs. suburban business model
- Desirable location?
- If a new location, is it close to the old location? Some people won’t travel further.
- Is it/can it be zoned for medical use?
- Size of elevators - can they fit stretchers?
- Can a new means of egress be created?
- Can you have signage and use the lobby?
- Structural considerations – imaging and vibrations
- Is Article 28 a factor?
CHALLENGES THAT RELATE TO THE EVALUATION PROCESS OF SITE SELECTION
- Different users have different needs, i.e. Finance vs. IT vs. Users. It would be nice to have a unified system vs. a variety of systems depending on need.
- Value judgments may be different for different types of facilities and locations - What entities get involved when?
- It’s challenging to negotiate with landlords and get attractive deals as they know you aren’t planning to leave after lease expires because patients grow accustomed to one particular location.
- Multi-tenant buildings in the outer boroughs don’t offer enough parking spots to accommodate the number of doctors coming in and out.
- Commonly available care – other providers can
do it more conveniently and sometimes more economically, which is why visibility is important.
- Evaluation of departments for needs - some institutions base it on profit centers while others base it on service lines.
- How can you best track real estate and when leases expire?
WHAT CAN ASSIST/EXPEDITE THE PROCESS?
- Custom software program that analyzes ROI for every square foot of existing facility properties
- Owner/developer involvement to shorten the procurement and delivery process
- Having templates available to rate properties
- Software showing when leases expire and prototypical test fit blocks to plug into plans
- Property Managers that can service healthcare practices
BALANCING REVENUE – INPATIENT VS. OUTPATIENT
- Looking at new offsite clinics – review the numbers, i.e. how many FTE’s, what will the service line be, what will the patient volume be
- Having a central location for all initiatives across the health system allows the ability to capture referrals back to the hospital – all service lines are under one umbrella and spearheaded by one group; then each service line has an administrative component that tracks the referrals back to each of the major facilities.
- If you open an ambulatory surgery center, you must also consider how many ambulatory outpatient procedures you’re doing at an inpatient site vs. outpatient. That affects the revenue of that particular facility.
- Consider what pushing services that used to be done at the hospital to your ambulatory surgery center means to that facility because they are losing that revenue.
- Drive cases that are medically appropriate out of hospital OR’s - You want to be careful not to push revenue out of the main hospital since roughly 60% of inpatient admissions come from the ED. You want to ensure the right patients are being sent to ambulatory care centers.
- It may be advantageous and economical to consolidate many small practices into one large ambulatory care center.
- ROI for outpatient facilities may be compromised in order to improve access and offer certain services for the community.
OTHER ITEMS FOR CONSIDERATION
- A need for more sophisticated O +M services
- More reliable and more responsive
- There are different types of ambulatory care facilities.
- Is it an urgent care walk in facility?
- Does it need to be Article 28 compliant for surgeries?
- Is it multi-specialty space?
- Pull patients out who can be treated in outpatient environments so they can focus on improving the inpatient environment.
- Ways to improve HCAHPS scores and reimbursement
- Looking at revenue per square foot
- If visibility is important to the enterprise, would they subsidize the rent for a great location?
- Need for property management that can service healthcare practices
- Outpatient space is vastly lower cost than inpatient space
- Decanting inpatient for outpatient
PROGRAMS TO BE AWARE OF WHICH IMPACT OUTPATIENT CARE
DSRIP (Delivery System Reform Incentive Payment Program) – Their purpose is to fundamentally restructure the healthcare delivery system by reinvesting in the Medicaid program, with the primary goal of reducing avoidable hospital use by 25% over 5 years.
Stark Law – Determining whether compensation is fair market value or takes into account the volume of value of referrals.
Knowledge sharing amongst an elite group within the New York City healthcare design and construction market has proven to be enlightening. It is interesting to see the similarities from institution to institution, borough to borough, urban to suburban, and then of course recognize where the differences lie. I look forward to sharing the outcomes of future sessions.
Blog authored by Jennifer O'Donnell, a former VP, Business Development at Array.