The Ultimate Guide to Healthcare Expansion
Hospitals who want to grow their footprint into the community are looking to expand their outpatient facilities, for good reason. By doing so, it can provide convenience and brand recognition to patients, as well as expand service line offerings. Looking to expand your facility strategy? This article will help walk you through the questions you need to answer to determine whether or not now is the right time.
To Own or Lease?
If I want to expand my facilities, should I rent or own?
Advantages of Owning
- Building equity on the facility's value
- More control over occupancy costs
- Developer completes all services required on a fee basis
Advantages of Leasing
- By leasing, health systems do not have to burden the massive debt they would inquire with owning a building.
- Not responsible for building maintenance and upkeep
- Financial risk is mitigated with responsibility to the developer
- Ground lease restrictions and covenants to maintain control of the site and facility
At the end of the day it boils down to your financial strategy, and asking the right questions to your department heads.
Hospitals that decrease real estate occupancy costs are able to free up capital to be invested in other mission-critical initiatives – including recruiting and retaining talent.
Pros & Cons of a Healthcare Developer
It's best to weigh both options when deciding which is a best fit for you.
Benefits of a healthcare real estate developer:
Using a third-party healthcare real estate developer is beneficial for health systems for many reasons. The resources that a developer can bring to the table can greatly outweigh the costs and risks the health system takes by providing their own capital.
- Provide the capital needed
- Expertise and knowledge database that a healthcare developer brings to the table
- Take the real estate risk associated with expansion
- Streamline and expedite getting your facility to the market
- Take the risk of leasing to third party community providers / partners
- Act as bridge capital to bring your vision to the market
- Offer ownership reversion options to ensure future control
- Lease flexibility to offset the FASBE accounting changes
Cons of a healthcare real estate developer:
- In some cases a higher cost of capital than health systems are able to borrow
- Escalating rental rates over the term of the lease in most scenarios
- Health systems don't own the long-term asset
- The asset can change ownership hands throughout the years
- Real estate control is limited
Who needs a healthcare real estate developer?
As a hospital executive, we know time is limited, yet highly valuable. The constant change in the healthcare industry leaves executives less time to react and adapt to their surroundings. Focus needs to be on patient experience, quality of care, human resources, medical equipment and the overall outlook for the community at large. By allowing an expert healthcare real estate developer like Boldt to take the financial risk and provide the capital for your expansion plans, it will free-up the available resources needed to focus on mission critical initiatives.
- health system
- physician group
- senior living
- performance and wellness complex
Check out the success our clients have had.
What you gain when working with a developer:
OWNERSHIP STRUCTURE & FINANCIAL FLEXIBILITY
Boldt not only provides all capital needed for your project, we prioritize the ability to tailor lease structures and tenant ownership options to match your specific needs. We offer a range of financial options that provide maximum flexibility.
Your health system maintains complete control of every aspect of the project. Including, but not limited to, how the facility looks, who the architect and construction partners are and any messaging in the market. We will work with leadership to incorporate these covenants and any other covenants that may be critical to your health system.
Boldt team members have a proven track record of working with the entire project team to collaboratively facilitate the design, construction and commissioning of the project. The health system is a key team member and central in all decisions.
INDUSTRY EXPERTISE & UNDERSTANDING
Our experience with on-campus and off-campus, multi-use medical facilities and as a nationwide healthcare real estate developer includes a national panel (across area and time) cost database. Our project teams possess an in-depth understanding of the healthcare industry, gained through years of experience focused solely on healthcare.
Boldt’s approach to real estate development