5 real estate wins for hospitals

Hospitals and health systems may be overlooking an obvious money-making opportunity: their real estate.

“It’s becoming a real trend with hospitals to monetize the real estate they have,” said PJ Camp, principal of Hammond Hanlon Camp LLC, a real estate advisory company that primarily deals with healthcare systems. Millions, he said, are to be made with a solid real estate plan.

Here he offers five real estate opportunities for hospitals to take advantage of:

1. Sitting on cash cows. Hospitals and health systems should examine all of the existing real estate they are sitting on, Camp said. “There may be a substantial amount of equity tied up in existing real estate.”  To take advantage of the real estate hospitals have, these organizations can take several approaches, including selling existing buildings to free up capital and continuing in the existing space by leasing or renting.

2. Planning for new developments. The healthcare landscape is changing rapidly so knowing what types of facilities will be needed in the transformed system can help hospitals and health systems run more efficiently. “The way healthcare has traditionally been delivered is not the way it will be delivered moving forward,” said Camp. “This will affect real estate acquisitions.” Camp sees a trend in health systems moving away from large campuses to smaller community-based models. “It’s much more convenient if these places are in retail locations,” he said.

3. Understanding financing. Financing real estate can be a tricky business, said Camp. Finagling interest rates and tax statuses can be a complicated equation. As hospitals more frequently finance real estate to keep capital available, it will be to their advantage to have an understanding of real estate financing and the various approaches they can take, he said.

4. Passing the buck. Owning real estate comes with risk and liability. One aspect of that risk is maintaining compliance with the Stark Law, Camp said, which comes up in relationships between hospitals and doctors. Financial relationships between health systems and doctors can become very complex if that relationship includes a landlord/tenant relationship between the two. The line between referrals and financial transactions sometimes becomes blurred. “The way you structure the leases can unfortunately lend itself to violating Stark Law,” he said. Hospitals can avoid the some of the conflict-of-interest complications by using a third party to own real estate from which doctors can lease while still maintaining a working relationship with the hospital.

5. Property management. Something that is commonly overlooked is how properties are managed, said Camp. “Hospitals will admit they’re not expert real estate managers,” Camp said. Administrators should rely on professional property management to take care of things such as maintenance and tenant satisfaction, which in return can help with patient satisfaction, ultimately helping a hospital’s bottom line.