Hospitals who want to grow their footprint in the community typically look to expand their outpatient facilities. There’s a good reason for this. With a comprehensive facilities strategy, health systems can further provide convenience and brand recognition to patients, as well as expand service line offerings.
Are you a health system looking to expand your facility strategy? Consider these key questions to better equip yourself to take the next steps in healthcare expansion.
WHO NEEDS A DEVELOPER?
Using a third-party healthcare real estate developer is beneficial to health systems for many reasons. Whether you are a hospital, health system, physician group, or senior housing provider, the resources that a developer brings to the table can provide advantages no matter the size or type of project you are considering.
Considerations for Using a Third-Party Developer
By partnering with a healthcare developer, they can
- Provide the necessary capital to achieve your goals
- Assume the risks associated with leasing and real estate acquisition
- Deliver flexible lease options and ownership structures
- Streamline and expedite the delivery of the facility through market expertise and experience
Although partnering with a third-party developer has numerous advantages, there are some drawbacks to consider when deciding if a developer is right for you.
- Limited control
- Higher cost of capital than you are able to borrow
- Escalating rental rates
- Ownership can change hands or never be transferred to the health group
OWN V. LEASE
One of the first decisions to consider when expanding your facilities is whether you will lease or own your new space. The not-so-simple answer is that it depends.
Advantages of Owning
- Build equity on the facility’s value
- Increased control over occupancy costs
- Utilize expertise of a developer on a fee basis
Advantages of Leasing
- Reduce the burden of debt they would incur to purchase the building
- No responsibility for building maintenance and upkeep
- Financial risk is mitigated as the developer assumes responsibility
- Ground lease restrictions and covenants to maintain control of the site and facility
