Groups of commercially astute physicians are creating medical centers that satisfy their communities’ needs for medical services, while promoting the competitive and financial interests of the physicians, themselves. Physician-run medical centers are at the crossroads of failing hospital service models and advances in technology that are facilitating such change. Surgi-centers, ambulatory care units, and outpatient facilities, among others, help patients access the best in care in less imposing settings nearer to their homes than ever before. This is taking place while physician groups execute strategic business plans to align their specialties with patient demand, and they are doing so more profitably than are many traditional hospital.

Still, solving the business challenges of physicians looking to augment their hospital affiliations and increase their profitability is more than a simple matter of decentralization and specialization. Like any competitive financial venture, branching out to specialized medical facilities is a complex marketing, operational, and financial undertaking. The ability of physicians to effectively accomplish this objective relies on the precise coordination of strategic business planning, architectural guidance, real estate intelligence and transaction savvy, engineering solutions, and construction management expertise, among others.

An optimal experience includes situating a combination of profitable medical specialties in a geography that includes competent, marketable Physicians and staff amid a population that demands and is capable of paying for those specialties. Also desirable is minimal local competition for those patients, and the availability of real estate in locations that can support such practices. Moreover, it is essential that the building that will house such a medical facility will contain the structural components and systems capacities to support the intended specialties.

However, along the way, challenges are certain to present themselves, some of which include:

• How will you decide which specialty services to offer?
• What will the venture cost and how will you finance it?
• What if patients exist in one geography, but physicians reside in another?
• Will you engage competition in profitable, familiar geographies or venture into new territories?
• How will you design a scope of work for each professional discipline that will be involved in your initiative?
• Will you design the facility with the patient first in mind, assuming that the physicians will follow, or will you design for the physicians, assuming that their patients will follow?
• What if demand changes – will your center be adaptable to alternative uses?
• Will the facility’s design be financially driven, and how will trade-offs between financial interests, physicians’ interests, and patients’ interests be reconciled?
• How will you ensure that the building you select can sustain the infrastructure required for your operations, or could costly modifications undermine your financial plan and timeline?
• Who will design your facility to be in compliance with local building codes?
• Will your facility support the certification requirements of public and private insurers?
• What happens when the building you select can not support the new equipment that will be required by your physicians?
• Will landlords of the buildings you target embrace your tenancy, or will the nature of your occupancy pose problems for their other tenants during construction?
• Will it be best for you to build a new facility or acquire an existing facility?
• Should you own or lease the facility?
• Will construction estimates be reliable or provide a shock to your business plan and financial backers mid-way through completion?

In part, a new medical facility is dependent on and impacted by the underlying real estate transaction. The financial stakes of any real estate venture can be high. Those stakes can become even greater when the real estate solution is serving a medical practice in which operations could place very specific costly requirements on the real estate. Like any other business venture, however, risk can be mitigated by applying proven methodologies that quickly get to critical information for creating likely scenario alternatives and selecting those that will thrive commercially.

When considering the creation of a medical center(s), your first step is not to acquire real estate and attempt to make the center fit into the property. More importantly, real estate should only be acquired once it has proven that it will effectively serve the demands of target patient, while supporting the operational, technological, cultural, and financial expectations of the physicians and their investors. Start by building a team of highly qualified and experienced professionals in real estate, healthcare business strategies, patient and competitive demographics, architecture, engineering, and construction cost estimating. By taking this approach, you will be well positioned to bridge the gap between the myriad of decisions that make up a medical practice business plan and a physical location in which to house that practice. Not only will you reduce your risk, but you will likely reduce your start-up and ongoing capital costs and achieve profitability sooner, all the while serving your patients and helping people live fruitful and healthy lives.

Real Estate Strategies Corporation, located in Kenilworth, New Jersey, and serving clients throughout the country, helps companies create and execute Business DRIVEN Real Estate Solutions...and Opportunities, faster and with less risk. Visit www.realstrat.com.

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