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How to Optimize Health Care Real Estate Businesses?

Now, more than ever, optimization has become an important goal for the health care sector. And this means, to pay attention to market efficiencies, access to capital and cost management to drive decision making. Modern Healthcare Magazine shared an article that revealed some interesting ideas on how the healthcare industry can reshape their businesses to seize new opportunities by reducing costs, aligning strategies and enhancing value.

“When properly deployed, organizational real estate strategy and operations can offer significant opportunities for cost containment, operational efficiencies, and capital investment to better support strategic growth, market expansion, and enhanced delivery of care”.

According to Modern Health Care Magazine, to optimize healthcare real estate businesses, we need to take into consideration four key components:

  • “Portfolio Performance – Ensure a comprehensive inventory of the current portfolio, including all owned and leased properties and develop an understanding of space utilization, expenses and other key financial performance metrics”.

  • “Operational Strategies – Critical assessment of current leasing, property management, facility operations and related functions. Staffing levels and technology platforms are critical areas where health systems tend to lag behind industry best practices”.

  • “Capital Strategies – An objective assessment of owned and leased properties relative to strategic and financial initiatives. Health systems often have significant capital committed to facilities without clear organizational reasoning or rationale. Opportunities may exist to recapitalize existing facilities and redeploy capital, or otherwise utilize third-party capital to enable strategic facility investments, new facility development, and market expansion initiatives”.

  • “Risk Mitigation – Health system owned and leased properties involving independent physicians are often subject to STARK and Anti-Kickback regulations. These considerations must be inherently ingrained in each and every real estate function and decision. Interaction between the leasing transaction team, lease administration, accounting, property management, and legal departments is paramount to avoid potentially costly settlements”.

The benefits of a proactive management of real estate in the healthcare sector are extensive.

To give an example, they sharedthis hypothetical case:

“If a health system successfully implemented cost-containment measures (utility controls, contract re-negotiations, or other measures) to reduce real estate operating expenses by only $0.50 per square foot across a one million square foot real estate portfolio, they could save $500,000 annually. Consider the impact over a 10-year time period: $5 million in savings. Straight to the bottom line and available for reinvestment in other healthcare services – physician alignment, technology, or new facility development.”

At MKThink we're working to help clients re-optimize their resources for the future. Whatever it is, our role is to help you think through it and make the best decisions to match your space to your organizational objectives.


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