NEWMARK KNIGHT FRANK

Breathing New Life into Outdated Health Care Real Estate

Making the decision to renovate, redevelop or raze underutilized health care facilities

May 3, 2017 Michael Hanley, AIA, LEED AP BD+C and Randy Guillot, FAIA, LEED AP

Dotting the landscape throughout this country are underutilized or shuttered health care facilities. Although there are no hard data detailing their provenance, many likely were built between the late 1940s and late 1980s and can be traced to the Hill-Burton Act of 1946, which ignited a health care building boom.

What becomes of these buildings that are mothballed or rendered obsolete by an array of circumstances and challenges that includes everything from declining reimbursements to a rapidly changing model of care to deferred maintenance?

Tired building stock should be renovated, redeveloped or razed. Coming to any one of these decisions, though, can be a difficult process, muddled by an uneasy confluence of deferred maintenance, financing, program needs, public opinion and often a vision that is too narrow for what’s possible.

The last of these roadblocks can be particularly vexing because renovating and redeveloping outmoded hospitals isn't typically part of a health care organization's area of expertise. But, with the right professional assistance and examples provided by successful repurposing projects at other hospitals, health facilities professionals can begin to explore alternative uses for obsolete facilities.

Getting started
Before visioning sessions begin, hospitals and health systems first should revisit some of their existing beliefs and protocols surrounding real estate decisions.

Even though the idea of developing property or working with a developer may seem outside the mission of delivering care, it’s important to be open to different models of real estate delivery and operation to take advantage of the full spectrum of opportunities around these outdated assets.

Focusing on the needs and desires of patients and serving staff can help to identify the larger role a hospital can occupy in the life of a city or community. So, it may be that a health care system becomes a landlord to retail and food tenants, because that’s how it’s able to develop the brand it’s trying to become — more lifestyle focused. It becomes a larger, more holistic and human-based business decision.

And, accordingly, the project team needs to reflect a more expansive focus. It’s not just about picking a team of architects, planners and facilities managers. A hospital or health care system that’s considering a major repositioning needs people who can calculate capital expenditure and operating expense, who understand catchment area, market trends and demand, and who can create a business plan.

Any such conversation should involve not only the facilities manager, but other stakeholders including the C-suite; finance and accounting departments; real estate brokers; human resources; and various user groups. All voices should help to shape a project’s vision, goals and drivers.

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