According to a new report, hospitals can cut costs by reconfiguring their real estate footprints.
Many health systems own the facilities that house their hospitals, clinics and administrative offices, but few analyze the data to determine how to best use them, real estate management experts at JLL concluded in a report released Monday.
Consolidating less-used structures, pooling lease agreements with landlords and pooling complementary services could reduce purchased service costs, limit energy costs, preserve equipment and improve patient and employee satisfaction, according to in the report. Such strategies could reduce the costs of installing health systems by 12% to 18%, JLL projects.
“We don’t see a‘ systematic ’approach in a mass of healthcare real estate,” said Richard Taylor, divisional president of healthcare solutions at JLL. Part of the problem is a lack of relevant and quality data, he said. This is despite the fact that real estate is the third largest asset in the balance sheets of health systems, he said.
Health systems are actively acquiring or merging with other systems and groups of physicians, which can make it difficult to get them incorporated into their operations. While labor and supply chain are typically the top priorities, data collection related to structure utilization, energy use, population growth, and maintenance plans can drive the process, he said. JLL.
For example, increasing the preventive maintenance work order by 17% can reduce reactive work order requirements by 25%, extending the shelf life of the equipment, the real estate management company found. Clustering complementary services in certain markets and improving the design of facilities can increase patient and employee satisfaction scores, according to the report, which cited scores of Integrated Health Systems in Hospital Consumer Assessment of providers. Health and Systems in the Low 80s Compared to the Average 70s.
“Integration should happen after mergers and acquisitions, but many times it’s not,” said Jay Johnson, national director of healthcare markets at JLL. For example, Johnson cited a case where a health care system employed four pediatricians in four different offices at half a mile each.
“Someone looked at the leases and did nothing because they were not due. But they could have lowered their costs for support services, consolidated medical equipment, reduced administrative costs and created a better brand presence,” he said. Johnson.
Poor planning, inadequate leadership support and a lack of institutional capacity or expertise often hinder the path to complete real estate strategies. But health leaders will be forced to look beyond the cost of labor and supply chain as they navigate the post-pandemic environment, the report says.
“We’ve seen sanitary systems eliminate a lot of work and operate with skeletal equipment. But then they have to employ structural management companies, which is expensive and can reduce quality,” Taylor said. “They need to train and grow their workforce and find more creative ways to save money.”