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Speed to market is a key component to success in today’s continual expansion of hospitals and their ambulatory services into metropolitan suburbs.

Other elements that usually come into play in developing a successful expansion strategy include:

  • Location;
  • Timing;
  • Selection of property in growth areas;
  • The ability to bring a focused program, design and construction to market.

While everyone may understand the importance of each of these factors, aligning the hospital strategy with a program supported by the local physician network is critical. The facility branding concept, jurisdictional timing constraints (whether state health organizations and/or local municipalities), and the overall ability to efficiently execute on a new development, can become daunting tasks to traditional organizations built to provide healthcare services in a confined location (main hospital campus).

Many hospitals ask themselves, “Why do we have to move quickly? Our patients are not going anywhere.” The answer has many implications, both from their competitiveness with others in the market, and the final cost when the project is eventually open.

Let’s consider two projects, one completed in the traditional hospital timeline, and one with an expedited implementation process.

Traditional Hospital Timeline

1. Hospital enlists a consultant to evaluate current business and strategize new market locations within the health system.

Outcome: Identifies 3-4 potential markets to leverage market share
Timeline: 6 months

2. Hospital either hires outside broker, or uses in-house resources, to identify and negotiate land purchase. Once selected, hospital goes through a due diligence process prior to land closing.
Outcome: Land position in key market areas

Timeline: 6 months

3. Hospital uses a design consultant to determine external branding, mix of services, sizing of services, and jurisdictional approvals.

Outcome: A branded health system design with physician buy-in to the new service line
Timeline: 6-18 months (depending on jurisdiction)

4. Hospital initiates a general contractor for construction of the facility.

Outcome: New facility providing services in a new market
Timeline: 6-12 months (depending on facility size)

In Summary

The traditional model would provide new services in a growing community within 2-3 years after initial identification. Key issues to consider during this process include:

1. Market conditions (including budget increases) that effect construction pricing could easily be increasing 8-10% a year in normal conditions (contrary to recent increases of 20-50% depending on market location).

2. Changing dynamics of the required healthcare services, either increased volume or changing mix since the program was generated, will occur. Keep in mind, this accounts for the hospital, physicians, and market conditions not changing strategic direction, and/or the ability to recruit during the development cycle. If either of those conditions occurs, the process will be moving backward in creating a market presence within the intended timelines.

Next month we will discuss an expedited implementation process and strategies that have helped many healthcare organizations successfully navigate through the expansion process.

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