Last month we explored the timeline of a traditional hospital project, which would allow a hospital to provide new services in a growing community within 2-3 years after initial market identification. Now, we will consider a project with an expedited implementation process.
Expedited Implementation Process 1. Hospital initiates discussion with its real estate team (internal resources and external developer). Outcome: Concurrent activities engage developer in real estate search (i.e. site selection, initiation of due diligence, land acquisition, design and construction selection); and the hospital initiates a service line evaluation and generates a program. Timeline: 3 months 2. Team engages a design consultant to determine external branding, mix of services, sizing of services, and jurisdictional approvals using external developer resources, initial project design, and development relationships. Outcome: A branded health system design with physician buy-in to the new service line and product type as implemented by external developer expedited services. Timeline: 3-12 months (depending on jurisdiction) 3. Team engages a general contractor (ideally internal to the developer) for construction of the facility. Outcome: New facility providing services in a new market Timeline: 6-12 months (depending on facility size)
Summary The expedited model would provide new services in the growing community potentially within a year of initial identification. Key benefits to the team members include:
1. Reduced financial risk associated with changes in development and/or budgets due to mitigated delays through the development process.2. Increased income streams from new community services.
3. Meeting community identified mix of services earlier.
4. Allowing the perception of growing with the community as its needs change over time. Why must we move quickly? In consideration of the scenarios mentioned above, there are two obvious advantages to moving fast. From a budgetary perspective, cost of development is a major concern. However, speed to market also directly impacts the way you are perceived in the marketplace, which ultimately is the lifeline to successful business ventures.
In new growth population centers, the first health system that is open for business usually draws the traffic flows. This first system creates the community identity. Through this identity, the overall concentration of medical services offered by other physicians, who hope to be convenient to both the healthcare referral pattern and the end-user patients, is dictated. If a healthcare system is second or third to market, it is very difficult to change the initial patterns. Such changes are only likely if the provider care offered is substantially better, or the real estate location is substantially more convenient to the community.
There are several key suggestions to speed the process that healthcare organizations use to mitigate cost increases and changing market demographic service lines.
- Implementation of an annual evaluation of existing business lines, making minor adjustments then, instead of only when assessing service lines for new facilities (on or off-campus). This enables the hospital to quickly make internal decisions when the next round of facilities is being contemplated.
- Alignment with a strategic real estate partner/developer now, whether or not the hospital has internal real estate resources. This process will keep you abreast of new growing markets and/or opportunities without continual market oversight by hospital resources. It will also eliminate the “getting to know you” period, and help the hospital focus on maximizing the use of the developers internal real estate resources. Your healthcare staff can remain focused on internal issues.
- Utilization of alternative financial vehicles for funding ambulatory facilities to help the hospital manage its capital constraints. There are numerous financially stable healthcare developers throughout the country that can align the hospital and its affiliated physicians in compliance with off-balance sheet transactions. Those same developers can provide services that include planning, ownership, and long-term facility management.
Implementation of these strategies has allowed the successful expansion of many healthcare organizations across the country. Often, the early adopters have been catapulted from average performing health systems to best-in-class. Through increased focus on the internal resources that can help patients, streamline efficiency, and leverage aligned stakeholder resources, these healthcare systems can successfully meet the strategic needs of extended healthcare communities.
