As hospitals and health systems face mounting financial pressures, many are pursuing strategies to reduce costs and unlock additional value from their real estate portfolios. Below are five approaches we are seeing in the market.
- Development Services – Some hospitals are acquiring more land than needed for new facilities, while others are purchasing available parcels near existing campuses. The hospitals plan to act as a developer to develop complementary uses, such as senior living communities, surgery centers, medical outpatient buildings (“MOBs”) and hotels to generate additional value.
- Real Estate Joint Ventures – Although many MOBs are developed and financed directly by hospitals or nonprofit real estate foundations, some health systems are partnering with for-profit developers. In one arrangement, a hospital system is seeking a share of project profits in exchange for leasing a majority of the MOB space.
- Branding Transactions – Some health systems are leveraging their brands to form partnerships involving new senior living communities and specialty hospitals. In exchange for an ownership interest, a health system may license its name and logo and provide operational oversight.
- Sales of Underperforming Assets – Health systems are also selling vacant, underperforming or non-core real estate. Recent examples include vacant specialty hospitals, corporate offices, micro hospitals, aging senior living communities and skilled nursing facilities.
- Vendor Contract Renegotiation – Larger health systems are reviewing and renegotiating vendor contracts to reduce operating costs. One common approach is issuing requests for proposals for services such as facilities management or brokerage services.
For additional information on this topic, please contact:
- Andrew Dick at adick@hallrender.com or (317) 977-1491;
- Joel Swider at jswider@hallrender.com or (317) 429-3638; or
- Your primary Hall Render or Hall Render Advisory Services contact.
Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot—outside of an attorney-client relationship—answer specific questions that would be legal advice.
