Tool: Real Estate Performance Metrics
Shared by Forum members Margie McHugh and Michael O. Lincoln
Performance measures can help healthcare finance leaders compare the strategic value of various real estate properties-and assess whether to keep, sell, consolidate, or relocate.
Number of Providers per Square Foot. This is a high-level indicator of capacity.
Benchmark considerations: Industry standards have historically ranged from 800 square feet to 1,500 square feet per physician. However, these vary significantly depending on specialty, practice model, use of mid-level providers, ancillary services in the practice, etc. The current trend toward increased efficiency is driving these metrics down toward the lower end of the range in large group practices. Additionally, true capacity analysis will also include the provider schedules, number of rooms, turnover of rooms, and other operating metrics.
Amount of Revenue per Location. When compared to similar locations, you can get a sense of which is more profitable.
Benchmark considerations: The key is to be able to compare within your own portfolio similar scope and size practices, using industry benchmarks, such as those offered by the Medical Group Management Association.
Rent as Compared to the Market. This will show whether the rental rate is comparably priced.
Benchmark considerations: Lease rates need to be compared to similar spaces within the market. This would mean that on-campus buildings would need to be compared to other on-campus properties, not just to other nearby medical buildings. Location, age of building, and amenities can make a big difference in rental rates.
Presence of Outliers. How are the operating expenses? Are the utilities high for this location? Are the taxes high?
Benchmark considerations: These metrics need to be compared to local market data, as well as to national benchmarks for medical office buildings.
Building Characteristics. These will include age, visibility, access, parking, general condition, amenities, etc.
Benchmark considerations: Properties should be scored against each other within the portfolio to identify problem areas that may need to be addressed. This comparison can also help determine whether a location is a good long-term fit.
Margie McHugh is senior vice president, Lillibridge Healthcare Services, Inc., Chicago, and a member of HFMA’s First Illinois chapter ([email protected]).
Michael O. Lincoln is executive vice president, Lillibridge Healthcare Services, Inc., and a member of HFMA’s First Illinois chapter ([email protected]).