Hospital Building Leases Involve Special Requirements

May 11, 2018 2:16 pm

5 areas to consider in healthcare facility leases.

LaMar Davis remembers the first time he ran a fire drill in a new off-site facility owned by his former employer, a Chicago-based healthcare organization. The building’s other tenants did not expect the drill, and Davis, now director of facilities, engineering and support services at Shirley Ryan Ability Lab, formerly the Rehabilitation Institute of Chicago, was confronted by an angry landlord.

“Why are you doing this?” Davis remembers the landlord asking. “I told him about the Joint Commission standards, but he said, ‘I don’t care because it’s not in the lease.’”

Healthcare organizations are not normal tenants. In addition to complying with numerous regulatory requirements, healthcare organizations often require more parking, better elevator access, strict infection-control protocols, space for medical gas systems, and scores of other facility features that typical tenants do not. And if those things are not in the lease or associated documents, costly problems can arise.

“What often happens is that the person at the healthcare organization negotiating the lease doesn’t know the requirements,” says Tim Adams, director of leadership development for the American Society for Healthcare Engineering. “All they’re looking at is the square footage, who is going to do the build-out, and what the costs will be. In a more ideal situation, the facility director, or somebody else knowledgeable about codes and requirements, is an integral part of the team negotiating the leases.”

Bottom line: When considering leasing new space, make sure the director of facilities is in the loop, and keep these five facility-related issues in mind.

Clarify who will handle construction. One of the first things that should be considered in a lease for an off-site healthcare facility is who will handle the build-out and subsequent construction work. For normal tenants, that’s a minor consideration. But for healthcare tenants, the issue is more sensitive because healthcare facilities need to meet stricter requirements than other facilities.

For example, the plumbing requirements in an ambulatory care center are much greater than those in an office building.

“With plumbing systems, one issue is following a waterborne pathogen plan,” explains Roger Bradley, regional director of facilities for BayCare Integrated Service Center in Tampa, Florida. “For example, you can’t have dead legs [a length of pipe that doesn’t maintain a regular water flow] in the plumbing because pathogens can breed there. Likewise, you can’t use aerators on faucets, because they cause the water to aerosolize, which may be breathed in by an immunocompromised patient.”

The same situation exists with renovations or repairs after healthcare tenants have moved in. If building owners are handling that work, contractors may not appreciate the importance of infection control procedures—such as isolating work areas so dust does not carry into patient areas—or other issues of concern to healthcare tenants.

Ensure patients have adequate access. Healthcare facilities generally have greater access requirements than regular tenants, and that should be spelled out in the lease or associated documents.

Kaiser Permanente, headquartered in Oakland, California, leases approximately 260 facilities across the country. Brian McElfresh, Kaiser’s executive director of national functions, says that how patients get in and out of the building is an essential consideration.

“Our biggest challenge with landlords is talking about access to the building and shared access to floors,” McElfresh says. “If we are working with a large building, we also focus on drop-off and pick-up areas, including a pick-up zone for an ambulance. It all has to be very accessible, but the owners don’t want it sitting in front of the main entrance.”

Other patient-access issues that should be addressed in the lease include parking, elevator size and availability, and hallway width.

Spell out the regulatory requirements. The requirements regarding fire drills and inspections of life safety equipment that a healthcare facility needs to meet are vastly different from what a non-healthcare building would normally perform.

“We were involved in a case where the landlord owned a portion of the emergency power system, and the healthcare organization leasing the building owned the other portion,” says Steve Spaanbroek, CEO of MSL Healthcare Partners, Inc., an environment of care consulting firm located in Barrington, Illinois. “We had a great deal of difficulty getting them to test that equipment according to how we needed it. Basically, we took a lump for it from the Joint Commission, because we were lacking proper documentation.”

Helping landlords understand regulatory requirements, and, when appropriate, codifying those requirements in leases or related documents, are keys to overcoming this problem, Davis notes.

“In some cases, I have printed out the Joint Commission standards for landlords, and walked them through them,” he says. “And sometimes we cut and paste the standards and put them right in the lease.”

Make sure maintenance and cleaning are up to healthcare standards. Offsite facilities need the same services as main facilities, but it’s uncommon for healthcare organizations to permanently locate facility staff at remote locations. That means services such as cleaning, maintenance, and inspections need to be handled differently. The documentation should clarify how those services will be dealt with.

For example, the cleaning requirements of ambulatory care centers are far greater than those of attorneys’ offices. Surfaces must be thoroughly disinfected, sharps containers need to be properly emptied, and frequent cleaning must happen midday at a moment’s notice, not just after hours.

“We just moved into a property near our hospital, and the landlord wants to be responsible for cleaning, despite us begging him to allow us to bring in our own cleaning crew,” Davis says. “We’re having issues already. It’s not really anybody’s fault. They just didn’t understand that we require a higher level of cleaning.”

Other maintenance, such as replacing light bulbs or making minor repairs, may be more conveniently handled by landlords’ maintenance departments. But even then, it’s important that landlords understand that medical facility needs should be handled with care.

Spaanbroek remembers a time when a newly hired facility manager who was unsatisfied with the directories on circuit breakers started flipping breakers to see in what parts of the building electricity turned off.

“At the time there were patients on the table,” Spaanbroek says. “Fortunately, they were asleep, but their loved ones were in the waiting room when everything went dark. Needless to say, there was a quick meeting [with the landlord] over that one.”

Let the new neighbors know a healthcare facility is coming. This last item is less likely to be codified in leases, but nevertheless, when negotiating with landlords, ask that they clear any special requirements with other tenants.

“Kaiser Permanente has experienced significant membership growth over the past several years which has led us to expand our physical footprint into new spaces and partner with new landlords,” McElfresh says. “Landlords who have previously worked with us understand that even in a standard clinical setting, the population coming in for healthcare is not a typical office worker. However, with some specialty services, there may be special considerations that you should disclose up front. It’s in everyone’s best interest to have open communications and parameters that everyone can live by.”

For example, McElfresh notes that other tenants may feel uncomfortable encountering patients in a shared lobby or other common spaces of an office building, so separate access may be appropriate.

“One area we occasionally struggle with is when we go into a mixed-use project or shopping center,” McElfresh says. “Our model has a pharmacy associated with it, and if you’re in a mixed use or retail location with a retail pharmacy chain, they generally have negotiated exclusives with those tenants. So then we need to negotiate a waiver with those tenants.”

Location and affordable rents are important factors when healthcare organizations search for new sites, but considering facility-specific issues—and having facility managers on negotiating teams—will make new locations more successful.

Ed Avis is a freelance writer in Chicago.

Interviewed for this article:

Tim Adams is director of leadership development, American Society for Healthcare Engineering, Chicago.

Roger Bradley is regional director of facilities, BayCare Integrated Service Center, Tampa, Fla.

LaMar Davis is director of facilities, engineering and support services, Shirley Ryan Ability Lab, Chicago.

Brian McElfresh, 
is executive director of national functions, Kaiser Permanente, Oakland, Calif.

Steve Spaanbroek, CEO, 
MSL Healthcare Partners, Inc., Barrington, Ill.


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