How to Boost Your Ambulatory Strategy and Thwart Retail Health Threats
July 9, 2015 | Mark Furgeson and Jim Eaton
With population health changing the healthcare industry, a different mindset challenges us to rethink ambulatory real estate strategy. Tomorrow’s MOB tenants may compete with retail health providers like Walgreens for business, changing the way we plan and invest in ambulatory facilities today.
New ambulatory real estate site selection approaches
We must consider: why is Starbucks right across the street from Caribou? How does Chipotle end up just down the road from Panera? It’s because they care less about the competition than the demographic markers of their target clientele.
Now we site MOBs with location intelligence exactly the way Starbucks and CVS do. What are the roadways? What are the services? Where are the schools? Yes, we still want to know where our competitors are and the physician access points. But this is a complete change in the way we evaluate real estate for outpatient facilities. See more on ambulatory hotspotting.
Population health: New focus on previously overlooked markets
Soon, many providers will receive a fixed sum to manage the care for a specified population. Low-income patients with multiple chronic diseases were historically less profitable. In a managed care arrangement there will be tremendous potential to save or even make money by proactively managing their health to keep them out of the hospital.
Managing the health of these populations represents a fundamental change in where we choose to locate ambulatory services. Soon, there will be incentives for providing easy access to ambulatory services in low-income neighborhoods.
Designing ambulatory facilities for consumers who will shop around
With millions of people on high-deductible plans, we can expect them to shop around for the best price and value. On healthcare.gov, the bronze health insurance plan has $10,000 deductibles. The silver plan has $5,000 to $6,000 deductibles. This means we will need to consider new ways of designing outpatient facilities more simply and less expensively.
Consider the facility cost implications of the fact that a Walgreens exam “room” is nothing more than a chair surrounded by a cardboard divider. To be competitive, we must “plan tight” to keep overhead costs down, minimizing the costs passed on to the patient.
Smaller, more efficient ambulatory facilities
When the cost to build one 110sf exam room can exceed $50,000, it is critical to not build any more rooms than are necessary. Process improvements can impel a smaller, more efficient facility sized to support streamlined staff workflows. Operational efficiency creates virtual capacity to see more patients in less space. By designing a facility to reduce bottlenecks, we move patients through their visits faster.
In a streamlined process, patient throughput improves by 10-20%, which increases the percent of time each exam room is occupied. This effectively increases the utilization of the room so that you can see the same number of patients in fewer rooms (thus less cost.)
Ways we achieve this:
- One centralized registration area at the main entrance, where any registrar can register any patient regardless of specialty. Checking in at the main desk as well as at the clinic tacks an extra ten minutes onto the visit.
- Online registration, either from home as when checking in for a flight or at a kiosk.
- Multifunction rooms with portable equipment rather than dedicated EKG rooms and lab draw rooms. When providers perform the different functions of pre-op testing in separate spaces, they struggle when patient volume misaligns with available rooms.
- Shared changing/subwaiting between different imaging modalities. We decrease throughput and wait times by manipulating the quantity of changing rooms and the size of the waiting space.
The rooms can be more flexible through the use of time share strategies. Ambulatory facilities designed for this model typically house a series of 3000 GSF pods. Each pod consists of three exam rooms plus a procedure room. These are larger than the 2000-2400 GSF we design because each specialist has their own supplies and needs dedicated storage. MOBs may staff this facility with a ‘facilitator’ who knows the routines of each time sharer. The facilitator goes into the space in the morning and sets it up for the day, accommodating for the preferences/requirements of each specific practice. Time sharing not only provides a higher utilization of the space, it also enables physicians to expand their practices in new locations.
Ambulatory planning techniques – make every square foot generate revenue
Facilities and real estate appear as capital assets on the balance sheet. Yet, they seldom maximize their contribution to the achievement of business objectives. Facilities must optimize the space allocation/revenue stream relationship.
Waiting rooms are a prime example of non-revenue generating space. They could contribute to more than one revenue stream by performing retail functions such as selling food or gifts that generate revenue. During off-peak hours, waiting rooms can house group meetings, nutrition counseling, and health education presentations.
Consider the Walgreens waiting area from this standpoint:
- Shared space. Ambulatory facilities can provide for shared space between different functions. Immediate care, primary care, and imaging can share nurse stations and bathrooms. Some multi-use spaces must be large enough to accommodate several different functions. For example, to use an exam room as a procedure room, it may need to grow from 100 to 160 square feet. While the cost of the room itself is higher, it is less expensive to build fewer multi-use spaces than to build more single-use spaces.
- Shared pre/post op. Because pre-op bed use peaks in the morning and post-op in the afternoon, these functions can share the same beds. A shared pre-op/post-op room arrangement requires approximately 20% fewer beds than separate rooms. If needed, pre-op or PACU can overflow into exam rooms. This concept is not unlike the way interventional centers use the same room for pre/post surgery, injectable imaging, minor procedures, pain management, and special procedures. Also: How to increase surgical capacity without construction.
- No private offices. Now, we design shared work areas in the style of an airport lounge to increase the utilization of back-of-house space.
- No free sample storage rooms. Free samples can cost a medical practice $250-300k per year according to the CMO of a 25-physician internal medicine clinic we spoke with. This practice entails building a +/-140 sf room to store them, monitoring the expiration dates, and administering them to the patient. Instead, pharmaceutical reps will provide a prescription pad for free samples so the patients can pick them up at their pharmacy.
- Consensus on implants. In many surgical centers, preference cards for instruments, drugs, and implants vary widely among physicians. This creates inefficient ordering and stocking, and requires a larger sterile processing space. To the extent that physician leaders can design their processes around standard protocols, they can reduce costs and increase efficiency.
- Standardization. Standardizing the design and layout of similar spaces can also reduce construction costs. With standard sizes, layouts, stationary equipment, and furnishings, family practitioners to Ob/Gyns can use the same exam rooms. By sizing every room at 105 sf, providers are more willing to share — rather than vying for a few larger exam rooms.
For more, see Three Ways Healthcare Facility Design Can Save Money.
Data-driven ambulatory facility construction
How does population health change the way that we build? We look for ways to build ambulatory facilities faster, to gain speed to market advantage. First, we no longer design or build ambulatory facilities beyond a fifty year life span. This alone decreases the duration of construction by approximately 10% and costs by 5-7%. Secondly, we use pre-fabricated construction techniques such as tilt-up construction, above-ceiling MEP pipe rack modules, and prefab bathrooms.
We also use data in new ways in ambulatory construction. DProfiler is a software that quantifies costs and material quantities in real time as you develop a conceptual idea in BIM. This technology has helped us build faster and more accurately with fewer RFIs.
Walgreens frequently employs Design Build project delivery to roll out its 60-120 new stores each year. Recently, we sat down and asked ourselves, “How are we going to meet the changing needs of our clients as they work to manage population health and offer a broader continuum of services?” We realized this meant we needed to offer solutions that stretched beyond our current services. As such, we recently joined forces with the Haskell Company to expand our Design Build project delivery capabilities. By removing silos, design-build results in the lowest overall cost and fastest speed to market. For more, see our Guide to Design Build Project Delivery.
FreemanWhite helps health systems, developers, and program managers plan ambulatory real estate strategies that capitalize upon new opportunities in population health. We balance cost and value in outpatient facility projects by validating programmatic and strategic recommendations with demographic and utilization data.
About the Authors
Mark Furgeson serves as a trusted advisor to healthcare clients, providing a deep understanding of the issues that impact this complex building type. He co-teaches a course at Cornell University that investigates the uncertainty regarding scientific evidence and the investment in healthcare facilities.
Jim Eaton is Vice President and leader of Haskell’s national Healthcare Practice. He has a well-rounded understanding of market positioning, profit and loss, as well as strategic growth planning within the national healthcare facility change market.
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