What You Need To Know About Managing Healthcare Real Estate

When it comes to managing healthcare real estate, it's an entirely different ballgame from managing office, retail or industrial assets.

BOMA International gathered Providence Health & Services regional director of Alaska region Andrew Romerdahl, Healthcare Realty VP Amy Byrd, Colliers International national director of healthcare services Mary Beth Kuzmanovich (moderator) and Physicians Realty Trust VP of property management Mark Dukes to discuss some of the challenges property managers and owners might run into when dealing with these unique assets.

Patient safety is paramount to everything, notes Andrew, so it requires a bit of negotiating with the landlord. If any physical features of the building are off, for instance, a provider could be denied Medicare and Medicaid payments. The property management team has to be able to take care of the building so if an inspector shows up, everything is squared away.

It's also about patient experience, even for the "plain Jane" tenant, Amy says. Healthcare Realty makes sure to talk to customers all the time. For instance, the time it takes to get from the parking space is very important to these customers. Is there enough parking? Is there a valet service for elderly or orthopedic patients? Do you have enough space for "tagalongs" to gather when their loved one is seeing the doctor?

You also need to understand tenants' needs and how they might impact other building occupants. For instance, many surgery centers run 24/7, making submetering critical, Amy says, so energy costs are not charged to the other tenants.

One time, Amy says she had a fertility clinic that was storing eggs. The location turned out to be next to the intake for the outside smoker's area, and the clinic almost lost some of the eggs due to damage from the smoke intake.

Andrew also told attendees that it's important to understand who is responsible for the maintenance, repair, janitorial and other needs the tenant might have. If the landlord is controlling the space, it has to make sure it's hiring the right person to handle those systems.

Another unique challenge to managing a healthcare property is electrical work. Amy recently had to replace a chiller, which required electricity to be shut down for the weekend. Medical tenants needed to be told at least a month ahead, whereas regular office tenants only require perhaps a week's notice. There are medications that might need refrigerating, for instance, or patients who must be rescheduled.

Another: As the bariatric surgery industry grows, Amy had to widen the automatic doors on some of her buildings to handle the patients' larger frames. Do people with orthopedic issues have a clear, easy path of travel? Can people with eyesight problems see your electronic tenant screen?

"Some older buildings are not designed for the traffic," adds Mark, who pointed to one asset that didn't have sufficient restrooms. Patients went into other tenants' spaces and asked to use their private restrooms. "That's not a good customer service situation."

While there are challenges, you shouldn't discount managing a healthcare property.

"When I transitioned into healthcare real estate, there were a lot fewer a-ha moments than I thought there would be," Mark says. "People told me I wouldn't want to touch it, that doctors would be painful to deal with."

One of his a-ha moments was when he realized it was just like managing office or industrial—just with a little more training.

"Even if you don't have it in your portfolio right now, you may in a month," he continues. "It's a very attractive asset class."