Med­i­cal of­fice build­ings go big

Med­i­cal of­fice build­ings grow in girth

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While new med­i­cal of­fice build­ings have been added to the land­scape across the coun­try, the on­go­ing trend to­ward larger mul­ti­spe­cialty prac­tices is driv­ing the need for su­per­sized physi­cian spa­ces. These new fa­cil­i­ties need to be big enough to house far more than a sin­gle physi­cian group, yet still invit­ing enough to make pa­tients feel com­fort­able, and func­tional enough for clin­i­cians and staff. Poorly de­signed space can dis­cour­age the very col­lab­o­ra­tion nec­es­sary in the post-re­form en­vi­ron­ment of pa­tient-cen­tered care, ob­servers say.

North­west­ern Memo­rial Health­care is among the sys­tems push­ing the trend. The Chicago-based sys­tem last year pur­chased a 130,000square-foot of­fice build­ing in the north­ern sub­urb of Glenview, Ill., with plans to con­vert it into med­i­cal of­fices. The fa­cil­ity, slated to open in March, rep­re­sents North­west­ern’s com­mit­ment to bet­ter co­or­di­nate care, says Dr. Daniel Der­man, pres­i­dent of North­west­ern Memo­rial Physi­cians Group. He sees hav­ing ev­ery­thing un­der one roof as ad­van­ta­geous, of­fer­ing “the most ef­fi­cient way” to take care of a pa­tient pop­u­la­tion.

Der­man says he’s not sur­prised by the es­ca­la­tion in med­i­cal of­fice build­ing size, given the in­creas­ing fo­cus on am­bu­la­tory care. Out­pa­tient care con­tin­ues to ac­count for a larger por­tion of hospi­tal rev­enue, surg­ing from about 10% in the early 1990s to cur­rently about 60% (Aug. 6, p. 24). Older, smaller fa­cil­i­ties typ­i­cally can’t ac­com­mo­date the grow­ing num­ber of ser­vices of­fered on an out­pa­tient ba­sis, es­pe­cially an ex­pand­ing menu of sur­gi­cal pro­ce­dures and di­ag­nos­tic imag­ing such as CT and MRI. Ren­o­va­tion or retrofitting such space of­ten is cost-pro­hib­i­tive, ex­perts say.

And still larger fa­cil­i­ties are be­ing de­vel­oped. For ex­am­ple, the Cap­i­tal Health Med­i­cal Cen­ter-Hopewell, Pen­ning­ton, N.J., in­cludes a 329,200-square-foot med­i­cal of­fice fa­cil­ity. The build­ing opened in Novem­ber 2011 and fea­tures imag­ing ser­vices, an on­col­ogy cen­ter and a cen­ter for di­ges­tive health.

“You’re see­ing a lot more cen­ters built around spe­cial­ties,” says An­drew Quirk, se­nior vice pres­i­dent and na­tional di­rec­tor at Skan­ska USA, the con­struc­tion man­age­ment firm for the Cap­i­tal Health fa­cil­ity. “You’re go­ing to start see­ing more ded­i­cated out­pa­tient treat­ment cen­ters for can­cer that are huge into pro­ton ther­apy.”

Quirk also ex­pects to see more free-stand­ing emer­gency de­part­ments. “I think it’s a good way for hos­pi­tals to in­tro­duce them­selves into the community and to take im­me­di­ate care of the peo­ple they are serv­ing,” he says.

Some of Skan­ska’s larger med­i­cal of­fice projects in­clude Car­il­ion Clinic’s 210,000-square-foot Riverside Cen­ter in Roanoke, Va., which had its lat­est wing open in 2009. It in­cludes in­ter­nal medicine, or­tho­pe­dic and neu­rol­ogy prac­tices.

“I can tell you that our av­er­age size of MOB that we have seen more of­ten than not is in the 30,000- to 60,000-square-foot range,” Quirk says. “We are now see­ing them rou­tinely greater than 100,000 square feet.”

An­other project is the 60,000-square-foot Univer­sity of North Carolina Health Sys­tem’s physi­cian’s of­fice build­ing in Hills­bor­ough, which is expected to open in the spring of 2013. The num­ber of physi­cian prac­tices has yet to be de­ter­mined, of­fi­cials say, but ser­vices are likely to in­clude on­col­ogy, ur­gent care and di­ag­nos­tic imag­ing.

An­other fac­tor lead­ing to the need for ex­panded med­i­cal prac­tice spa­ces is the surge in physi­cian em­ploy­ment by hos­pi­tals and health sys­tems. And those providers are likely to continue to hire more doc­tors, says Keith Konkoli, a se­nior vice pres­i­dent for health­care at Indi-

Read the Con­struc­tion sec­tion at mod­ern­health­care.com/con­struc­tion

anapo­lis-based de­vel­oper Duke Realty. Given the grow­ing num­bers, big­ger of­fice build­ings just make sense, he says.

“They need places to work and they need to get all the physi­cians to­gether,” Konkoli says. “You need the ser­vices be­hind them to sup­port their prac­tices.”

Duke Realty’s projects in­clude the 114,000-square-foot physi­cian of­fice build­ing that is con­nected to the Bay­lor Med­i­cal Cen­ter at McKin­ney (Texas). The new med­i­cal of­fice build­ing opened in July and houses more than 10 physi­cian prac­tices.

Konkoli also cites St. Joseph Re­gional Med­i­cal Cen­ter in Mishawaka, Ind., which in­cludes a four-story, 205,600-square-foot mul­ti­spe­cialty fa­cil­ity that fea­tures an MRI fa­cil­ity, wound-care cen­ter and a pe­di­atric clinic. The med­i­cal of­fice build­ing, which Duke de­vel­oped and built, opened in 2009 and houses five of St. Joseph’s physi­cian prac­tices.

These larger build­ings are go­ing up across the county, not con­fined to spe­cific re­gions where strong pop­u­la­tion growth might be a ma­jor fac­tor. “With all of the CEOs and CFOs that I’ve talked to about this across the coun­try, it’s neat to see it’s not just a re­gional thing, it’s a na­tional re­sponse.” Quirk says.

Konkoli says it has taken some time, but dur­ing the past decade, physi­cian in­te­gra­tion has con­tin­ued to im­prove with a in­creased fo­cus on col­lab­o­ra­tion. The pa­tient ex­pe­ri­ence also im­proves through the con­ve­nience of hav­ing mul­ti­ple spe­cial­ties in the same build­ing, which of­ten pro­vides more cost-ef­fec­tive set­tings. That’s es­pe­cially im­por­tant with shrink­ing re­im­burse­ments, he says.

Even though build­ings are trend­ing larger, it’s of­ten the case that the work spa­ces are get­ting smaller as providers push for ef­fi­ciency. Physi­cians from dif­fer­ent prac­tices share more wait­ing rooms, back-of­fice space and nurs­ing sta­tions: “It just op­er­ates more ef­fi­ciently. It’s an open col­lab­o­ra­tion,” Konkoli says.

Build­ing larger of­fices also rep­re­sents a more ef­fi­cient way of spend­ing money, since the cost of manag­ing real es­tate con­tin­ues to rank as a ma­jor ex­pense for hos­pi­tals. Based on data from Chicago-based real es­tate man­age­ment firm Jones Lang LaSalle, real es­tate rep­re­sents 40% to 50% of hospi­tal sys­tems’ as­sets, mak­ing it the third-largest ex­pense, be­hind pay­roll and sup­plies.

The com­bi­na­tion of a de­cline in provider re­im­burse­ment and ris­ing de­mand for cap­i­tal makes strate­gic plan­ning more im­por­tant for hos­pi­tals and health sys­tems, says Shawn Janus, the firm’s manag­ing di­rec­tor. Larger med­i­cal of­fice build­ings are typ­i­cally more cost-ef­fec­tive ver­sus con­struc­tion of new full-ser­vice hos­pi­tals, he says.

One way con­struc­tion costs dif­fer be­tween types of fa­cil­i­ties is with HVAC sys­tems, as hospi­tal fil­tra­tion re­quire­ments are more strin­gent com­pared with of­fice build­ings, Janus says. Med­i­cal of­fice build­ings don’t have to ad­here to those higher stan­dards, which means low­ered costs, he says.

Hos­pi­tals and health sys­tems are also em­ploy­ing the new “on­estop shop­ping” med­i­cal of­fice venues to cater to pa­tients’ on­de­mand life­styles.

“As a con­sumer, I would much rather be able to see my doc­tor, have my am­bu­la­tory surgery and have my re­hab—ev­ery­thing—at one fa­cil­ity very close to where I live,” Janus says.

Those in­ter­viewed for this story strug­gled to come up with neg­a­tives to the larger med­i­cal of­fice space. Konkoli be­lieves that even­tu­ally build­ing size could be capped once they ap­proach the size of larger hos­pi­tals. Some med­i­cal of­fice build­ings are al­ready eclips­ing the size of smaller hos­pi­tals.

“You could say that with be­ing big you lose ef­fi­ciency, and you look much like a hospi­tal again,” Konkoli says. “Typ­i­cally, you’re not go­ing to have any bed com­po­nent. I just think it’s a mat­ter of what’s be­ing de­liv­ered and the num­ber of physi­cians and what can be ef­fi­cient in the space.”

The avail­abil­ity of cap­i­tal also dic­tates fewer hos­pi­tals and more of­fice build­ings, Janus says, point­ing to an in­crease in the num­ber of merg­ers and ac­qui­si­tions. Smaller hos­pi­tals are seek­ing the sta­bil­ity and in­creased cap­i­tal of larger sys­tems.

De­clin­ing re­im­burse­ments mean physi­cians are also af­fected by the avail­abil­ity of cap­i­tal. It’s more dif­fi­cult to find fi­nanc­ing to build their own of­fice fa­cil­i­ties ver­sus work­ing in a larger spa­ces owned and op­er­ated by hos­pi­tals and health sys­tems, Skan­ska’s Quirk says.

Build­ing in flex­i­bil­ity has al­ways been key to de­sign­ing of­fices, and the larger build­ings of­fer even more adaptability, Quirk says. Com­pared with build­ing a hospi­tal, larger out­pa­tient of­fice space is a cheaper al­ter­na­tive that’s more invit­ing for pa­tients, he adds.

And they might of­fer ameni­ties not found at your typ­i­cal community hospi­tal. Quirk says more of­fice build­ings will in­clude health clubs or spas, cit­ing one ex­am­ple of a re­tail com­po­nent that’s also be­com­ing more fa­mil­iar in med­i­cal of­fices to keep the cus­tomers happy.

While it’s easy to see the trend to­ward larger build­ings, the fo­cus shouldn’t just be on size, Der­man says. The fate of the pa­tient ex­pe­ri­ence lies with how build­ing de­sign­ers use the space to help clin­i­cians de­liver a higher qual­ity of care and ser­vices. “The size of the build­ing, the size of the hospi­tal does not dic­tate the ex­pe­ri­ence,” he says.

“The size of the build­ing, the size of the hospi­tal does not dic­tate the ex­pe­ri­ence.”

—Dr. Daniel Der­man, North­west­ern Memo­rial Health­care

Two med­i­cal of­fice build­ings sport­ing six-fig­ure square footage in­clude a four-story fa­cil­ity at­tached to Bay­lor Med­i­cal Cen­ter at McKin­ney (Texas), left, and the fa­cil­ity at St. Joseph Re­gional Med­i­cal Cen­ter in Mishawaka, Ind., be­low.

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