CHICAGO – A strategic and centralized approach to healthcare real estate results in significantly better overall financial and operational performance, according to a new report from global real estate services firm Jones Lang LaSalle.
In its report, “Improving healthcare systems through strategic real estate and property management,” Jones Lang LaSalle notes that of the systems surveyed, those with a system-level strategic approach had an average operating margin of 3.89 percent – a full percentage point above the industry average. The firm recommends centralizing real estate planning, design, construction, leasing and property/facility management for optimal efficiency and effectiveness.
According to Scot Latimer, managing director and leader of Jones Lang LaSalle’s Capital Asset Strategy practice for healthcare, there are five opportunity areas that, when viewed together and from the perspective of executive system leadership, form a comprehensive picture of the organization’s current performance and a roadmap to improve it:
1. Portfolio optimization: This is the process of matching location and capacity with the organization’s overall business strategy, and it relates to all space owned or occupied by an organization as it pursues its mission. Portfolio optimization will be increasingly important as organizations seek to simultaneously broaden geographically and focus their reach and service mix in the future.
2. Occupancy cost management: When properly managed, facilities can be a strategic partner in delivering sustainable cost savings and executing business strategies that dramatically improve operating margin. One significant consideration in this area is energy cost control and carbon footprint management. At every juncture in the real estate cycle—acquiring, managing and disposing of assets—there are opportunities to consume less energy. As a part of any review and strategy development, resource consumption should be measured and a plan for active management developed.
3. Ownership strategy: Organizations recognize that various factors influence what must be owned, including competition for scarce capital, a need for future flexibility, and a finite and closing window on strategic opportunities. One step healthcare systems should take when centralizing real estate and facilities under a strategic plan is identifying and selling land and buildings that are no longer essential.
4. Execution approach: Paramount to the success of a well thought-out strategic plan is its pairing with a strategic execution plan. According to Latimer, an effective corporate real estate organization is action-oriented, anticipating rather than reacting to the next move.
5. Organizational effectiveness: Best practices in corporate real estate management are often not applied in the healthcare industry. Yet there is much to be learned on the topics of asset management, efficient operations and precision in execution, and those organizations willing to look beyond their perceived boundaries have found a wealth of relevant examples.
“The healthcare system is so asset intensive, yet remarkably little attention is paid to the performance of those assets,” said Latimer. “A real estate strategy is really about making those assets perform.”
“Corporate America focuses on reducing cost of occupancy and net assets employed to produce a unit of service,” added Latimer. “Healthcare can do the same with a little discipline, and I believe the industry will respond when the cost pressure becomes severe enough.”
Follow HFN Editor Rene Letourneau on Twitter @ReneLetourneau.
