CREJ - Healthcare Properties - June 2016
A new health system executive is informed that three of the system’s medical office buildings are scheduled to be inspected by the State Board of Health and the Healthcare Facilities Accreditation Program. Should he be concerned? Not if the facilities are operated by expert third-party property managers, who specialize in health care and have a thorough understanding of the accreditation bodies’ regulations and standards. But a skilled third-party health care property manager will go beyond that. He will ensure that the maintenance and other staff at each facility are trained to properly maintain the building so that it’s compliant with all standards. He also should be trained to deal with inspections so he understands what the inspectors will be looking for, to answer the inspectors’ questions and readily provide all requested records and documentation. Finally, good property managers know the accreditation bodies often have their own interpretation of the standards. The key, therefore, is to select a third-party property manager who has dealt with hundreds of inspections and knows what to anticipate. This is probably the most critical area for hospitals and health systems, so it’s essential that they choose wisely. While superior property management of medical facilities always has been important, it’s become even more vital during the past few years because of the increase in financial, compliance and health care laws and regulations such as the Sarbanes-Oxley Act of 2002, the Patient Protection and Affordable Care Act of 2010 and the Healthcare Education and Reconciliation Act of 2010. Noncompliance of some laws, such as the Physician Self-Referral Law, can have serious financial repercussion for providers. In addition, there’s been an increase in environmental laws and regulations that cover a wide variety of issues, such as water and air quality, energy efficiency and environmentally friendly building materials. It’s essential that property managers stay up to date on all of these issues for the sake of both the owners and the tenants. One of the greatest benefits of using a third-party property management firm is that clients can share in the broader experience of that firm and its personnel. A company that manages hundreds of thousands or even millions of square feet of health care facilities can identify best practices and leverage them for individual clients. Third-party property managers also can serve as good stewards of the health system’s assets and finances. They can enhance the value of properties through regular and preventative maintenance, which will minimize the owners’ capital investment. Health systems often have a stable of excellent, lower-cost vendors for janitorial services, paper products and other goods, and services, so a property manager should consider collaborating with the provider and use some of those vendors, thus leveraging the system’s purchasing power. Property managers also can reduce operating expenses, which will save costs for the owners and keep tenant lease rates stable, which translates into more satisfied customers. One important example of reducing expenses is real estate taxes. If the owner of a medical building is assessed a higher tax rate, the property manager and his health care tax consultant can appeal the rate or, if necessary, obtain legal counsel. A property manager should, therefore, do everything necessary to make sure the owner of the medical building doesn’t pay more real estate taxes than other comparable MOBs in the area. Superior property managers also should ensure that patient, staff and visitor safety is paramount and proactively implement plans in concert with the health system’s plans that will mitigate the system’s risks in the building. For example, the property manager should develop emergency response plans for tornadoes, floods, earthquakes and other disasters. Plans for serious influenza and disease outbreaks, such as for the Ebola virus, also are essential. In addition, by regularly performing preventative maintenance and safety inspections, the management team will reduce the number of hazards and equipment malfunctions that often lead to costly insurance claims. Another vital area for health care property managers is to ensure that the tenants and building owners enjoy the highest levels of customer satisfaction. The medical building is branded with the hospital’s or health system’s name, so the property manager needs to obtain the system’s buy-in as to how he will manage the facility. Then the property manager needs to regularly collaborate and communicate with the health system to ensure that the management team provides consistent agreed-upon services. To keep tenants satisfied, the property manager also should communicate regularly with them, address their space and other needs, and work with the building owner to keep lease rates stable and competitive. It’s much less expensive to keep a satisfied tenant in place than to search for a new tenant and build a space to suit its specific needs. Health care providers that are looking for a third-party property manager should consider a number of important characteristics. As mentioned before, the prospective manager should understand and keep up with all applicable financial, compliance, health care, and environmental laws and regulations. They should understand the importance of maintaining strong relationships with the health system and the physician tenants. They should have experience managing the upkeep and finances of health care properties, as well as experience working with providers to develop emergency disaster plans. Finally, they should have broad experience and a comprehensive understanding of the health care industry and the inspection process. All of this will ensure that the health system and its medical facilities will be successful now and well into the future.