Owning real estate can be expensive in 2024, but it comes with several benefits for physicians who own or are looking to own their own practice.
Collin Hart, CEO of Healthcare Real Estate Advisors, discussed with Becker's the pros and cons of self-owning a facility versus leasing a space.
Question: What are the pros and cons of owning your own facility?
Collin Hart: Owning your practice or ASC real estate is a great way to control the destiny of your operation. Real estate ownership provides certainty in terms of patient experience and occupancy cost, which are welcome additions to today's challenging healthcare environment. Conversely, over time, the delivery of care has changed and often requires less space (or larger operating rooms). If you own your ASC real estate, certain elements can become obsolete over time, or be costly to upgrade, convert and maintain. It's key to understand your entry and exit points into a real estate investment. Properly timing your investment (not around the market, but around business growth and objectives) helps mitigate the risks and improve the rewards.
Q: Are there any emerging real estate trends specific to ASCs that leaders should be aware of? How might these trends shape future growth and development?
CH: While it's historically been common for physicians to own their ASC real estate, we're seeing fewer physicians actually take the leap to buy in. This isn't for lack of desire, but more affected by other financial burdens, including mounting medical school debt, practice and ASC buy-ins, high debt costs and an overall aversion to risk. This leaves senior physician real estate owners in the sensitive position of properly timing and executing on their real estate exit strategy. While perpetual ownership can seem like an ideal plan, it's often riddled with investment risks that aren't factored in to the decision-making process.
Q: What are some key factors to consider when selecting a location for an ASC, given current real estate market conditions?
CH: Contrary to the traditional real estate axiom of "location, location, location," ASC real estate is different. ASCs are destination facilities that don't require the typically desirable "Main and Main" location. Focusing on location from the perspective of patient convenience and proximity to provider offices (or the hospital campus) opens the box in terms of site selection and will help reduce land cost, ultimately reducing center overhead.