Paula Crowley explains how her real estate firm uses retail development strategies to aid healthcare organizations.

Any retail development project is driven by finding the perfect location, providing accessibility and convenience to the consumer, and responding to a market need. Paula Crowley, CEO of Anchor Health Properties, wants to know why the same can’t be said for the development of healthcare facilities.

Paula Crowley, CEO

“Why shouldn’t the consumers of healthcare services have the same experience as they do when they shop or stay at a hotel?” asks Crowley. “In retail, you want to be flexible in how you accommodate those principles in your real estate. You go into a department store on a Friday, and the following week the entire floor looks different. It’s not as drastic in healthcare, but in a sense, healthcare providers need to respond to not only the changing service lines but also the changing consumer demand.”

For Anchor Health Properties, this translates into a wide variety of variables, such as where you locate the facility, what the facility looks like, how you get into the facility, how physicians operate their business in the facility, and how they integrate their services into the facility. Once the paradigm is established, every piece of the development is created in relation to it.

“We know healthcare administrators have a strategy that influences their bottom line or how the public perceives their institution,” said Crowley. “We want them to let us use the development project to facilitate their strategy.”

Quick change
Although the possibility of a healthcare facility changing its layout as fast as the local Gap is unrealistic, the facilities developed by Anchor Health are considerably more flexible than the average medical center. First, the developments are built to different standards than those typically used in hospital construction. They are developed similar to office or retail space so if and when the healthcare organization wants to expand, it isn’t tearing down systems and walls that are expensive to redevelop.

“We want the companies we work with to focus on how they lay out space and think about potential changes ahead of time,” said Crowley. “In retail, you don’t open a store and walk away. For some reason, it’s a frequent occurrence in healthcare.”

In an effort to restructure the delivery of healthcare services, Anchor Health expects its customers to pay the same level of attention to the evolution of their facilities as a retailer would by reevaluating the building every few years. “Even if the project makes money and generates high levels of customer service, we want our customers to ask themselves what new services need to be added and whether or not their market has changed,” said Crowley. “It goes beyond the developer and highlights the hospital’s commitment to changing the way it does business.”

Leasing agreements
Anchor Health Properties offers three leasing options to facilitate the capital challenges many hospitals face. In the first scenario, the hospital provides the capital, leaving Anchor with the developmental aspects of the project, such as finding the site, hiring the architect and contractor, working with the hospital, and securing leases. In the second scenario, Anchor Health provides the capital.

“In those situations, we facilitate all aspects of the development as well as putting up the capital,” explained Crowley. “The hospital signs a lease for its space, as do other physicians and services in the development, but we take all the development risk associated with the new project.”

The third model, which Crowley said is the most popular, is a partnership or joint venture between the hospital, physicians, and Anchor Health. Anchor Health still has management control of the project, but the capital to finance the project is a combination of funds from the hospital, physicians, and Anchor Health. Crowley said this option has become increasingly popular because physicians want to be aligned with and have equity in the project.

Additionally, hospital administrators keep close tabs on the capital they borrow in a given year. Consequently, when they’re looking at applying their money, as long as the services they put in the facilities can pay the rent and make money, many hospitals believe it makes more sense not to own the real estate. “They are then free to better use their capital,” said Crowley. “That also puts the burden on them to make sure the space they’re renting is properly utilized.”

Crowley wants her business partners to think retail when they think about the design of their new facility. Retailers know exactly how much space they want, what their space should look like, what it will cost, where they want to be, and what their customer base is as a result of market research. “Retailers have figured that out, and it’s how they’re successful. Now we’re working with hospitals to put them in the same frame of mind,” she concluded.