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Posted: Wednesday, December 19, 2012

4 Ways to Mitigate Costs When Developing Medical Offices

Hospital executives who plan to build medical office facilities know that construction costs can steepen quickly, but there are some steps they can take to mitigate burdensome expenses.

The average cost of a medical office building across 25 metropolitan markets last year was more than $240 per square foot, according to data from REED Construction. New York, San Francisco, Boston, Chicago and Philadelphia had the highest medical office building costs at $257 to $303 per square foot. However, hospitals can control those costs with a better capital strategy.

"One of the more significant changes in the medical office building arena is that hospitals have begun to control a greater majority of the space within a building," said Shawn Janus, managing director of healthcare solutions at real estate firm Jones Lang LaSalle, in a news release. "This control allows the hospitals to design and build the facility around an overall, integrated strategy."

Mr. Janus outlined four ways to keep medical office building construction costs from spiraling out of control.

1. Create greater design efficiencies. Medical office buildings today must take advantage of shared spaces, such as waiting rooms and examination rooms, through better design. If the buildings reduce unnecessary space, hospitals may also be able to relocate administrative functions from the expensive hospital arena to the medical office building.

2. Consider alternative building materials. While hospitals should strive to make medical office buildings look attractive, spending large sums of money on expensive materials such as marble and granite may not be worthwhile. Patient experience must be considered in the design, but Mr. Janus said that alternative construction materials and design elements can achieve a similar "wow" effect without running up the tab.

3. Standardize design prototypes. Mr. Janus said in the release there is "no need to reinvent or redesign the wheel with each project." Instead, hospital executives and construction/design teams should standardize features of medical office buildings wherever possible so they can be easily, and more cheaply, adapted to other construction situations.

4. Evaluate all capital sources. Large health systems may run the day-to-day management of construction and monitor construction costs, but smaller systems and hospitals may want to assess all options, including third-party sources.

Source:  Becker's Hospital Review, Bob Herman


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