Muhsin Lihony speaks at BISNOW San Francisco

Best Delivery Method For Medical

This morning, we heard San Francisco's top experts tell us medical facilities are booming in S.F., but the way projects are delivered is changing. Here's the rundown from Bisnow's 3rd annual Healthcare Real Estate Summit at Hotel Nikko.

Swinerton Builders Healthcare SVP Curtis Johnson says capital spending pressures are enormous and real. Many strategic alliances are being considered as clients try to figure out what elements of the healthcare stream they should they be involved in. Clients are all looking for efficiency, he says, even outsourcing elements they've traditionally done in-house. Clients are asking for reductions in total operating cost, he notes, and as a contractor he's working to better advise designers, owners and developers on projects. The era of guaranteeing the performance of buildings in the future is upon us.


Adaptive reuse is the fastest way to get to market, but converting existing product is challenging when you add the need for seismic resilience and floor vibration mitigation, says Degenkolb senior principal Chris Poland. (Just add dance music, then everyone will move at the same pace as the vibrations, mitigating their effect. We don't get science.) New buildings must be designed to adapt to new future services. The traditional low-cost office building doesn't work for medical office, where there's heavier equipment, special design requirements, and parking for direct patient access to each floor.

Meridian Property Co COO John Pollock named some recent "retail-ization" projects. He's converting a 1960s-era post office into an 8,600 SF outpatient clinic, which sits next to a Safeway in Walnut Creek. (Doctor: "Either tell me where it hurts, or just give me the zip code.") Visibility and convenience are two big requests. In the past, medical office buildings were commonly "condominium-ized" for independent doctors. Today he's not seeing that in the market (with the city as an exception). In more rural areas, the popular trend is larger groups of contiguous space with shared waiting rooms.

Smith Currie & Hancock attorney Ernie Brown moderated and asked panelists their preferred project delivery method; the consensus is design build. He calls that method the biggest innovation in the last 25 years in the US construction industry. He says public-private partnerships are now expanding in the US in a major way. He also quoted a Stanford study that says if you can reduce healthcare labor costs by 10% over 30 years, you essentially get a free building. That shows how important it is to think about efficiencies tied to running a medical clinic.

Lionakis NorCal Healthcare Leader Muhsin Lihony thinks as healthcare providers are challenged with lower reimbursements through the Affordable Care Act, there's going to be a boom in outpatient clinics and ambulatory care centers. Ground up, renovation, adaptive reuse and modular construction are a few approaches. There are over 9,000 urgent care centers nationwide, 75% of which are in suburban areas. The idea is to cover more ground and disperse clinics throughout the communities.

The 250-person event was standing-room only (we eventually found them seats, just like a receptionist would in a doctor's waiting room). A rising trend panelists highlighted was retail health clinics, which are geographically distributed to support hospitals and may sit in superstores, local pharmacies, or stand-alone locations. (When talking about your life, there is no buy one, get one...unless you believe in reincarnation.) It's important to plunk them next to public transits routes with ease of parking, noted Muhsin. The cost of care is driving development of retail health clinics, which are typically 30% to 40% less than a physician office or urgent care center. Customers like them because they're quick and no appointments are necessary.