Key Considerations in Determining Whether to Renovate, Expand or Build New

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This topic generally is one of the very first questions that arise when considering a major capital building program. In most situations, many organizations must go through this assessment to 1) determine the cost and schedule comparison of the two options and 2) weigh the long term operational impact and capital investment.

Many community and rural hospitals must also face the issue of investing in a new location versus sustaining the existing investment in the current campus. There are so many complex aspects in making these decisions, it often becomes overwhelming.

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Below are 11 items to consider when assessing your options:

1)      Financing costs and the organization’s debt capacity.

2)      Capital project costs.

3)      Timelines and phasing requirements.

4)      Facility’s ability to physically accommodate todays and future market-driven services and technologies.

5)      Ability to increase market share.

6)      Define level of operational efficiency compromise in remaining at the existing facility.

7)      If you stay at your present campus, will the campus be able to regenerate in the future.

8)      Affect on recruitment of physicians and staff.

9)      Community perception.

10)   On & off site private and public capital cost considerations.

11)   If you move the campus to a new location, what will you do with the existing buildings and land.

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Here are a few of the “top of the mind” items that we have experienced in working with numerous community hospitals.

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They are:

  • Update their strategic plan.
  • Perform a market assessment.
  • Determine the financing source options and determine their debt capacity.
  • Update their physician referral plan.
  • Define the “drivers”, i.e., why do we need to do anything.
  • Establish measurable “success” goals.
  • Analyze their service line volumes and prepare volume projections.
  • Consider reimbursement trends & potential changes.
  • Prepare a preliminary capital project cost comparison.
  • Consider real estate cost.
  • Evaluate site options for:
    1. Access & visibility.
    2. Site capacity.
    3. Natural amenities (good & bad).
    4. Infrastructure: roads & utilities (capacities, to & on site).
    5. Environmental issues & soil conditions.
    6. Neighborhood relationships (present & future).
    7. Adjacent real estate opportunities.
    8. Land entitlement issues.
    9. Helipad & FAA requirements.
    10. Flexibility & growth zones.

 

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