Author: Marisa Manley
Author Information: Marisa Manley is president, Healthcare Real Estate Advisors, a nationwide real estate consulting and advisory firm.
Competition among urgent care centers has increased as they have become a more important and common feature in the American healthcare landscape. Among the baseline requirements for a successful urgent care center are high visibility, ease of access and an inviting, reassuring, and professional environment.
Whether you are creating a new urgent care center from raw space in a strip mall or office building or refurbishing an existing medical practice space, careful planning and near-flawless implementation are required to achieve a build- out that will satisfy patients and meet your business objectives.
This article will not consider building an urgent care center from the ground up. Such a construction project involves considerations beyond the discussion here. Our focus will be on constructing an urgent care center in an existing building.
Goals and Strategy
You may have a good idea of what you want to accomplish as you build out an urgent care center. However, before you begin, it’s important to review your goals and create an explicit, effective process and plan to successfully develop an urgent care center. Consider these guidelines:
- Be realistic about the need for reconfiguration and rehabilitation of the space you will occupy. Often doctors and practice administrators start out looking for a perfect “move-in space.” These seldom exist. Once you start moving even a few walls, you’ll need to move heating, cooling and ventilating (HVAC) and electrical distribution systems as well. If you are assessing raw space–space within a building that has been stripped down to floor slab, unfinished walls, and ceiling slab–realism is also required about how the space can be configured. Consider not just the obvious elements, but slab-to-slab height, spacing of columns, location of wet columns and the like as you determine whether a space is suitable for your operations and the ambience you wish to create.
- It is important that your urgent care center have a warm, welcoming atmosphere to greet patients walking in the door. Be sure to make this a part of your planning. The front-end experience sets the tone for your interaction with a patient. Stay away from bus terminal-style waiting rooms where tenants sit in fixed rows, often facing the reception desk or a video monitor. Most patients seem to prefer waiting areas that offer furniture in conversation groupings or other small clusters. Allow adequate privacy for a patient to register and describe his or her symptoms. Some practices favor TV as a distraction; others see it as a bad news annoyance. Whatever your choice, consider how it affects your patients’ experience. Use natural light to enhance the environment.
- In connection with a lease, negotiate to get funds from the landlord for the build-out you need. This may be called a “TI allowance,” “Workletter Contribution,” “Landlord Contribution” or something similar. In most markets, a workletter allowance–of some amount–is included as part of the quoted market-rate rent. In some circumstances, you may negotiate to have the landlord lend you money—which you will pay back along with rent–to fund more of your build-out on favorable financial terms. That would preserve your credit facilities for other operating purposes. In general, do not expect building ownership to fund your entire build-out; the funds you can secure will be a function of competition in the market, the length of your lease, alternatives available to building ownership, and your negotiating ability. This is also time to think about the cost of eventually exiting your space. When you negotiate the build-out, negotiate the right to walk away at the end of the lease term without having to restore your premises to some previous condition. Failing to do this can cost you several dollars per square foot.
- Make arrangements to choose, based on requests-for-proposals, first an architect and later, a general contractor (GC), and to negotiate all needed agreements and budgets. It is important that the architect and GC be on board with your plans and willing to work with you to achieve your objectives. Be leery of choosing an architect or GC recommended by a neighbor or someone who did a fabulous job for a friend’s vacation home. The world of commercial build-outs is very different from residential. Commercial build-outs are more complex and infrastructure plays a more significant role. In every case, look for professionals who are team- and solution-oriented. Every construction project comes with bumps in the road!
- Develop and execute a detailed plan for project management during construction. At a minimum the project management team should include representatives from the architectural/engineering team, GC, and the landlord. If members of your staff, such as a nurse who manages medical operations, are expected to provide input to the design team, be sure that they are included in meetings at the appropriate time. Inserting new team members late in the process can cause expensive re-work. Be sure to have a single point of contact for the architect, GC and your own staff with the team. Allowing staffers to unilaterally direct the architect or GC without approval from your designated team representative can cause friction, confusion, delay and cost overruns. The project management must include a project schedule with key dates and responsibilities. Incorporate your landlord’s base building obligations in this schedule; delay on his or her part can significantly affect your entire project. Many teams start out with a schedule, then put it in a drawer. Don’t let this happen to you. Delay usually means higher costs.
- Be sure you have sufficient electrical power for any special equipment you may use. This is usually not an issue in contemporary office or retail buildings. HVAC needs may be more challenging. It is possible that you will require more fresh air or cooling or at different hours than other tenants if you are in an office building or retail strip. Be sure to negotiate availability and pricing in advance. Otherwise you may find unbudgeted utility costs eating into your bottom line.
- Investigate specific technical, zoning or code requirements you need to meet. In most jurisdictions, urgent care centers will qualify as a “business use” and not need to meet special healthcare-related building requirements. However, depending on the services you offer–x-rays, for example–you may need to get lead shielding, a higher than usual allocation of parking spaces, special filtration for your HVAC system, back-flow preventers on your waste lines, and/or a physicist’s opinion on the setup.
- Consider whether your facility would benefit from an emergency generator and the cost of providing one. A relatively small emergency generator may enable you to provide service during power outages–definitely a competitive advantage. If you incorporate this in your business plan, you will need to select a location that can accommodate a generator pad, with no difficult zoning restrictions.
- Consider accessibility for people traveling to your urgent care center, including adequate parking, accessibility for elderly and physically challenged patients, and proximity to public transit. Make it easy for patients to get to you. If you are leasing space in an office building or retail center, consider negotiating for a few dedicated spaces close to your premises’ entrance. These are not always available, but if you can secure them, with the right signage, it is a feature your patients will appreciate.
- Building or other exterior signage–such as monuments or pylons–and signage to help find your way once inside, is important in an urgent care center. Make it easy for people to find you. If you have a rear entrance from a parking lot, and a front entrance from a street, different parking lot or building lobby, be sure to provide a clear path for patients to find your suite. Patients seeking urgent care are reassured by knowing just where to go. Help them to navigate within your space internally as well–even though it may be small. Simple signs or architectural features can help tenants orient themselves to a registration desk, waiting area, or exam room and let them know they are where they should be. Always be sure your exterior and exit signage complies with applicable regulations.
The above are some general, useful guidelines to keep in mind when planning a buildout for an urgent care center. Another thing to keep in mind is that you must be well-organized in implementing a construction project.
Fast-moving schedules, complex teams and third parties beyond your control who influence construction projects require clear structure, a defined process and a forum for open, frequent communication.Here is how you do it:
- Assemble a project team that shares common goals and can work effectively together.
Critical team members are your urgent care center’s executive management; the project manager (in-house or imported for the project– sometimes called an owner’s rep); the architect/engineering group responsible for design and mechanical, electrical and plumbing work; and the general contractor who builds your urgent care center based on drawings and specifications developed by the architectural and engineering team.
To be successful, you must thoroughly understand duties of each of these players and how you can best work together.Your urgent care center’s leadership team must agree on objectives, communicate them clearly, and be willing to make timely decisions about the project. This is all too often easier said than done, so it is helpful to start by developing a written statement of project objectives–including site selection criteria, budget, and general design goals. Your project manager must coordinate and manage the activity of the architect/engineer and general contractor in a way that is entirely focused on your interests. The project manager’s duties include monitoring the schedule and budget, being first-responder for the unexpected situations arising on construction jobs, and leading weekly team meetings that keep everyone current on job status and coming challenges.
Your architect should be both strong in design style and in the details that will deliver a comfortable environment that meets code requirements. In most projects, 50% or more of your construction dollars are spent on items that will be invisible–plumbing, electrical, and HVAC infrastructure. You will want professionals who can produce the best quality for you. This means knowing how to allocate funds effectively and maximize the value you receive from the funds available for finishes. Beware of architects who focus exclusively on design and tell you they “pass the baton” to the general contractor during construction. This may mean they abdicate responsibility for making sure that their design really works. Generally, the architect contracts with a mechanical/electrical/plumbing (MEP) engineer on your behalf. But you must qualify the engineer separately. When you interview architects, insist that they make their engineering partner part of the team–especially the project principal and the engineering firm’s project manager. Ask the engineers questions about their experience with similar jobs, how often they will be on site, and what difficulties they anticipate with your job. As with your selection of an architect, you want to confirm strong technical competence and a can-do orientation that you are comfortable with.
- Choose your contractor wisely.
In choosing the general contractor, decide first on the building model you will use to execute the job. The most common models are “design-bid-build” and “design/build.”In the design-bid-build model (also called “stipulated sum”) all construction drawings and details are complete before you seek to hire a general contractor. The candidates to be your general contractor compete primarily on price in these situations, and as a result have little input into how a job will be constructed, little scope for creativity and no official role in improving the job. General contractors hired on this basis sometimes overlook details, submit proposals with manyexclusions or just don’t include critical job elements in their pricing. The process of focusing almost exclusively on the lowest bidder during contractor selection can create incentives to use change orders to make money. This can make the construction process adversarial.
Design/build (and its many variations), on the other hand, incorporates the general contractor earlier in the process, and invites the general contractor’s construction expertise into the final design stages. This may take more management and some additional risk on your part, since you hire the general contractor before construction costs are finalized, but it can provide you with lower costs and superior facilities. When the relationship is properly structured, you gain an additional consultant for the price of the same general contractor fee.
Consider which approach works best for your project. Design-bid-build may be best for straightforward work where the details are clearly laid out and the general contractor is a known commodity–responsible and qualified. Design/build works best for fast-track or complex jobs where a general contractor experienced in this type of job not only builds, but trouble shoots and is comfortable with the ambiguity involved.
- Take the schedule seriously.
“On time, on budget” is the watchword of every construction project. All too often, though, individual departments or managers dread making the daily interim decisions needed to keep a project on track. Another common snafu is adding or changing scope during the construction process.
- Develop a simple, transparent decision process.
Speed and accountability are the keys. Within your organization, there must be a single point of contact with authority to make changes on the job. Whatever your internal processes, the architect and general contractor must know that only one member of your team is authorized to provide direction. This avoids the problem of unauthorized change orders and uncertainty about whose direction to follow. Decision-making must be prompt because decisions required during the construction job may affect work already underway. In one case, a client’s failure to decide what type of flooring to select when the manufacturer could not deliver the specified materials on time caused three trades to put their work on hold and extended the construction schedule by 2 weeks–plus additional costs for contractors’ overhead and other related items.
- Hold weekly meetings with the general contractor, architect, project manager and others whose skills are required.
Review current progress, discuss outstanding issues, agree on responsibility for next steps, and anticipate challenges in the weeks ahead. Your project manager should use the weekly job meetings to create a forum for brainstorming, celebration, and when needed, reminders about accountability. Meetings can be held by conference call, Skype or in person–virtual is just as good as real, as long as the communication happens. Weekly meetings are important to reinforce shared goals and sustain focus on results. Summarize key action items following each meeting and send the information out with the meeting notes.
Complying with regulations
Urgent care centers must comply with applicable zoning, building and health department or similar regulations. At the same time, do not get caught in the trap of over-complying. If you build to hospital standards where those standards do not apply, you may end up spending hundreds of thousands of dollars unnecessarily.
Complying with building codes and passing inspections is an area where teamwork is essential. Generally, the contractor will take the lead in securing building permits and walking inspectors–electrical, HVAC, and fire marshals, for instance–through the job. An inspector can demand changes if he interprets the code differently than your team–insisting that additional lights or strobes be added, that door swings for safe exit be changed, even that additional protection be added to combustion-proof rooms for chemical storage.
On a recent job, the fire marshal threatened to withhold a certificate of occupancy because he wanted additional smoke detectors. The architect and contractor worked together to craft a solution that used battery-operated smoke detectors and strobes for additional coverage, instead of adding stations to the hard-wired system, and the facility opened on time.
Knowing what regulations to meet may be a challenge. For instance, in some jurisdictions, if you use sedation in your urgent care center, even if it is a low dose, you may need to meet local health department regulations or standards of accrediting organizations whose imprimatur you desire or require. These standards may require you to restrict access to treatment areas, which can be done through a lockable airlock, an airtight door designed to equalize air or gas pressure, and which can also restrict personnel access. However, if you are not using sedation, the standards for your urgent care center are often much less stringent and the build-out much simpler. Chances are your urgent care center will then resemble a pediatrician’s or general practitioner’s office more than a hospital, enabling a less-costly build-out.
Always be sure your urgent care center complies with the Stark Laws’ provisions against special favors, special compensation, or givebacks to doctors, particularly if you are leasing space from a hospital. To comply with the laws’ provisions against conflict of interest, leasing transactions should be at market rates, not special rates that may be seen as favoritism. Do not interpret this to mean that you must pay a higher rate. Negotiate hard for the best terms–just document your process and market-rate comparables.
Patient demand for accessible, hospitable, and quick healthcare fosters opportunity for urgent care centers. Meeting this demand and succeeding in the urgent care market must include a plan for your facilities. They are a critical component of your delivery platform and your brand.
Controlling construction costs, delivering work on time and budget, and complying with applicable regulations can be accomplished with careful planning and assembly of a team that is focused on a common goal and maintains open communication throughout the process. With the right approach you’ll benefit from an excellent facility to carry your business forward.