🤝 Maximizing Value Through Real Estate Joint Ventures
In this series, we have focused on the critical issues that often affect the feasibility of new facility projects and how to address barriers to drive to operational results. In this final post, our focus is on the key considerations for how to apply real estate investment as an effective strategy to create long term value for physician and hospital investors including:
- 👨⚕️ Recruitment tools to attract independent and employed physicians to your organization
- 💰 Steady returns that increase physician compensation
- 🏥 Long-term alignment through an economic investment in a facility
- 💼 Reduced up-front capital costs
To effectively utilize and apply real estate investment for realizing this value, there are several key considerations that should be considered to ensure its success.
Key Considerations
- Business Plan Objectives 📑 Often an optional real estate investment is primarily driven by the development or relocation of a joint venture such as an ambulatory surgery facility, diagnostic center, or other venture. Because the true success of the real estate is directly tied to the performance of the underlying service, the real estate economics should support the required return on investment within the operating entity business plan.
- Regulatory Compliance ⚖️ Real estate is one of the most regulated and risky of the contractual relationships that involve hospitals and physicians, especially as it relates to the adherence to the Stark Law and federal Anti-Kickback statutes. All transactions must be structured so that they meet fair market value standards to avoid being interpreted as creating value in exchange for patient referrals. To address this risk, it is often best to utilize a third-party real estate firm that is not considered a healthcare provider. This effectively nullifies the risk and ensures full compliance with the various laws and statutes.
- Financial Leverage 📈 New ventures typically require a significant up-front investment for the design and construction of new facilities, medical equipment, financing costs, working capital, and other start-up costs. Leveraging capital provided by a real estate partner often lowers the up-front cash investments required by individual physician, physician groups, and hospital partners while optimizing physician and hospital returns.
- Long-Term Commitment 🏢 The greatest value of a real estate investment is primarily generated over the long-term through asset appreciation and the paydown of debt. Structuring a real estate investment for long-term value creation results in lasting commitment to a facility and collegiality amongst the various investors.
Our team has years of experience and a track record of structuring successful real estate partnerships. To learn more about how to effectively apply this strategy to your next facility project, contact us:
☎️ (952) 829-3488
