New ASCs see savings in pre-existing structures

For the last several years, ASCs have been popping up in some unlikely places, from vacated mall spaces to churches to day cares

As the cost of real estate development continues to rise,i physicians and health systems are seeing the advantages of opening new ASCs in pre-existing spaces.

"Real estate market conditions do not necessarily drive the location of an ASC. Convenience to the physicians is priority, second is ease of patients to access the facility," Stephanie Tarry, senior partner at Physician Transaction Advisors, told Becker's. "For most elective surgeries, patients will go where their doctor directs them. The current real estate market conditions might be driving new development of ASCs to existing buildings that can be renovated. Some costs might be saved, versus the cost of new construction in today’s markets."

Approximately 87% of large shopping malls are expected to close over the next 10 years, and from 2017 to 2022, the number of functioning malls in the U.S. declined by 16.7%, leaving thousands of square feet of vacant building space all over the nation. 

Last year, approximately 4% of vacant malls became healthcare, hospital or medical facilities, and that number could continue to grow as construction, supply and development costs for new builds rise. 

Malls are also often located in densely populated areas and close to major highway systems, putting them in prime locations for physicians referring patients.  

Since malls are already existent, physicians can save money on construction as there is already ample parking, access to bathrooms, and plumbing and centralized electricity and IT capabilities.

And as property and development costs rise, independent physicians — already facing economic challenges — could see additional difficulties. 

"Property values are going to keep climbing while interest rates remain escalated, but surgical reimbursement remains stagnant or not increasing at the same pace as the property cost.  Increased costs are narrowing the profitability of the operations of the facility," Ms. Tarry told Becker's. 

When physicians choose to open a new outpatient facility, the decision to purchase or lease a space can be a difficult one. 

"If you own your facility, you have full control over your property and the lease terms.  However, as a physician you must be prepared to time a sale of your property at the right time of your career or when the markets are advantageous," Ms. Tarry said. "Typically, if a third party owns the property, the tenant operates under a triple net lease and taxes, utilities and maintenance are paid by the tenant." 

For physicians that want to own their own property, pre-existing real estate could provide a more affordable opportunity, with less development costs and challenges. 

"It's my preference is to find things that are move-in ready or that could be easily converted," Maryellen Westerberg, DrPH, COO for SAC Health, told Becker's. "I think the timing of that is much more in line with our expansion efforts as a clinic system on the whole. "

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