Not long ago, it was a matter of course that patients would go to a hospital for surgery and other complex procedures. Today, it's well documented that higher-acuity care is increasingly being delivered in medical office buildings (MOBs) and other outpatient spaces, rather than in more highly regulated inpatient facilities. 

Healthcare reform, with its expanded requirements and mandates to curtail costs, is expected to accelerate this trend. Now more than ever, providers need to continue pursuing the most convenient, high-quality, cost-effective care strategies to remain competitive. 

As part of that, more hospitals and healthcare systems will offer higher-acuity services in freestanding emergency departments (FEDs) and ambulatory surgery centers (ASCs) in MOBs and other off-campus facilities.

However, unlike traditional MOBs, these more sophisticated stand-alone facilities will require a different way of thinking and planning—and a higher level of expertise from the healthcare system, the real estate developer, and the entire design and construction team. 


Why is this happening? 

The 2010 Patient Protection and Affordable Care Act requires hospitals to invest in and implement many costly new systems and procedures. At the same time, hospitals face a continued downward pressure on both Medicare payments and private insurance, all of which is forcing them to look for possible ways to cut costs. 

MOBs and other outpatient facilities are an attractive solution because they cost less to build, operate, and maintain than hospitals and inpatient facilities—for both physical and regulatory reasons. 

Reed Construction/RS Means, a construction cost estimating company, found that 2011 average construction costs for a two- to three-story hospital in 25 major cities in the United States ranged from $425.02 per square foot (PSF) in New York to $245.70 PSF in Winston-Salem, N.C. 

In contrast, average construction costs for an MOB in the same cities ranged from $292.20 PSF in New York to $166.09 PSF in Winston-Salem, nearly one-third less than the cost of building a hospital in those two cities. 

Although there were significant differences in construction costs by location, MOBs cost considerably less than hospitals in every market, according to the survey. 

A major reason for the difference in construction costs is regulation. Hospitals and other inpatient facilities are subject to more national, state, and local codes and regulations, because they serve patients who occupy beds for 24 hours or more while outpatient facilities discharge patients before the 24-hour deadline. 

Regulations by organizations such as The Joint Commission, the National Fire Protection Association (NFPA), and the Occupational Safety and Health Administration (OSHA) specify minimum standards for all aspects of the healthcare facility’s design, construction, and operation. 

In addition to cost considerations, there’s been a growing trend for hospitals to locate outpatient facilities so they are more convenient to the patient. These facilities are closer to the patient’s home, so there’s no need for a long commute or the need to navigate a massive medical center campus in an unfamiliar community, which can be stressful for the patient. 

Outpatient facilities can also be a good marketing strategy in this highly competitive healthcare environment. Satellite outpatient facilities in suburban areas enable healthcare systems to improve consumer access to healthcare, differentiate themselves from the competition, increase or defend their market share, grow revenues, and allow for referrals to the main hospital. 


What are the implications?

The new higher-acuity outpatient facilities will be a hybrid—somewhere in between a hospital and a traditional MOB in terms of sophistication and cost. Most importantly, the facilities will need to be designed to a higher standard than typical MOBs. 

The new facilities will change how the development team plans, designs, and builds out the space. The team will need to be well versed in how the facility will be classified and, thus, what regulations will govern their work. 

They'll need to determine how all the functional requirements and the needs of the patients and other users differ from an MOB and a hospital, and plan accordingly. 

For instance, while patients won’t stay overnight after surgery, they'll still require pre-op and post-op recovery space, including adequate space for sleeping, bathrooms, nutrition services, waiting areas for family, changing rooms, and privacy for meetings with physicians. 

Another important design consideration is the growing trend toward creating higher-acuity clusters in outpatient facilities, such as grouping the ED, operating room (OR), and imaging/diagnostics in one area. This enables the development team to implement the stricter standards required for higher-acuity care in the cluster but not in the other areas of the facility, reducing the overall cost of the building.

Although delivering higher-acuity care in outpatient settings is primarily driven by the desire to reduce costs and mitigate regulation, patient safety remains paramount. 

The American College of Surgeons has classified surgical procedures as Classes A, B, and C—minor, intermediate and major surgery. These classifications are summarized in the Guidelines for Design and Construction of Health Care Facilities, which recommends minimums for size, functional programs, patient handling, infection prevention, architectural detail, and surface and furnishing, as well as minimum engineering design criteria for plumbing, electrical, and heating, ventilation and air-conditioning (HVAC) systems. 

The Joint Commission, many federal agencies, and most states use the Guidelines as a code or a reference standard when reviewing, approving, and financing plans; surveying, licensing, certifying, or accrediting newly constructed facilities; or developing their own codes. 

Even if architects and general contractors aren’t required to comply with some of the more stringent regulations, they might do so voluntarily to ensure efficient, safe, quality care, especially for more vulnerable patients. 

For example, while a Class B outpatient OR usually isn’t required to be more than 250 square feet, they might opt to make it larger to accommodate more sophisticated technology. 

Healthcare systems should be aware that the regulatory landscape might soon change as some local, state, and national regulators are taking steps to more closely regulate outpatient facilities. For those considering building new higher-acuity MOBs, it might make sense to proactively incorporate some of the higher design and construction standards in anticipation of stricter regulation in the future. 


New model for North Fulton

A good example of a hospital that moved higher-acuity care into a new outpatient facility is North Fulton Hospital in Roswell, Ga., an Atlanta suburb. North Fulton had operated a spine and pain clinic in an inefficient and dated space. The hospital expanded the practice and located it in a new 10,300-square-foot space in a three-story, 54,000-square-foot on-campus building. 

The project, developed by Duke Realty, opened in October. 

The clinic was prev
iously treated as MOB physician office space and, therefore, subject to fewer regulations than an inpatient facility. Now, because the practice is owned by a hospital, included in the hospital’s licensure, and subject to Joint Commission jurisdiction and the state of Georgia pain ASC regulations, it's classified as an ASC and required to follow more stringent healthcare and life-safety regulations. 

The development team had to design and build the facility differently than an ordinary MOB. ORs in the facility needed to meet Class C requirements, increasing to a minimum of 400 square feet rather than the 150 square feet permitted in their previous MOB space. 

This allowed the facility to accommodate more required equipment such as ceiling-mounted surgical lights and mobile X-ray and anesthesia equipment. 

The team also had to use higher standards for HVAC systems, wall and ceiling fire ratings, and medical gases. In addition, they needed to install an emergency communication system for summoning additional staff when necessary, and build larger pre-op and post-op recovery rooms, as well as other support space not required of an independent physician practice in an MOB. 

All of this required additional square footage. However, the facility was still less expensive to build and operate than inpatient space. 

Duke Realty and North Fulton Hospital executives agree that building a higher-acuity outpatient facility can be a more rigorous process than building a traditional MOB. 

“While communication between the hospital and development team is always essential in building a new healthcare facility, it’s probably even more critical when dealing with new models like higher-acuity care MOBs,” says Deeni Taylor, regional executive vice president, Duke Realty. “It’s important that the entire team is fully aware of what types of higher-acuity care will be offered and the unique facility and licensing requirements of each, and have the architect verify these requirements early in the planning process.” 

“Also, while a facility with stringent ASC standards is more expensive to build and maintain, the team needs to determine if there are ways to save costs, such as clustering higher-acuity care services in one part of the building and less complex care in other areas,” Taylor says. 

“We needed to understand how to accommodate complex levels of medical care and stricter standards in an outpatient setting while also planning for future space demands and even more stringent future regulations,” says Deborah C. Keel, chief executive officer of North Fulton Hospital. And the effort paid off. Today, Keel says, the MOB is providing a wider array of services in a more convenient location for its patients. 

It’s clear that the trend of providing higher-acuity care in outpatient facilities is increasing and will continue to grow in the future. Health systems that are considering this new model will face many challenges. However, through careful planning and collaboration with team members, providers stand to reap many benefits, including an expanded service area and patient base, reduced costs, increased revenues, and improved quality of care. 

Bruce Gordon is vice president, leasing with Duke Realty. Ketan Sanghvi is director, business development & leasing with Duke Realty. For more information, please visit the company’s website at