Rush University to outsource facility management, illustrating a trend

Rush University Medical Center is working with the real estate firm JLL to manage its facilities, which is expected to net the Chicago-based academic medical center about $40 million in savings.

Part of the cost reduction will stem from more energy-efficient assets, JLL said. JLL will use energy usage and cost data from other healthcare systems in the Chicago area and adapt Rush's 5 million square feet across 21 buildings accordingly.

Rush's current facility staff will join JLL, which will provide them with career development opportunities, executives said. There are 110 employees from Rush's engineering team who are impacted, some of which may retire.

The real estate company will also look to bolster Rush's local supplier base and educate and train employees at neighboring businesses to try to improve the area economy.

"Healthcare facilities management is becoming increasingly important to the patient, visitor and staff experience with facilities performing as a business enabler," said Richard Taylor, executive managing director and lead of JLL Healthcare Solutions. "As a result, facilities management is required to be more strategic and more sophisticated in delivering additional value and return on investment."

More providers are outsourcing property management, including day-to-day maintenance and transactions. Some are selling part of their underutilized space or even their entire property in sale-leaseback deals, freeing them up to spend more time and money on patient care.

Huge swaths of health systems' revenue are often tied up in brick-and-mortar facilities, which can make it hard to spend on capital-intensive programs related to technology and population health. Adventist Health, based in Altamonte Springs, Fla., for instance, said about $7 billion of its roughly $10 billion in revenue is dedicated to its property.

While it can save providers money and drive efficiency, they are often reluctant to relinquish control.

"It is a lot more difficult for a board of directors to concede that they will relinquish control of their real estate as opposed to their food or technology services," said Jud Jacobs, a partner at Caddis Healthcare Real Estate. "That can open up questions that rise to the level of CEO or COO."

Outsourcing facilities management can save providers money and streamline operations, Jacobs said. But they have to be careful and choose the right partner, he added.

"Their real estate is so linked intrinsically to the care they provide," Jacobs said.

Many times, health systems' real estate and business models are at odds, said Greg Gerber, senior managing director of healthcare transactions management at JLL.

"Most are trying to do everything themselves," said Gerber, adding that providers need to stick to their core competencies. "Advanced health systems will deliver healthcare and let someone else manage buildings better than they can."

Hospitals and health systems are sitting on untapped resources, said Sylvia van Loveren, a senior vice president at JLL. They could free up capital for more staff by outsourcing real estate management or selling part of their property, she said.

"You have to rethink the big box and what you can do with it," said van Loveren, especially as less care is delivered in hospitals. "Can you reutilize the infrastructure more efficiently so that it's tailored and customized for your population?"

Commercial real estate firm CBRE said there continues to be strong interest from healthcare providers that look to monetize their real estate portfolios and explore energy-savings programs as well as new development alternatives, said Jim Hayden, CBRE's executive managing director for healthcare in its global workplace solutions.

"At some point, the economics are going to be such that there is more value in their real estate that would exceed any not-for-profit concessions they would get," he said. "Hospitals will question whether they need to own their acute-care facility."