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A Cash-Raising Healthcare Real Estate Strategy

Rene Letourneau, for HealthLeaders Media, June 3, 2013

Some enterprising hospitals and health systems are reevaluating their real estate strategies and selling medical office buildings as a way of accessing capital.

Hospitals have many competing priorities for where to spend their capital dollars: building renovations, construction projects, healthcare IT initiatives, equipment upgrades, and physician alignment strategies, just to name a few. While there is no lack of opportunity to spend the money, raising it is another story.

Some enterprising hospitals and health systems are reevaluating their real estate strategies and selling medical office buildings as a way of accessing capital.

On April 4, Truman Medical Centers in Kansas City, MO announced that it will sell four buildings, which currently house medical and administrative personnel, to neighboring Children's Mercy Hospitals and Clinics.

The 380-bed TMC system reached the decision to sell its buildings during the course of discussions with Children's Mercy about growth strategies, says Mitzi Cardenas, TMC's senior vice president of strategy, business development, and performance integration and its CIO.

"Children's needed the space, and we were looking to renovate a building on our campus for a call center. We are selling them four buildings over a 26-month period, and the capital will be used for that project," says Cardenas.

In addition to the building renovation, TMC will use the proceeds from the sale to consolidate its IT and call center staff into one building, and any remaining funds will be used toward the potential consolidation of its outpatient surgery services. The amount of the sale has not been disclosed.

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