Healthcare providers choose “timeshares” as a real estate solution to three growing pains

By: Katie Trevena, Senior Vice President-Real Estate Advisory

Healthcare systems, hospitals, and private practice groups have grappled with increased costs and reduced insurance reimbursements since the pandemic. In that time, thriving practice groups and systems have reimagined their mission and reinvented their strategy to serve patients.

One of the biggest drivers in healthcare is real estate – location, location, location. The decisions that healthcare providers make about their locations can have long-term impacts in both positive and negative ways.

Most healthcare groups reevaluate clinic locations at the beginning of the year, reviewing costs, drivers of service, and demand. Many want to expand but opening a new location has many risks. Even when they find the right location, staffing becomes the next challenge, especially in more rural or exurban areas.

Timesharing, where two different businesses or healthcare providers share the same clinical or office space either part-time or for a limited duration, has become a great way for many practice groups to serve a new or tertiary market without a long-term real estate commitment or a dedicated full-time suite.

Healthcare providers use timeshares for three reasons:

• • • to test new markets
    • to increase operational efficiency
    • to offer non-core specialties

In all cases, the timeshare agreement is beneficial for practice groups and patients, but these agreements also have some complicating factors that all parties need to follow.

Test new markets

Growth into new markets can be time-consuming and expensive, so practice groups test more suburban or rural Minnesota markets by starting with timesharing. It allows the expanding group to test the waters of that market without the long-term commitment of people or places.

Orthopedic practices experiment with new markets, like Hudson, Wisconsin, and Brainerd, Minnesota, to provide post-operative care – like physical therapy and, post-surgery assessments – for patients who had surgery in one of the larger ambulatory surgery centers within the Twin Cities metro.

Become more efficient

When testing a new market, the practice group can use staff from other locations one or two days a week. Once appointments start to fill, the practice group can assess whether more time is warranted at the location.

Eventually, like in the case of Retina Consultants of Minnesota, their specialists spent years of timesharing with other business entities in Duluth and St. Cloud.  In 2023, they relocated and leased new space to accommodate existing patients and support long-term growth.  In certain markets, the group signs longer-term leases with space for growth, when demand increases.

When offering a timesharing location, practice groups can alternate which specialty practice uses the same space. In those locations, the landlord provides the administration staff and the reception area; the physician can claim specific days of the week and begin to grow the practice without most of the overhead.

Supplement core specialties

Healthcare systems often need to be focused on core services that exclude some specialties, like orthopedics or pediatrics. Those systems can open their larger real estate footprint to specific, non-competing specialties to augment their platforms and more fully connect the patient to their system.

In the case of Ridgeview Medical in Waconia, LeSeur, and Arlington, Minnesota, timesharing spaces in owned buildings allow them to add specialty practices, like nephrology, oncology, or cardiology, for one or two days per week without supporting an entire practice group. Those location-sharing physicians have access to testing equipment and support services without the redundancy of having their own systems.

According to Ridgeview CEO Paul Ham, “As a healthcare system, Ridgeview manages our real estate in ways that support both partnership and smart growth. Creating timeshare space allows us to bring third-party specialty care to the communities we serve while we remain focused on our own core competencies.  Timeshares enhance space productivity, generate revenue, and provide flexibility to adapt with the market.”

In comparison, specialty groups often consolidate their core services in fewer locations and use timesharing locations for smaller satellite offices, which improves the connection between patients and care.

Children’s Minnesota in St. Paul and Minneapolis offers their cancer and blood disorders care in two outstate locations – St. Cloud and Duluth. This allows patients to be treated within Children’s specialty care for pediatrics without traveling to a different clinic. While the practice services may change over time, the space allows Children’s the flexibility to provide well-rounded care to their patients.

But there’s a catch

Healthcare timeshares are regulated by state and federal rules that ensure that any lease between two groups passes a litmus test of “fair market value” of both the tenant improvement and lease rate.

• Stark Law: This federal law prohibits physician self-referral, meaning a physician cannot refer patients to a medical facility in which they have a financial interest unless certain exceptions are met.
• Anti-Kickback Statute (AKS): This statute makes it illegal to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce or reward referrals for services reimbursable by federal healthcare programs.
• HIPAA Compliance: Medical timesharing involves sharing facilities and possibly electronic systems, which means strict adherence to the Health Insurance Portability and Accountability Act (HIPAA) is necessary to protect patient privacy and data security.
• Fair Market Value (FMV): Lease payments in medical timeshare agreements must reflect fair market value to avoid regulatory scrutiny.

You’re right if these rules sound harsh or complicated. It makes it more important to have a real estate advisor who understands the nuances and can navigate the complexities of real estate and healthcare.

It’s all part of strategic planning

Ultimately, all healthcare providers are looking to be more efficient and effective in their care delivery. With strategic planning that looks out five to ten years, these groups can use their real estate footprint to their advantage by testing new concepts, using a trial balloon method with new markets, and remaining open to blurring some long-held beliefs about where patients are seen.

If you have real estate questions or would like to review if timeshares could help your practice manage through growing pains, be more efficient and deliver the care when and where it is needed—contact our experienced Forte advisors.