Think Before you Locate
Three Important Questions to Ask Before Locating a HealthCare Facility
By James Perez

Where to place a new facility is one of the most important decisions affecting the financial success of any healthcare organization. Location decisions are crucially important for all healthcare providers, from large hospital systems seeking to build new facilities to single-practice physicians looking for a leased property in which to locate.
Every provider, large and small, can benefit from the same set of location considerations. Following are three questions to ask when making location decisions.

1. Who are our “customers”?
Knowing who your “customer” is will allow you to make the best informed decision possible. Your healthcare facility will have many customers. First and foremost, your customers are the patients who will use the services you provide. When deciding where to locate your facility, make sure that the services you plan to provide reflect the population you are serving. With properly conducted market analysis, you can learn the demographic and psychographic profile of the households in the trade area. Identifying your patients’ households is instrumental to aligning your services and products to the community’s need. The type of patients utilizing your facility will impact operational issues as well as capital considerations. For instance, a bariatric population will require special equipment, facility planning and staff training. Being able to identify their customers allows decision makers to make more prudent decisions when looking at new service lines.
It is important to remember that other internal and external customers will be affected by the local of your facility. The impact on your physician staff, both employed and independent doctors, needs to be recognized.  Will physicians believe that the new facility provides better access to ancillary services and gives the community new specialty services, or will the facility be viewed as competition and perceived as a threat?

2. What is driving the location decision?
Your driver for the location decision should be patient demand. It’s vital to obtain detailed analysis that clearly shows adequate patient demand for your services within a clearly defined trade area.
All too often, building/leasing decisions are knee-jerk reactions to location decisions made by one’s competitors. Just because the competition is willing to forge into a new area does not mean that you should follow. It’s possible that the competition is premature in locating to a particular site or community. If patient volumes or service demands are not adequate, your system or practice will lose money for many years until demand catches up. Don’t make that mistake.
Sometimes physicians drive location decisions based solely on their political clout with a system or practice. While it’s important to give physicians input in the decision process, don’t let their desires form the basis of your decision.

3. Does trade area analysis support the decision?
While it’s necessary to have proof of patient demand for your services, you also need to consider several factors related to the trade area. We recommend performing a trade area analysis on possible locations to compare the benefits and flaws of each one. Here are some factors to consider:

Convenience
When locating a facility, think like a retailer. Is it going to be convenient for my patients to get here? If your patient base has to drive across congested highways or use inadequate public transportation to arrive at your location, they are going to look for alternatives.

Co-tenants
At each possible location, who are your neighbors? The types of co-tenants or nearby businesses affect the overall impression your patients will form about you in regard to professionalism, quality and services. If many of the co-tenants are of a discount variety, potential patients could perceive that your facility or practice is discount in quality. Select a location with neighbors you choose to be associated with.

Daytime/nighttime populations
Be sure to analyze how the population numbers change during various times of the day and different days of the week. Busy business centers can be deserted at night, while suburban neighborhoods can gain population. Knowing how the population waxes and wanes throughout the course of day and week will help you better choose the right location.

Competition analysis
You must know who your competitors will be in a particular trade area. The main reason to gain this knowledge is to make sure that adequate patient demand exists for both you and your competition. Don’t forget that your existing locations are “competition.” Be sure that your proposed site does not cannibalize your existing sites. When defining your competition, think outside the box. Americans are starting to look at various types of holistic approaches to medicine. These alternative medical providers could provide more competition than you might believe.

As competition in the healthcare industry increases, your location decisions become increasingly important.  Be sure to analyze your customers’ needs, your reasons for locating the facility and the characteristics of the trade area before jumping into this decision.

James is Vice President of HealthCareID, responsible for business planning and brand building focusing on the healthcare industry. Prior to joining Buxton, James worked for Pekin Community Hospital where he was responsible for the day to day operations of their clinic system. It is this experience that helps him to understand how to strategically grow the medical industry.