Intelligent Investment

Portfolio Optimization that Delivers Healthy Results

How to build ambulatory networks that provide the right services in the right location at the right economics

January 6, 2023 7 Minute Read

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CBRE Healthcare recently hosted a FOCUS Forum, Portfolio Optimization that Delivers Healthy Results, highlighting the ongoing efforts by healthcare providers to evaluate their real estate holdings with a focus on ambulatory services.

Real estate is capital intensive with long planning lead times. The challenge for healthcare real estate leaders is to develop a nimble and proactive strategy that effectively serves the healthcare needs of the community. We define portfolio optimization as a health system’s approach to delivering clinical services—the right services in the right location at the right economics—an essential cornerstone of effective real estate and capital planning. 

A Comprehensive Approach

Health system portfolios typically consist of inpatient hospital facilities, outpatient ambulatory sites and administrative offices. Optimizing each of these is essential to ensure that health systems maximize the economic value of every square foot in their portfolio.  

In an earlier article, The Future of Work—A Healthcare Perspective, we outlined strategies for managing administrative space in the new world of hybrid work, highlighting the opportunity for health systems to reduce their administrative footprints by 20% to 30% and improve employee satisfaction, engagement and overall performance. Here, we will address the clinical components of a health system’s portfolio, focusing on the highly dynamic outpatient ambulatory segment.  

Market Trends That are Reshaping Ambulatory Care

While hospital care is the largest component of the healthcare market overall, a disproportionate share of growth is occurring in the delivery of outpatient services in ambulatory settings.1 The pandemic spurred major changes in ambulatory care, which, combined with preexisting market factors such as advances in technology and clinical care delivery and consumer demand for convenience, is reshaping how health systems position themselves in three ways:

  1. Growth in Outpatient Surgeries
    There is a significant shift from hospitals to ambulatory settings for surgical procedures, largely driven by changing practice patterns during the pandemic, greater use of minimally invasive procedures and increased investment by private equity in ambulatory surgery centers.2

  2. The Move to Telehealth
    The rapid acceleration of telemedicine during the pandemic redefined how care is delivered. The impact of telemedicine on real estate was recently addressed in a CBRE Healthcare FOCUS Forum article: Telemedicine’s Impact on a Health System’s Real Estate.  

  3. Heightened M&A Activity
    Mergers and acquisitions between healthcare providers have significantly impacted health systems’ portfolios, forcing combined organizations to rationalize their administrative footprint and optimize the delivery of care, especially in overlapping markets.

A Good Starting Place: the Portfolio Diagnostic

Optimizing real estate holdings is an essential, albeit challenging, task for health systems. It’s often a transformational effort that begins with identifying clinical objectives and then determining how clinical services are delivered. Evaluating a health system’s current clinical portfolio is a key step to determine which real estate moves will be the most impactful.

Begin with Data

A portfolio diagnostic evaluates each clinical location on how well it supports the health system’s strategic objectives. It factors in essential metrics like patient volume growth, market coverage, space efficiency (volume per exam room), facility condition, financial performance and the impact of telemedicine. Additionally, health systems will add their own metrics to track specific strategic objectives. Portfolio diagnostics can be significantly enhanced by using data visualization and market analytic tools such as CBRE’s proprietary location intelligence tool, DimensionMED.

A portfolio diagnostic helps healthcare real estate decision makers evaluate the efficiency of their portfolio.

Selecting the Right Services for the Right Location

Identifying what and where services should be placed is based on both a quantitative assessment of the market and a qualitative understanding of local dynamics, with a focus on how each service fits with the rest of the healthcare continuum. Demographic data and claims-based demand forecasts typically inform service mix decisions, but a health system’s mission often serves as the foundation of service delivery decisions.

Case Study: MultiCare Empowers Local Market Leaders with Strategic Guidance and Actionable Data

Erin Kobberstad, VP for Strategy for Washington-based MultiCare, shared that her organization focuses on finding new ways for people to access their healthcare system by growing existing services, adding new programs and sites of care, and expanding into new communities.
MultiCare brings this strategy to life by empowering local leaders to deliver clinical offerings based on local needs. Local leaders are accountable for strategic planning, with the corporate strategy team providing actionable market intelligence, including community demographics and makeup, market share breakdowns and growth forecasting. The corporate strategy team also provides local teams with toolkits, shares best practices, and hosts an annual summit to encourage transparency and alignment.

Defining What Parts of the Delivery Network to Develop

Health systems also need to identify which parts of the care continuum they want to directly provide. It’s not necessary to own every part of the continuum or delivery asset, as many systems work with existing providers to best meet the needs of the local community. Alternatively, some organizations realize they have gaps in their capabilities and look to M&A to fill and scale services.

Case Study: Tenet Acquires New Capabilities to Support Ambulatory Services

Tenet Health, a global health system based in Dallas, manages its offering of clinical services by deploying a strategy focused on smaller markets, anchoring services around its 12 hospital systems to complement current offerings. In addition, its newest hospital facilities have partnered together with United Surgical Partners International (USPI) for ambulatory surgical services, offered under the Tenet umbrella.

Selecting the Right Location

Informed by market-specific healthcare utilization and demand data, health systems can curate their service mix based on market demand, demographics and their strategic goals. Once the optimal mix of clinical services is identified, the real estate team can then seek target locations.

Market analytic tools, such as CBRE’s DimensionMED, help real estate teams identify potential clinical sites. The insights generated from such tools, paired with input from local real estate advisors, are key to pinpointing which locations will ultimately work best.

woman working at desk
For Tenet, the location search lies heavily with the local market and is dependent on the economic environment at the time and the stakeholders involved. Many of the decisions involving strategy for USPI are driven by local practices and joint ventures.
Perry GuinnVice President of Real Estate, Tenet Health

Building an Ambulatory Network Planning Roadmap 

The resulting analysis forms the basis of a multiyear Ambulatory Network Plan Roadmap. Health systems use the roadmap to develop plans to optimize the portfolio, reviewing new and existing sites to determine where to stay put, expand, consolidate or divest. The roadmap also informs long-term capital planning, often prioritized by the most strategically important markets. 

Delivering the Right Economics

Determining the economics of ambulatory locations requires a holistic view of all financial determinants. The Total Economic Value of Occupancy (TEVO) measures the economic impact of a location in terms of its business case by adding patient revenues and real estate revenues (rent, licensing agreements, etc.) less operational expenses including clinical personnel, medical supplies and real estate expenses. The only component typically not included are downstream or referral revenues for services provided at another location like procedures or diagnostic activities.


Developing an accurate TEVO requires rigorous attention to real estate expenses that form the Total Cost of Occupancy (TCO). These include rent, utilities, repairs, maintenance, common area maintenance, real estate management fees, real estate taxes, property insurance and depreciation. Local commercial real estate advisors who specialize in healthcare properties can often provide an estimated TCO as well as the estimated cost to prepare a space for occupancy.

Building Healthy Results

The performance of the current portfolio and the results of the portfolio diagnostic inform the multiyear Ambulatory Network Planning Roadmap, resulting in a comprehensive strategic plan that enables a more proactive approach to managing healthcare real estate. As health systems further their mission to deliver the best care to their communities, the ability to bring the right services to the right location at the right economics will remain paramount.


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