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Healthcare Property Valuation

Healthcare property should be assessed for various reasons. There are some basic rules governing its valuation and it needs a multi-disciplianary team.

Healthcare refers to efforts to protect people’s mental, emotional or physical well-being. It also refers to endeavours to restore health in all the abovementioned areas.

One shouldn’t confuse healthcare for health care. Healthcare refers to the industry or system through which we get services for protecting and restoring well-being. On the other hand, health care refers to specific activities professionals undertake to protect and restore health.

The healthcare enterprise may be divided into emergency, rehabilitative, hospice, and long-term care. Other variants include preventive, primary, home care, diagnostic, and palliative healthcare.

Types of Healthcare Assets we Assess

We categorise healthcare assets using two primary criteria; their nature and their uses.

Classification by Nature

Tangible Assets

Tangible assets include property such as land, buildings and improvements. Movable assets such as furniture, equipment and fixtures also fall under this category. Other properties under this category include cash and inventory, such as medicine and reagents. Accounts receivable and supplies are also in this group.

Intangible Assets

Intangible assets are more distinctively related to the healthcare industry than tangible assets. They are pretty valuable and contribute to the overall value of healthcare assets. They include permits, easements, rights to use, zoning waivers and leasehold interests.

Skills and training possessed by the workforce and rights to the custody of patient records are intangible assets. Identifying the skills available in a hospital is one of the comonest reasons for health care intangible assets valuation.

How does something intangible qualify to be a asset? It needs to be legally identifiable as existing. Furthermore, it should be possible for an institution or person to legally own and transfer it to others.

See related: Dubai property valuation

Classification by Use

Nursing Homes, Supported Living and Hospices

These facilities fall under the healthcare category of hospices and long-term care institutions. The establishments are equipped to various levels, thus they comprise of both tangible and intangible assets.

Surgeries and Acute Hospitals

These are hospitals where people get healthcare services such as diagnosis, treatment, surgery, prescription, etc. We assess the buildings, equipment, leases, patents, and other tangible and intangible assets.

Equipment creates the difference between surgeries, acute hospitals, and long-term care facilities.

Healthcare Property Valuation Principles

The following are fundamentals of healthcare valuation.

Anticipation

This rule looks to the future of the facility. Benefits projected to accrue to the property under assessment form a part of its value. Anticipation is one of the reasons why some people consider healthcare property valuation a part of strategic consultancy.

Change

This principle holds that the property under assessment and the environment in which it exists is constantly changing. Therefore, as valuers, we try to include any foreseeable changes in the valuation process.

Substitution

Substitution considers whether there exists an alternative to the property under assessment. The existence of an equally or more desirable and effective option reduces the demand for the property, thus reducing its value.

Conformity

The value of a property depends on the level to which it conforms to its surroundings. Such harmony increases the facility’s ability to meet its intended needs, thus increasing its worth.

Contribution/Utility

A healthcare property’s value comes from its contribution to the entire enterprise. How useful is it?

Trends for Healthcare Property Valuation

Trends for healthcare valuation are based on four fundamental pillars; regulation, competition, reimbursement and technology.

Regulation

Healthcare related transactions are subject to government regulations globally. Governmental scrutiny may cause hospitals an associated enterprises to take measures to reduce exposure to liability.

Some of these measures include hiring doctors as independent consultants, not permanent employees. Having doctors under such terms may reduce liability but it also denies the facility ownership of doctor’s training and patents.

Reimbursements

Private and public insurance companies reimburse healthcare facilities for treating their customers. This trend informs the assessment of both hospitals and insurance companies. Medical insurance companies are part of the healthcare industry.

Competition

This trend aligns with the principle of substitution. Your property is likely to reduce in value if there is a more efficient competitor.

Technology

Innovative technology is likely to be more efficient than traditional methods. Thus your property accrues or losses value depending on whether it is in tandem with technological trends. Technological advances may render some of the property you currently hold obsolete and therefore very low value.

Conclusion

Effective healthcare property valuation assesses all aspects of an enterprise. It includes the assessment of healthcare establishments offering long-term, short term and complementary services.

We assess both tangible and intangible assets. These include building, equipment, furniture, intellectual property, and leases. Our work is based on principles and trends specific to healthcare property valuation. Contact us to further discuss your case.

Frequently Asked Questions

Healthcare property valuation lets you know whether your facility is gaining or losing value. It is a great tool to help you chart the course into the future.

There are many reasons to assess healthcare property, including determining the correct insurance premium. Furthermore, the healthcare property may be valued as part of its strategic planning or for the benefit of investors.

A valuation report is a comprehensive document. It includes preliminaries such as terms of reference, dates and locations. The substantive parts of the reports may consist of valuation consideration and analysis. Risk analysis, valuation rationale and SWOT analysis are also part of it.

Healthcare property valuation is complex. It includes real estate, specialised skills and training, patents for equipment and software and so on. It is unlikely to find an individual with all the skill sets necessary to evaluate all these aspects. This necessitates the use of experts in various fields for the best results.

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Vinodh Mahadevan MRICS

Author

Vinodh Mahadevan MRICS

Vinodh Mahadevan is the Head of Business & Strategy at Land sterling and a Member of MRICS. With over 14 years of experience in investment advisory, consulting, valuation & advisory services, he has gained extensive exposure to valuation engagements. Vinodh's expertise includes due diligence exercises, appraisals of commercial and residential properties, mortgage and collateral appraisals, retail malls, large-scale industrial parks, hospitality and entertainment projects, and other special use real estate valuations.

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