Recruiting Physician Tenants 1
Recruiting Physician Tenants To The Hospital Campus
David E. Toborowsky
University of Kentucky
April 20, 2004
Chair: Dr. Len Heller
Advisor: Dr. James Morton
Reader: Dr Jeff Talbert
Outside Member: Steven Jenkins
Norton Health Care
Recruiting Physician Tenants 2
Table of Contents
Table of Contents: ……………………………………………………………………….. 2
Executive Summary: …………………………………………………………………….. 3
Statement of the Problem: ………………………………………………………………...5
Purpose of the Study: ……………………………………………………………………..6
Research Questions: ………………………………………………………………………6
Definition of Key Terms:………………………………………………………………… 6
Review of Literature: ……………………………………………………………………..7
Recommendation: ……………………………………………………………………… 41
Relevant Courses: ……………………………………………………………………….45
The economic stability and proper utilization of the new medical office building
attached to Norton Audubon Hospital requires a proper study in order to develop an
Recruiting Physician Tenants 3
aggressive recruitment strategy. The five areas of this study include the strategic plan, a
center of excellence, the medical office building, the tenant mix, and organizational
considerations. These five areas mentioned are essential in maximizing the potential of
the new building.
The strategic plan, as developed by senior leadership, and approved of by the board of
trustees is the path that Norton Health Care System will follow. The strategic plan
includes data relating to demographics, economic status, population details, and volumes
which will lead to service line planning. The distinction of being a center of excellence
is will enhance the campus and also lead to additional volume increases. This is a direct
result from currently being recognized as a top heart hospital. Becoming a center of
excellence is the next level that Audubon should follow. The plan for the medical office
building is a study of the various possibilities for MOB’s. This includes structure and
management of the building, the fit up costs, as well as the opportunities that will arise
from the building. The proper tenant mix will assist in the success of the campus as well
as the building. Tenant mix includes the proper ratio of specialists compared to family
practice, anchor tenants, as well as various services that can be located in the building. It
is essential to utilize the anchor tenant of DR’s Rice and Donahaue an 12,000 sq. ft.
internal medicine practice to recruit the specialty tenants such as Bluegrass Cardiology,
(Cardiology) Chest Medicine, (Pulmonary) and DR’s Schiller, Bloemer, & Stearns
(Orthopedics) in order to have the correct specialty to family practice. This will not only
drive our volumes but the other physicians that locate at Audubon. Organizational
considerations must be the foremost recommendation to be implemented to recruit the
best possible tenants to enhance the over all growth of the hospital. This area will look at
the who should be instrumental in recruiting the tenants to make this campus successful.
The results of the strategic plan will serve as the basis for most of the data that is used
in the study of this plan. It will also help in formulating the final recommendations.
Recruiting Physician Tenants 4
The literature and research shows that having a center of excellence will allow the
campus to grow in terms of volumes and marketability.
The medical office building will show that there are several ways in which hospitals
are currently expanding. Partnering with Faulkner-Hinton is consistent with trends in
health care, however, the risk that Audubon is taking must be shared with Faulkner-
Hinton. Norton Audubon leadership should immediately sit down with Faulkner-Hinton
and renegotiate the terms of the agreement. The risk that Audubon is having to assume is
unbalanced. The 120 build out time that Faulkner-Hinton has allocated should have a
penalty clause in order to get the tenants in the building in a timely and efficient manner.
This will provide an incentive to Faulkner-Hinton to lease and build the space.
The location of the MOB is as important as the tenants who occupy the building. The
tenant mix should include cardiologists, pulmonologists as well as family practice, such
as Blue Grass Cardiology, Cardiovascular Specialists (Cardiology),Chest Medicine
(Pulmonary), Louisville Pulmonary Specialists (Pulmonary), DR’s Schiller, Bloemer, and
Stearns (Orthopedics), and DR’s Hurt & Marquees (Family Practice) to support the
strategic plan for Audubon.
The organizational considerations should include the chief executive officer, medical
director, manager of business development, anchor tenants, physician liaison and
representatives from Faulkner-Hinton and associates. The should have action plan and
regularly scheduled meetings in order to lease this space that will not case undue burden
to the campus.
Understanding the history, locale, plan for growth and the competition gives a wider
view of Norton Audubon Hospital and it's future. Audubon is a community hospital and
part of the Norton Health Care system which consists of six hospitals, five immediate
Recruiting Physician Tenants 5
care centers, 22 physician practices, and 9300 employees. Norton Health Care's annual
revenue is $1,100,000,000 which includes Norton Audubon's annual revenue of
$280,000,000.00 (“Strategic Plan”, 2003). With a margin of $3,100,000. The primary
service lines are cardiac, orthopedic, oncology, and pulmonary services. The average
daily census for The campus is 204 patients and the hospital is licensed for 380 beds.
Located 4 miles from downtown Louisville, the hospital is located in the north central
part of Jefferson County. Historically, Norton Audubon Hospital was part of the Humana
system preceded by Colombia/HCA. The competing hospitals for open heart cases are
Jewish Hospital, Baptist Hospital East and University of Louisville Hospital. The first
artificial heart transplant was preformed at Norton Audubon in 1981. Caritas Hospital
also competes with Audubon for other services such as oncology and orthopedics. The
decision to build a new medical office building was based upon the need to expand the
campus as well as provide additional office space to referring physicians. The national
trend in health care is to locate doctors close to the campus. This paper compares the
possible outcomes as well any alternate options available.
Norton Audubon is following the path that many health care systems are using as a
model for increasing capacity with limited resources. The use of capital for the building
will be invested from the outside real estate company. This will allow the hospital to put
capital in other areas such as equipment and services.
The campus has the existing six story medical office building on the East Side of the
campus. This building was sold to the real estate company Faulkner-Hinton in December
of 2003. The hospital has projected volume growth to offset increased costs in order to
make budget for the next few years.
Statement of the Problem:
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Norton Audubon has limited space and also has factored higher volumes to offset
increases in costs, so a decision was made to build an attached medical office building.
Audubon Hospital entered into a real estate venture with Faulkner-Hinton & Associates
as the outside contractor. This new venture requires Audubon to guarantee a 60,000 sq. ft
lease for 15 years at a market rate of $19.50 per sq. ft. with $14.50 being the base rate
and a $5.00 operating expense. The guarantee is essential to the real estate company as
this is how they secure the financing for the building. Norton Audubon is to then sub-
lease the space to other tenants to offset financial obligations. The budgeted impact for
fiscal year 2004 is a loss of $750,000.
Purpose of the Study
The purpose of this study is to identify details from the strategic plans, understanding
centers of excellence, building medical office space, identifying proper tenant mixes, as
well as the organizational considerations that must be considered to recruit physician
tenants to the Audubon campus in order to continue on a successful path and compliment
the hospital’s operation.
I will answer the following items in order to make recommendations.
• What service lines are we trying to achieve based on strategic plans?
• How and why do we become a center of excellence?
• How should we structure the deal pertaining to the new building?
• What types of tenants or services should we offer at the MOB?
• What organizational considerations are needed and what kind of recruitment team is
Recruiting Physician Tenants 7
Definition of Key Terms
Master-Lease Agreement: A Real Estate agreement between 2 parties with the terms
of the Lease to sublet to other tenants, as third parties. This provides guarantees to the
outside real estate company for a continuous revenue stream and return.
Tenant Mix: This is the ratio of Specialists and the Specialties compared to the
number of Family Practice and Internists either in a non-specialty hospital or Tenant
MOB: Medical Office Building. A building designated for health care providers.
Shell Space: The areas that each tenant will lease with out any finishes.
Build Out: Is the allocation of dollars to build the space for each tenant.
Review of Literature
The majority of my literature and findings are from the Health Care Advisory Board,
which is non-profit organization based in Washington, DC. This Advisory Board has a
membership of 2,100 of the country's largest and most progressive health systems and
medical centers and provides the best practices research and analysis to the health care
industry, focusing on business strategy, operations and general management
issues.(Advisory Board, 2004) There are other studies and news articles included which
will provide data and information about medical office space. The literature will support
the five components that make up my study.
Recruiting Physician Tenants 8
The article relating to market research is a strong foundation for research information. It
lists several different sources for obtaining marketing and sales data and can be used to
track important data such as the average length of stay, inpatient data, outpatient data,
and geographic area. The article suggests using this data for planning purposes.
(“Managing Market Research”,2003)
Norton Health Care strategic plan suggests that to have a better understanding of
competing hospitals use the following information:
COMPdata® which provides state-supplied market information and keeps hospital
abreast of competitors.
The various state hospital associations offer COMPdata, which is a database
compilation of hospital-reported data. The database is approximately 90 to 95 complete
and is fully searchable for ad hoc queries. Most hospitals in different states use this
service. Two members of the planning and business development department are
responsible for searching the database, keeping track of competitive data including the
• Average length of stays (ALOS)
• Charge for services
• Diagnosis-related groups (DRGs)
• Geographic area
• Total market share
This data is used to compare Audubon Hospital to its competitors and its lines of
services are benchmarked to other hospitals. This data is a one good source of
information to administrators as well as strategic planning departments. This information
is used to market potential physician practices and groups to the campus.(“Strategic
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The feasibility of a new medical office space has been the study of The Real Estate
Center at Texas A&M University. The article further expresses how to conduct a
feasibility study prior to opening of a medical office building. This study clearly states
that medical tenants due not typically move locations because of the expense. They
further state that medical office space has a higher start up cost due to the interior finishes
such as cabinetry, plumbing and other medical specialty needs. Accordingly, to start
building additional or new space it is important to have a 65%-70% pre-leased space to
meet the economic needs.(Hunt, 2003)
The feasibility study conducted for the City of Memphis, Tennessee was utilized for
the pre process of developing a medical center to serve a larger three-state area. This is
an extensive study that contains some of the basic elements that make up any good plan
and can be applicable. These elements include basic demographics of the area, which
include age, sex, race, economic status, & health data. These numbers are important
because it allows the leadership or any decision-maker to make decisions based on
national and historical trends. This is important when trying to evaluate any future
programs or service lines that the hospital might offer.(“Medical District Master Plan”,
The web site surgicenter online has an article relating to feasibility studies in general.
This article explains in detail the necessary steps needed to conduct a thorough study.
Most of the information pertains to an out patient surgical center and can also be utilized
for the medical office building. A feasibility study, according to the article, should have
five-year financial projections, volumes, gross and net revenues, and pre-opening
expenses. These financial considerations are important to analyze in any feasibility study
Recruiting Physician Tenants 10
to make a decision to proceed with the project or look at an alternate option.(Serbin,
Centers of Excellence
“Integrated Heart & Vascular Institutes” is supportive article for centers of
excellence. This article maintains that having centers of excellence will increase volumes
and that cardiac and other vascular centers will drive up the bottom line as these service
lines have some of the larger profit margins. The article also states that patients who
unknowingly suffer from vascular disease are an untapped market and that having a
center of excellence will enhance volumes. (“Integrated Heart & Vascular”, 1997)
“Centers of Excellence” is an article relating to the marketing of a hospital or service
line. The article further states that marketing hospitals with this distinction is a tool that is
very instrumental in driving market share and referrals (“Centers of Excellence”, 2002).
There are several different criteria that go into making a center of excellence. The
most important understanding is that a center of excellence is one that is not normally
given by a regulatory body, but based upon industry standards. There is not a certain set
of criteria that must be in place to have this distinction, but there are several shared
commonalties. The main two common points are that they have strong reputations and
state-of-the-art clinical resources. Solid patient outcomes are a typical observation that
should be in place to have this distinction. Marketing this title helps drive physician and
patient volumes. With some additional dollars placed into certain service lines for
educators and marketing will attract physicians that provide these services.(“Developing
Recruiting Physician Tenants 11
There is a regulatory distinction for a center of excellence this is given out by the
Department of Health & Human services. This is not a common status that most hospital
systems will go after. The only ones that have been awarded this status are a few
hospitals that applied for a grant that pertain to services for women. Centers of excellence
can also have a positive impact on recruiting the types of doctors to the campus that want
to tie into this marketing effort. (“Centers of Excellence”,2002)
Medical Office Building
The article “The Value of a Medical Office Building.” goes into further detail of the
importance of having medical office space and doctors on the campus, which greatly
increases the volume and states that physicians on campus can be more productive with
their time because of their proximity to the hospital. The referral patterns of physicians
and the mix of specialists adjacent to hospitals helps each practice increase patient
volume as well as being important to attracting other doctors to the campus. (“Value of
Medical Office Buildings”, 2002)
This article discusses the various options for marketing and managing the office
space. Several options include:
• Leasing space at a monthly rate
• Condominium style (Ownership)
• Hospital ownership of space with sub leases
• Outside Real Estate Ownership
• Time Sharing Space
Recruiting Physician Tenants 12
This article states that further study is needed to analyze the different cost structures
with owning and operating the structure. Outside real estate agreements are the latest
trends that allow the hospitals to get out of the real estate market and put their resources
into profitable areas such as service lines and equipment. Having outside real estate
companies manage the building will not only free up scarce capital, but also take the
hospital out of managing the daily operations of a non revenue generating area.(“Real
Estate Management Practices”, 2002)
Proper utilization of capital planning for the hospital, which is a major focus of this
study, is dependent upon several factors. Market analyses and establishing the costs of
operation are important to setting strategic goals and setting a fair market price for a
medical office building. Market analyses are conducted annually, surveying the fair
market value for lease space in the local market. The article “Real estate management
Practices” explains that to determine market price, the costs must factor in the
maintenance, utilities and environmental services of operating a medical office building.
The operating costs are measured per square foot and cost per square foot includes space
and operational costs, typically competitive to the fair market value to avoid inurement
violations. Lease agreements include charges incurred from space, maintenance and
utilities. Telephone use is the only additional fee not factored into the lease rate. (“Real
Estate Management Practices”, 2002)
In the article ‘When Leasing Campus Space,’ administrators abide by an institutional
philosophy of providing health services to the community rather than making a profit.
Therefore, campus space is leased out to medical personnel at a cost lower than private
market rates although still high enough to cover operating costs. (“Leasing Campus
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In order to free up capital for other areas many articles discuss using outside real
estate companies. This is becoming a more common practice around the nation.
An article in the Raleigh News & Observer from 7/10/03 discusses how the University
of North Carolina has partnered with a respected real estate company to build 63,000sq.
ft. and 30,000 sq. ft. office complex and outpatient center. This is allowing them to put
their resources into hospital based capital needs. (Fischer, 2003)
The next phase of the paper is the leasing and locating of occupants to the medical
office building. This area becomes the most important aspect of the project as this is all
of the studies and actual analysis must come into play. The anchor tenants have a vital
role in the campus. The following articles relate to tenant mixes and types of tenants that
should be located in the office building including anchor tenants
The article, as mentioned earlier, relates to the physician and tenant mix. This
article was written at a time when managed care was a dominant factor in health care and
the article states that a non-specialty hospital should have a mix of 50:50. (“The correct
PCP-specialist mix”, 1997)
The article that supports the recruiting of medical tenants relates to time sharing of
space. This is not what hospital administrators like to do due to the amount of time it
takes to operate a time-share. It is a good source of revenue and it allows doctors time to
build their practice at the new location. There are several different options discussed in
the articles from 1997. The different hospital groups that were studied had different
arrangements. The first hospital had 2500 sq. ft and the receptions and other support staff
was provided. The second hospital had 2000 sq. ft. and the staff was provided with the
doctor. The biggest constraint is managing the space was deciding who gets the space
Recruiting Physician Tenants 14
and when. Some hospitals will limit how long a practice can time share. Some groups
would divide the days up in order to facilitate their various practices. (“Time Share
According to the study, it is important to have more than one specialist or group of
specialists on any campus. A proper and good mix prevents a physician or group of
physicians from controlling the campus, plus this allows each practice to feed into each
other. The success of all practices is not only good for doctors, but essential for the
hospital. (“Tenant Mix”, 1997)
The article that is important to recognize is “Marketing to Physicians”. This study
promotes a wide variety of ways to get Doctors involved with the campus. This should be
a major initiative of administration. The article also states that having executive
participation is vital.(“Marketing to Physicians”, 2002)
These four tactics are important to physician outreach. They are market specialty
practices to physicians: hire dedicated, clinically knowledgeable staff to market specialty
programs to PCPs in an effort to increase specialist referrals through physicians
education of hospital or health system resources. Offer opportunities for continuing
medical education (CME) courses: CME promotes hospital resources, increasing primary
physicians’ familiarity with medical institutions and fostering relationships between
physicians and hospital executives. Foster structural bonds between hospital executives
and physicians: Empower physicians to partake in designing the service delivery system;
encouraging physicians to become involved actively in the decision-making process
increases the perceived value of maintaining the relationship. Employ dedicated
physician liaison staff: These staff members link medical staff to hospital executives,
Recruiting Physician Tenants 15
maintain relationships with individual physicians and serve as physician advocates in
hospital-based decisions.(“Physician Outreach Tactics”, 2000)
The research has also stated that relationships between the nursing staff and
physicians have a positive impact on the overall relationship with the hospital. Using
Hospitalits to cover the Primary Care Physicians (PCP’s) will ensure over all coverage of
patients. It is also important to have good communication between the Emergency
Department staff and doctors. Creating committees to get the doctors to help assist in
recruitment of tenants to the campus will generate buy in from the medical community.
This is essential as it builds relationships with the administration. The final comment in
the article is having easy access parking for doctors. (“Physician Marketing”, 2002)
The five major areas that make up the study in this paper include strategic plan,
centers of excellence, medical office buildings, tenant mix, and organizational
consideration. The five areas mentioned will be compared with the literature to the data
to be able to discuss and make recommendations regarding the recruitment of physician
tenants to the hospital campus. The literature has provided a basis to proceed onward.
The focus of the analysis will relate to the five areas of the study that the literature has
identified as critical to the process of recruiting physicians to the hospital campus. These
areas pertain to the strategic plan and what makes up the plan as it relates to service lines
and other areas of strategic goals of the organization. The centers of excellence and its
relationship to the service lines previously identified, the medical office building and its
arrangement with Faulkner-Hinton and Associates. This will look at the data as the costs
as well as the opportunities for the prospective tenants to build out their space with the
Recruiting Physician Tenants 16
$50.00 per sq. ft. allocation. The proper anchor and tenant mix will also be supported
from the data that has been collected.
The data was compiled by Norton Health Care’s office of strategic planning, senior
leadership, senior management and all of the strategic plan is presented to the board of
trustees which must be approved. The other source in this study was a market analysis
conducted by Faulkner-Hinton & Associates. The study included data from the 1, 3 ,and
5 mile radius of Norton Audubon. This data incorporates all demographic and economic
data from the area.(Filer-Smith,2003)
Period of Time
The time period that is covered in this study is from 2000-2003.
The five components of the study is measured and than analysis is made based upon
the data that was collected which includes population, race, gender, age, sex, economic
status, house hold sizes, disposable income, primary and secondary service areas. This is
also directly relates to the service line planning created by the strategic planning
department. This data includes the information that was utilized in creating the SWOT
analysis from the strategic planning department.
The limitations is that the economic data is for a small period of time and the other
limitation is that a market study or feasibility study was not conducted prior to the office
building being started. There is very limited data from the strategic planning department
Recruiting Physician Tenants 17
relating to centers of excellence. The agreements with Faulkner-Hinton and the
construction design was pre negotiated and implemented prior to this study. They were
based on the need to build space for a large internal medicine practice group (Dr’s Rice
& Donahue) that was recruited from Caritas in 2002.
The service line planning is a major part of the strategic plan. The service line
planning comes from the data related to demographics and economic data. The service
line plan looks at each service line to determine were the resources are allocated and
which lines are provided at each of the facilities in the system. The first line that is
analyzed is the cardiology line.
The primary areas that are served from this line include the following: Jefferson,
Bullitt, Oldham, Marion, Carroll, Harrison (IN), Floyd (IN), Clark (IN), Scott (IN), These
are the primary areas that we service for cardiology. The second service areas are the
counties of Meade, Breckenridge, Hardin, Grayson, Edmonson. Warren, Larue, Hart,
Barren, Nelson, Washington, Taylor, Green, Metcalf, Adair, Spencer, Shelby, Oldham,
Anderson, Henry, Trimble, Jefferson (IN), Washington (IN), Crawford (IN), & Perry
Norton Health Care has made significant investments in cardiac delivery services.
The main competitors for cardiac services still remains as follows:
Open-Heart: Jewish Hospital, Baptist East, University of Louisville, Hardin Memorial.
Non-Open Heart: Caritas Medical Center, Clark Memorial, Floyd Memorial, Flaget
Hospital, Taylor County.
Jewish Hospital: Strong Preference for cardiac services. Strong Physician alignment,
strong marketing including expansive mass media campaigns and physician relations.
Recruiting Physician Tenants 18
Baptist Hospital East: Growing Cardiology volumes; Growing senior/Medicare patient
base. High awareness and preference growing beyond eastern Jefferson County.
University of Louisville: Strong ties to Jewish Cardiac program. Targeted and steady
marketing program primarily focused on cancer services.
All of Norton Health Care had volumes around 9108 cardiac inpatients during 2002.
Norton Audubon accounts for 3,850 of those patients. Cardiac patients are trending to
need other services over the remainder of their life. Invasive surgeries account for 2,248
at Norton Audubon last year. This includes open heart surgery, stents and other invasive
procedures. The overall cardiology volumes decreased from 2000 to 2001. 24.3% of all
cardiac surgery was performed at a Norton Hospital. Norton Audubon had a growth of
about 4.1% of the market share from 2000-2001.
The service line of Neurology is not a major staple of Norton Audubon Hospital. This
accounts for about 5.7% of the market share. This data shows that there is room to grow
volumes in the neuro-spine area. The orthopedic market is expected to increase as the
population ages. Norton Audubon Hospital has one orthopedic group on campus. They
split the work between 3 of the hospitals in Louisville.
The oncology sector of the market will continue to be a major opportunity for all
hospitals as the population ages. Norton Health Care has made significant strides in
marketing the cancer service line through out the community. The Norton Health Care
system has about 40% of the medical oncology market share in the primary service area.
The surgical oncology accounts for about 30.5% for Norton as it relates to market share.
Norton Audubon Hospital does not market for woman’s services. It does have a
mammography machine but does not do any obstetrics, gynecology work. This is not part
of the long term strategic plan for this campus. Norton Audubon has a newly renovated
emergency room department with about 36,000 sq. ft. There were 37,249 patients treated
in 2001. An increase of 2% was expected for the next several years. The more physicians
that are located on the campus the more volume is expected to the ED. Norton Audubon
Recruiting Physician Tenants 19
emergency room treats more adults than any other hospital in Kentucky. It serves an
entry point for inpatient volumes. Studies were conducted for the emergency departments
over the past two years. The main recommendation that has been offered is to build fast
The strategic plan for Norton Audubon Hospital takes into account that the hospital is
licensed for 480 beds. It is centrally located in Jefferson County and has strong ties to the
surrounding neighborhoods. With the continue volume increases and patient satisfaction
scores, Norton Audubon is in a position to grow.
Listed below are the volumes for 2002:
#’s % of Market Share
Total Admissions 13,350
Emergency Department 39,672 11.3%
Surgery Inpatient 4,121 10.1%
Open Heart 763 18.1%
Cardiac Cath Lab 3,545 14.4%
The next step in the methodology is understanding what the is perceived as the SWOT
Rated regions top heart program by Health Grades
Strong history of quality cardiac care
Strong administrative staff committed to Norton Audubon Hospital
Recent capital improvements
Growing primary base
Recruiting Physician Tenants 20
Strong dependence of a few key physicians groups
NPO (Nurse Professional Organization) making recruitment more difficult
Facility directions/signage, No central entrance
Former association with Colombia/HCA
Aging medical staff
Competition with other Norton Hospitals.
Little or no volume from Eastern Jefferson County
Growing volumes from Southern Kentucky with physician referrals.
The Southern Indiana Heart Hospital is not opening due to new law.
More market share from Bullitt County. (Marketing)
Recruitment of primary care doctors to support specialists
Designate as a center of excellence for seniors.
Aging population in area.
Jewish East could steer cardiac patients to new location
Jewish’s new diagnostic center opening in Bullitt County
Growing Baptist cardiology program
Aging medical staff
Expansion of U Of L cardiac program
The data below are related to Audubon’s predominant zip codes based on discharge
51.8% Female 48.2% Male
Recruiting Physician Tenants 21
18-24 - 13%
25-34 – 18.1%
35-44 – 17.6%
45-54 – 20%
55+ - 30.3%
0-35,000 - 41.1%
35,000-75,000 – 40.2%
Grade School 2.3%
High School 40.4%
Post Grad 4.3%
Anthem BC/BS of KY 13.1%
Option 2000 10.7%
Recruiting Physician Tenants 22
Aetna US Healthcare 10.6%
Types of coverage
Medicare + Supplement 38.5%
No Insurance 3.2%
Top Physicians Visited in Past 12 Months
Mental Health 8.7%
Primary Care 69.8%
PCP Selection Factors
Long Relationship 36.8%
Close to Home 29.3%
Refer by friend 25.8%
Refer by MD 13.4%
Affiliation with Hospital 12.9%
Recruiting Physician Tenants 23
Specialist Selection Factors
Refer by MD 40%
Refer by Friend 20.5%
Background Experience 14.9%
Close to Home 11.8%
Affiliation with Hospital 9.5%
Long Relationship 5.2%
PCP is FP or GP 54.5%
PCP is OBG & Others 15.1%
PCP is multiple types 11.5%
PCP is other 4.8%
PCP is Internist 3.8%
Hospital Selection Factors
MD Recommended Hospital 61.1%
Inpatient Stay (12 Months)
85.8% No Stay
14.2% In Patient Stay
79.7% Aware of Norton Audubon Hospital
32.2% would go to hospital MD Recommend
55.3% Would Ask MD to send me to my preferred hospital
5.2% Would go to another MD to go to preferred Hospital.
Summary of Adults in Norton Audubon zip codes:
For general care they chose Baptist East followed by Jewish and Audubon.
Recruiting Physician Tenants 24
Jewish is preference for Cardiology, followed by Baptist East and Norton Audubon.
For Oncology, they prefer Jewish with Baptist East second and U of L Third.
The age range is even with the largest group 45-54 years of age.
They are more likely to have income in the $25-50K category
The insurance is likely to be Medicare or Humana.
This data will help assist in making recommendation to determine which type of
practice is based suited for the new medical office building. The understanding of any
data is what is the national trend compared to the Louisville market. This will be
furthered discussed in the discussion phase of the paper.
Service Line Avg. Length of Net Revenue Expenses Admissions
Cardiology 4.9 $8928 $6649 4047
Pulmonary 6.6 $6162 $3918 1560
Orthopedics 5.2 $6162 $4185 545
Neurology 4.7 $3971 $2839 78
The current year population in the selected geography is 274,498. In 2000 the
population was 277,480. This is equal to a –4.5% change. The estimated population for
the year 2007 is 268,277. The current population is 47.37% Male and 52.63% Female.
The median age of the population is 36. This is consistent with national averages. The
population density in this area is 3,495 per sq. mile. This number shows that the
population is predominantly female and this also relates to life expectancy. The service
lines that are needed should pertain to the resident population
Recruiting Physician Tenants 25
There are currently 120,491 households in this selected geography. The census
revealed household counts of 120,889 in 2000. This is up from 1990. The household size
was 2.2 and the average number of vehicles was 1.3. The average number of years in the
area is 4.32 years. Many people in the area have remained for years while other areas of
the community see a high rate of transients. This also relates to an area of the survey that
has seasonal workers.
The median house hold income in 2002 was $27,596, compared to the US median
income of $40,497. The census also revealed median household incomes of $29,286 in
2000 and $22,085 in 1990. This represents a change of 24.95%. The estimated household
income in 2007 $33,915. This would tell us that the economy of 2001 has had a drastic
toll on the income of the residents. The numbers also do not reflect the increase of
uninsured that is becoming more abundant as people who lose their jobs tend to lose their
health coverage. This can have an adverse effect on the hospital. The estimated income
for 2007 shows an increase in employment. This would increase the hospitals net income
as the insured tend to use more services and not use as much of the hospital resources for
non revenue patients.
The predominant make up of the area is White compared with Black and a small but
growing Hispanic and Asian population.
The median value of a house in this area in 1990 was $49,944 in 2002 the number is
the number was $81,913. The national average was $93,807 for the same period. The
average rent in 1990 was $267.00 vs 2000 that number was $376. The number of owner
Recruiting Physician Tenants 26
occupied house in 1990 was 66,687. In 2000 the.120,889. This shows a substantial
increase in home ownership. This is important for longevity and loyalty to the area.
Unemployment in this area in 2000 was 4.76%. The number of unemployed increased
after 2001. The number was not released at the time of the study. The increase in
unemployment has a direct effect on the uninsured population. In 2002 there were
294,826 employees (Daytime) in the area and 16,907 establishments. The population in
the area in 2000 is 57.44% White Collar compared to 42.56% Blue Collar. The average
travel time to work in 1990 was 10 minutes and in 2000 the time was up to 18 minutes.
This shows that people travel farther to work which is also indicated in population loss to
the Southern and Eastern Part of the Jefferson County. This is a concern because Norton
Audubon does not attract people from the Far Eastern segments of the county.
Center of Excellence
Limited data was reported pertaining to centers of excellence.
Medical Office Building
The strategic plan only mentions that the new MOB will be a strength for Audubon in
the coming year. Norton Audubon has a need to build an additional Cath lab for the
increased volumes that it is experiencing. The funds that were generated from selling the
first medical office building can be allocated to the new Cath lab. Audubon is currently
allocating ample physician parking at the new building as well as increasing the parking
at the main parking lot.
Recruiting Physician Tenants 27
The Strategic Plan states that Dr’s Rice & Donahue have moved to Audubon from
Caritas and will become major volume drivers for the next several years. They are the
anchor tenants in MOB II.
There was limited data relating to organizational considerations.
The data that was collected by the strategic planning department provides data that is
relevant to formulating a marketing plan to attract and recruit new health care tenants. It
is important to understand that the strategic plan is formulated by the senior leadership
and the board of trustees that oversee all of Norton Health Care. The entire premise of the
plan takes into account service line planning as well as hospital specific plans. This data
is compiled from the demographic as well as from economic data for the past several
The first area to understand is what the goals of the organization are for the next
several years. The first objective is to meet the mission of Norton Health Care. The
mission as it is stated is:
“To meet the health care needs and improve the health status of people in the
Louisville region in a manner consistent with the Judeo-Christian values of its founding
organizations. Those values are respect, service, excellence, and integrity. Provide the
context within which the communications strategy and messages are
developed.”(Strategic Planning, 2003) Norton Health care also wants to set the standard
for care in our area of the country, as the strongest, most comprehensive and preferred
network of providers and hospitals
According to national data collected by Norton planning department, there is going to
be an increase of 8.8% in cardiac services. Kentucky has the 2nd highest mortality rate in
the nation for cardiac disease. Cardiology is a major revenue producer for the system.
Recruiting Physician Tenants 28
The data collected clearly shows that cardiology and pulmonary are the areas in which
the majority of the revenue is produced. This is why Norton Audubon has decided to
make Cardiac and Pulmonary services the major lines for the campus. The data shows
that the population is aging, and it also is reflected in the increased numbers of open heart
cases plus other invasive procedures. The percentage of seniors ages 55 and above is
30%. This number reflects the increase in Medicare patients. Listed above is the data as it
pertains to Audubon’s numbers in terms of economics, patient days and volumes. This is
the projected data for the fiscal year 2003. This data should be used to determine the
type of physician and the types of service lines that Norton Audubon should support. It is
not in the plan for Audubon to seek women’s services. This service line is at Suburban &
The population of the local community is aging. Almost 1/3rd of the hospitals main
service area is above the age of 55. This is very consistent with the national trends on
population demographics. By the year 2020 the nation will have 66 million senior
citizens. The demand for technology and health care will also see a tremendous increase.
The population’s needs will still be in cardiac, pulmonary and orthopedic services, as
well as oncology.
Faulkner-Hinton and Associates conducted the following study in September of
2003.(Filer-Smith, 2003) The appendix section has detailed information regarding the
following findings in an executive demographic report. The report is based on 1, 3, & 5
mile studies of the Audubon campus.
The population table clearly shows a trend in loss of population surrounding the
Audubon area. Many of these people have and will continue to move into the suburban
communities. This is important as many people will not travel as far for their primary
care physicians as they would a specialist. The chart that refers to race and ethnicity is
important. This chart should provide further study on the needs of the black and Hispanic
Recruiting Physician Tenants 29
population for services. Income levels and vehicles per house hold, as well as occupation
are tools that can be used to analyze disposable income and payer mixes.
The data from strategic planning focuses on the various service lines in relation to the
primary service area. The demographics of the area are changing, thus it is important to
align services to meet the needs of the population. The Louisville market is not a growing
market but it is an aging market. Louisville does not have the managed care penetrations
that other markets have seen. Most all service lines are expected to increase by 6%-8%
over the next five years with the exception of women’s services. This is directly related
to the aging population
The moving of the work force to the outer areas of the county are a concern as many
people will seek health care within a five mile radius of their home. They will travel
farther for specialists. The information was collected by STDBonoline and developed by
Experian/Applied Geographic Solutions (AGS).
The largest employers in the Jefferson County area provide opportunities for shared
marketing. They also provide us with the necessary information to market their
employees directly. The age and sex of the population are vital. We all understand that
females are the major decision makers in the health care arena. This is important in
marketing and also in strategizing the physicians and hospital to attract those decision
makers. The age and sex also give us the ability to make some assumptions about
services that will be needed in the years to come. The population that is aging will need
oncology, orthopedics, cardiology, pulmonology, and endocrinology services. The
mobility or vehicles per household also give us an idea of how can they get to Audubon
given the distance from the hospital to the growing areas of the county. This number also
reflects on the population that surrounds the hospital that can not drive or does not have
the means to purchase a car. The income level as mentioned earlier gives us some what of
an understanding of how much people can spend on medical care as opposed to other
goods. The important number to understand is the disposable income because this gives
Recruiting Physician Tenants 30
you an amount that can be spent on medical care. The population is aging however, the
seniors still want to have the same quality of life at 80 as they had at 18.
Centers Of Excellence
Branding Norton Audubon as a Cardiac center of excellence will attract the best
doctors to the MOB. The opportunities for secondary diseases such as pulmonary disease,
orthopedics, diabetes, and oncology will help the hospital grow in volumes and financial
The important aspect to recruit physicians is to create centers of excellence. The
article mentioned earlier states that COE’s will draw not only doctors’ but patients as
well. Many different hospitals are using outreach programs to attract new patient
business in the area. This also helps to draw patients to the physicians associated with the
hospital. This could be furthering enhanced by involving the education department and
by located an educational area that would be used by the staff with the community.
Physicians that are associated with centers of excellence will drive volumes to that
facility. This not only enhances their customer loyalty but it also will drive patent
satisfaction scores. Orthopedics would be a good area to create a center of excellence.
Education for pre-op and post up could be a major part of what potential patients need to
enhance outcomes. By distinguishing Audubon as a center of excellence would help
doctors drive their volumes as well as the hospitals.
Medical Office Building
The medical office building, to be named the Norton Audubon Medical Plaza West, is
presently a six story 82,000 sq. ft. building with the capacity to have additional six stories
on the West Side of the campus. A good feasibility study with the right construction
Recruiting Physician Tenants 31
design and correct tenant mix will create a successful campus. This will support the long
term goals of the hospital and will benefit both Norton Audubon Hospital and Faulkner-
Hinton and Associates.
The Master-Lease agreement, which became effective for payment in March, 2004,
states that Norton guarantees $19.50 per square foot for 60,000 square feet, which is $1.2
million dollars annually in rent, for any unleased and vacant space as well as for utilities.
Failure to lease the medical office space is costly to Audubon which will cause budgetary
constraints. A negative outcome would prohibit Norton Audubon from expanding. It
would also prohibit the building of the additional six stories. This would also have a
negative impact on the perception of Audubon in the market place. The positive aspect is
there is an allocation of $50.00 per sq. ft build out to allow a physician tenant to design
the space in a more efficient manner. This will make the hospital cost competitive with
alternate office spaces in the area. The studies suggest that it is very difficult to move
physician practices as well as expensive by having the build out will alleviate some of
The purpose of this study is to identify details from the strategic plans, understanding
centers of excellence, building medical office space, identifying proper tenant mixes, as
well as understanding organizational considerations in order to recruit physician tenants
to the Audubon campus in order to continue on a successful path.
Norton Audubon Hospital entered into the agreement with Faulkner Hinton and
Associates to build and maintain the new buildings. The logic behind this was to raise
capital for a bond payment due in 2006. The budgets that were built for the next fiscal
years were based on volume increases. Most volume growth is related to physicians and
Recruiting Physician Tenants 32
physician practices. This building could generate the capital to allow Norton Audubon to
open new beds as well as buy new equipment.
Based on the national data as mentioned in the literature, and the statistics of growth
of Audubon, the new medical office building will enhance the growth of the campus.
This is reliant on filling the building with the correct mix of doctors, being inline with the
long term goals of the hospital as well as the relationship of the anchor tenants.
The research shows that having a medical office building adjacent to the hospital will
increase the volumes, which is related to the proximity of the physician practice and the
convenience to the patient. All of the research and experience of leadership state that an
increase in volumes will lower the long term marginal operating costs of the hospital,
which will create addition available capital either through debt structure or operating
income.. The additional available capital will allow the hospital to allocate resources to
other areas such as new Cath. Labs, MRI machines, and services. This will increase the
hospital’s capital fluidity. Having these newer technological equipment will be
advantageous to the campus. The capacity to treat additional volumes will drive other
physicians to schedule patients at Audubon.
Volumes are the driving forces behind most investments in health care. The
budgetary constraints on hospitals due to increases in costs associated with labor,
insurance, supplies, pharmaceuticals and technology are forcing hospitals to look at ways
of increasing revenue to offset costs. This is also important as insurance companies and
other payers are cutting reimbursements to the facilities. Volumes will increase cash flow
as well as lower the long-term operating costs. This will help in increasing the profit
Partnering with an outside vendor is the trend in the nation. A shared risk with the real
estate company would create a need for this building to succeed so that the additional six
stories could be built.. This will allow the hospital to increase in size with out investing
large amounts of capital. To compete with other hospital systems it is important to have a
Recruiting Physician Tenants 33
variety of core services and modern facilities. Hospitals are not good at managing real
estate. This is directly related to physician relation ships that are developed through out
the community. It becomes extremely difficult to raise the rent or charge the physician
for miscellaneous services while they drive volumes. This is why the literature states that
using an outside vendor takes the hospitals and the administrators out of the equation.
The major reason behind the building of the new MOB was to accommodate Dr’s
Rice and Donahue who were located at Caritas prior to coming to Audubon last year.
They are now owned as a physician practice operated by Norton Health Care and are
planning to expand their practice over the next 12-18 months. They anticipate that they
will have 7 doctors and 3 Physicians Assistants (PA) which is important as they will
drive, not only the hospital volumes, but the volumes of other specialists. They are also
the anchor tenants in the building. They have many long term relationships with some of
the practices at Caritas. This will be important in recruiting them to the new MOB.
Studies prove that an appropriate tenant mix has a great impact on the hospital’s
profitability as well as the perception of the hospital in the medical community. This is
important to the overall objectives of leadership.
Based on these articles and the findings, in developing a strategy for marketing and
recruiting for Norton Audubon, a good specialty mix for the hospital would be between
65-70% specialists to general practitioners. In 2002, 700+ open heart surgery cases were
preformed in Norton Audubon. This hospital has the distinction of being known as a
cardiac and pulmonary facility. Norton Audubon is a specialty hospital
The article on the proper physician mix states that having the proper tenant mix
creates a center of medical care that supports each physician practice. During the times of
Recruiting Physician Tenants 34
managed care a mix of 50:50 would be recommended. This is no longer valid as the
managed care penetration in the Louisville market is minimal. The hospital strategic plan
as proven from the data is to be a center of excellence in cardiac and pulmonary care.
This is why it is important to have a mix of specialists to family practice of 65-70%
compared to 30-35% of family practice. Specialty hospitals will draw additional patients
if considered to be a center of excellence. I also further suggest that having other
specialists that treat other diseases associated with obesity and aging should have a
presence on the campus. This will keep the health care dollars on the campus. The aging
population will also have a need for orthopedics. This is an area that needs additional
The research for the Audubon area clearly shows a very strong affiliation with the
hospital. This is also very prevalent in the specialists that are currently practicing here.
The data shows that patients chose their hospital based on physician preference. They
also will chose their specialist based on a primary physicians recommendation. These are
all important considerations that should be considered in the recommendation phase. The
community that surrounds Norton Audubon has a long history with the hospital. This
dates back to the precursor to Audubon which was St Joseph’s infirmary. This hospital
was established in 1832 as a facility to treat TB patients. The hospital was purchased by
Humans in 1981 and changed ownership several times during the 1990’s before
becoming part of the Norton Health Care system in 1998. During this time brand loyalty
diminished as well as physician choice. Many doctors who occupied the medical office
building one left the campus. This was due to leadership changes as well as the decaying
of the hospital. Since Norton Health Care assumed ownership the hospital has seen a
remarkable turn around.(Courier Journal, 2004) This is directly related to the leadership
Recruiting Physician Tenants 35
and staff. The loyalty of the physicians that remained on the campus was also driving
factors behind the recent successes.
My analysis of the literature suggests that we have 30%-35% of the new MOB should
be primary care physicians and internists. The literature also suggests that we have
anchor tenants that support our service lines that are major volume drivers. This is
important because as the literature suggests that they will send their referrals to the
specialists located on campus, They also will bring the vast number of people here for
outpatient testing and more frequent needs. The primary care doctors are the ones that
Audubon might have a harder time locating as they do not benefit from being on the
campus as much as the specialists. If they admit patients, it is extremely convenient to be
located at the hospital.
This mix of physicians would support one another and allow them to grow and
prosper. The research also suggest that created the centers of excellence will improve the
image of the campus and thereby attracting additional doctors and patients. The research
also suggests that only having two-three different practices with in one specialty is
important. The article suggests that having too many will take away from each other and
having too few puts the hospital at risk of ‘putting all of its eggs in one basket.’
The reimbursements for family practice are lower than that of a specialist. This is a
common trend in the nation today according to the article written in 1997 on correct
physician mix. The article also states that it is important to locate tenants based on the
hospitals need and that a group of doctors who regularly use the hospital should have first
access to the building. This is important because of the restraints of space.
Norton Audubon currently has several tenants time sharing in Medical Office
Building I, now called Audubon Plaza East. This has been good for patients as it provides
additional specialists and keeps patients from leaving the campus. To build a time share
at the new campus would require a commitment from at least 2 tenants before $50 per sq.
ft. is spent on a suite with out any idea of the specific tenant needs.
Recruiting Physician Tenants 36
The research suggests to locate retail space on the first floor of the building. This
would include an ophthalmologist and optometrist, pharmacy, deli, lab and bank. This
would provide necessary services to our employees, doctors, staff and patients. This
would also allow us to charge some $19.50 rates for space as many retail tenants pay
higher rents than physicians.
The numbers and charts above are all necessary tools that will help in developing a
market strategy to recruit the types of tenants that will make the Norton Audubon
Hospital campus profitable. Cardiac service is one of the highest volume drivers at
Norton Audubon Hospital. This is important, as we need to recruit tenants who will
continue to drive the cardiac service line. We also need to analyze some of the other
services that cardiac patients use. Orthopedics, oncology, nephrology, and pulmonology
are large volume opportunities. The types of services and the practices that should be
located at the new building will also be beneficial to the physicians as well as the
community. Creating the team with a defined strategy will ensure that the hospital and
the new MOB will have the correct mix and type of physicians. It will take the chief
executive officer, medical director, manager of business development, physician liaison,
anchor tenants and a representative from Faulkner-Hinton to work together to be
successful in recruiting tenants to the new MOB.
Cardiac recognition is Audubon’s notoriety, therefore the data supports going after
large cardiologist practices. There are 3-4 groups that would be ideal tenants to the
campus. Some of them are currently located as the Medical Plaza East (MOB I) but only
one of them has a significant portion of their practice here. The four groups are Cardio
vascular Associates (CVA), Commonwealth Cardiology, Bluegrass Cardiology, and
Cardiovascular Specialists.. The first three groups are currently doing work at Audubon.
Considerations should be given to build a Cath Lab at the new facility. The plans for
Recruiting Physician Tenants 37
fiscal year 04’ are to upgrade 1 of the 2 cath labs at Audubon. I would recommend that
we build a new lab at MOB II. This would provide easy access to the cardiologists to
perform their non-invasive procedures. By providing block time it would also minimize
the delays in the current cath lab. A further study to determine a possible joint venture
with the Doctors whereby they could bill for their services in lieu of the hospital. This
would be good for the physician practice but it would cause some revenue to be cut from
the hospitals income. The revenue stream would increase as a large number of
catherizations will lead to invasive procedures such as stents, open heart and other
cardiac surgeries. This will bring a larger profit as the figures for open heart has a large
net income compared to other services. The constraint for these groups is that many of
them rely on primary care doctors located at competing hospitals. Some of the referral
could be lost if they were to locate their primary office to Audubon.
The last statement in regard to cardiology is that Norton Audubon could recruit these
tenants and allocate some resources to a marketing campaign to brand Audubon as the
heart hospital of choice. This would attract patient and most importantly referring
physicians from outside the main service area.
The next group of doctors that I would seek is the pulmonary groups. This is also a
large portion of our current volume and also an area that we can become a center of
excellence. Having the distinction of a center of excellence attract patients from not only
outside the service area but it also attract the attention of referring doctors. The 2 groups
that I would recommend are currently working at the campus, but are located at outside
offices. The first is Chest Medicine associates. They are located 2 miles of campus and
are major players at the campus. They also operate a sleep disorder center at their
primary office. To attract them to the campus will not change the volumes, however they
could be helpful in attracting their referring doctors, which will assist their patients in one
stop medical, needs shopping. Most of the patients of Chest Medicine have co
morbidity’s such as diabetes, cardiac as well as pulmonary problems. This is why having
Recruiting Physician Tenants 38
Chest Medicine on campus will allow us to recruit other doctors in an aggressive manner.
The constraint is that Audubon also operates a 14 bed sleep center. The recommendation
is to operate a Joint venture sleep center which would allow us to apply for grants and
bring additional patients to the campus which will help the volumes of other practices.
The other group that works here is Louisville Pulmonary Associates, primarily based at
Jewish Hospital. Having them locate a satellite office at the Audubon campus would help
the inpatient volumes. This also will send a message to other doctors that Audubon is on
the ascent as a hospital, and a place that is conducive to doing business.
The third group of doctors that should be courted is DR’s Schiller, Bloemer, &
Stearns. They are currently located at MOB I, however they do not do most of their work
at Audubon. This is directly related to Audubon’s push to being a cardiac facility. The
research shows that, as the population ages so does the need for orthopedic services. I
also would recommend that Audubon seek to recruit Bluegrass Orthopedics, which is
currently located at Caritas Hospital and is one of Audubon’s main rivals for the south
end population of the county. Last year Audubon recruited their largest internal medicine
group to the practice who has recently located in MOB II. This group will be the driving
forces behind the referrals to Bluegrass Orthopedics. Having them locate here will also
push Schiller, Bloemer & Stearns to locate at the new building. This will also push them
to due more work here. The physicians on campus are very loyal and prefer their referrals
to stay on campus when possible. After continued discussions with the various
orthopedics groups I would also recommend that the hospital build a small casting area.
This can be located in the current Emergency Department or on a vacant area of the 6th
floor of the hospital. This would allow the doctors to tell all Ed patients to come in at a
morning time to have their casts set. This will not tie up the doctors offices with post ED
patient follow up. Audubon also needs to have further discussions on OR practices and
other inpatient protocols that will enhance the orthopedics doctors needs.
Recruiting Physician Tenants 39
The doctors that I have targeted are all working at the campus but they are not
primarily based here. They are Dr Cyrus, Dr Duff and Endocrinology group of
Louisville. The last part of why Audubon needs to target diabetics is that they tend to
have other diseases associated with obesity. Not that all diabetics have obesity, but this
life-threatening disorder is found in a larger segment of the population.
The other group of specialists I would target is the endocrinologists. The older
population also has a need for diabetic physicians. This is also becoming more prevalent
in the younger population due to weight gains that all Americans are facing. Locating
these groups of doctors as well as a dialysis center will bring a new type of patient to the
campus. It also allows the campus to have one stop shopping for most of the major
diseases that face the aging of Americans.
The other recruitment strategy is to locate the educational department at the new
MOB. This would allow all doctors not just the orthopedic doctors to use that space to
educate the community or have health screenings. All health screenings will attract
additional patients to the campus. The education department would occupy about 7500
sq. ft in the new building. This area would cost the hospital $150,000 per year in lease
payments. I would suggest that an additional educator be hired to seek research grants
and to utilize the educational department and its personnel to become a revenue
generator, not just a cost center. The area that the educational department is currently
occupying is located on the 3rd & 4th floor of the hospital. This space, if vacant, would
allow the hospital to open up additional beds. This is very important as the hospital has
been operating at near capacity over the past several months. This would also allow
Audubon to bring in additional revenue.
There are 2-3 other groups that need to be approached. They are Dr’s Hurst &
Marques, as well as Family Doctors Inc. who are currently located in the area but are at
an older building, which has very inexpensive rent. This will cause a constraint on
Recruiting Physician Tenants 40
bringing them to campus, as Audubon’s market rate is significantly higher than the other
medial office buildings in the three-mile surrounding area.
The last groups of specialists I would approach would benefit not only us, but also
themselves from being on campus. The first would be Louisville Ear, Nose & Throat.
(ENT). Which is currently located in the oldest medical office building one mile from
campus. (Same building as Chest Medicine) The patients would benefit as they sell
hearing aids and also have a large allergy testing area. This would be beneficial for
Audubon’s patients as many of the family practice doctors have to refer their patients off
campus as since there is no full time ENT doctor on campus. The constraint on bringing
them is that they are currently covering all the call schedule for Norton South West
Hospital and Caritas Hospital. This is a concern to the physician practice. The
recommendation is to compensate them as they are at South West, which will provide
Audubon with a full call coverage for the ED. This will also increase volumes in day
surgery. I also recommend that Audubon seek two neurologists. We have one full time
presence of neurologists, but he does not have a good relationship with staff or other
practices. The two groups that I have identified work here but are not located at Norton
Audubon. These are the Neurosurgical Associates of Louisville and Hodes Neurology.
Having them locate on campus would bring additional volumes and support or family
doctors with referrals.
Focusing on these groups is not the only avenue that is recommended it is in the
discussion phase of the project. All physician groups that would benefit the campus
should be analyzed and approached using the committee comprised of by the CEO,
anchor tenants and others previously mentioned..
Recruiting Physician Tenants 41
The purpose of this study was to identify details from the strategic plans,
understanding centers of excellence, building medical office space, identifying proper
tenant mixes, as well as understanding the organizational considerations to recruit
physician tenants to the Audubon campus in order to continue on a successful path.
I further would recommend that Audubon evaluates the educational department, have
them go to a zero-based budget, and study the operations.
A secondary reason to use the educational space at the new building is to allow the
doctors to work with staff members to provide pre and post operative education to
patients. This program has been used at Baptist East in their wellness center. This will
help in creating a center of excellence in orthopedics as well as other targeted service
The direction that Norton Audubon Hospital is taking is very consistent with the
national trends in health care. Using the data and demographics to create a service line
and strategic plan will provide a basis for growth of the campus. This also will help in
creating centers of excellence which as the literature states will help attract doctors to the
campus. The literature also suggested that having a medical office building adjacent to
the hospital will drive volumes. This is a strong way to increase revenue. Building a new
medical office space also would require additional capital investment, however Norton
Audubon has made a strategic move by partnering with an outside company. This is
becoming a trend in health care. This is evident in the strategic partnership with
Faulkner-Hinton and Associates. The relationship with them must be a shared risk in
order to make this new building successful. The 120 days allocated to build out the space
is putting Audubon at risk of losing money. This is why it is important to renegotiate the
contract with Faulkner Hinton to create a fair and balanced relationship.
The campus, as reported in Business First, is growing and positioned to be one of the
best hospitals in the region. This is why it is as important to attract not only the right
Recruiting Physician Tenants 42
tenant mix but the ones best suited for the campus. The biggest constraint will be the
location of Audubon with respect to the rental rates in the area. The positive aspect is that
the physician tenants will be able to build out their suites with a $50.00 per sq. ft.
allocation. This will create an opportunity for them to have an efficient office space
designed for their practice. The second aspect is the limitations that were set upon on
Audubon, as the building was not built to hospital specification. This will prohibit Norton
Audubon from billing as a hospital charge for any service that might be located at the
new MOB. The second building could be built at hospital specification but the costs will
be 10% higher according to the construction manager at Faulkner-Hinton and Associates.
The proper tenant mix will ensure that the hospital will see increases in the volumes of
inpatient admissions as well as outpatient procedures. The most important aspect is be
engaged with the physicians that are anchor tenants as well as the ones in the area in
order to recruit and retain physician and physician practices to the Audubon campus. This
will not only be good for the area, but it will provide financial long-term stability.
The important aspect of any recommendation is to understand what is the ultimate
goal of the organization is to recruit physician tenants to the campus.
The following actions should be utilized or implemented in order to achieve both short
and long term goals of the campus. The recommendations will be in order of priorities.
The first is to have a committee headed by the chief executive officer, medical
director, anchor tenants, manager of business development, physician liaison, and a
Recruiting Physician Tenants 43
representative from Faulkner-Hinton. to identify the potential physicians that would
support the campus.
The second recommendation is renegotiate the contract with Faulkner-Hinton and
Associates. The 120 day build out time does not currently have any penalty clause for
failure to meet deadline. I recommend that after 120 days from signing of the lease
Norton Audubon is released from any further rents due on that particular space.
It is imperative to meet the deadlines on the prospective tenants that have been
identified as priority leases. The committee must have regular scheduled meetings and
action plans to recruit the tenants that are critical to the hospital and the anchor tenants.
Creating centers of excellence will help in recruiting physicians to the campus
however, it is vital to attract the physicians who will strive for the service lines that are a
major part of the strategic goal. This is when creating centers of excellence can be
The Chart Below is the Prospective and current tenant list. It is vital to go after the
anchor and tier I tenants in order to meet the objectives of the leadership. I also
recommend that Norton Audubon take the lead with the prospective tenants as Faulkner
Hinton does not have any risk if the space is not leased out.
Tier I & Anchor Tenants Sq. Ft.. Sign Date Open Date Status
Recruiting Physician Tenants 44
Rice & Donahue (Internal 12,000 1-Sep-02 15-Mar-04 Open
Louisville Heart Surgery 2,500 10-Apr-04 10-Aug-04 Signed
Forsenius Dialysis (Dialysis) 10,000 1-May-04 1-Sep-04 Out for
Blue Grass 8,000 1-Jun-04 1-Oct-04 Negotiations
Commonwealth Cardiology 2,500 1-Jun-04 1-Oct-04 Negotiations
Cardiovascular Specialists 7,500 1-Aug-04 1-Dec-04 Space
Chest Medicine (Pulmonary) 10,000 1-Aug-04 1-Dec-04 Negotiations
Louisville Pulmonary 3,000 1-Sep-04 1-Jan-05 Space
Specialist (Pulmonary) Planning
Schiller Bloemer Stearns 8,300 1-Sep-04 1-Jan-05 Negotiations
Hurst & Marquees (Family) 2,500 1-Oct-04 1-Feb-05 Initial Talks
Duff (Endo) 3,000 1-Oct-04 1-Feb-05 Waiting on Forsenius
Cyrus (Endo) 2,500 1-Oct-04 1-Feb-05 Space
Louisville ENT (Ears, Nose 7,700 1-Jun-04 1-Oct-04 Negotiations
Tier III & Others
Eye Care Institute 3,300 1-May-04 1-Sep-04 Out for Signature
Lab Corp (Lab Testing) 1,500 1-Jun-04 1-Oct-04 Waiting on other Docs
Gould Medical Equipment 2,000 1-May-04 1-Sep-04 Out for
Cath Lab (Diagnostic Only) 1,500 1-Sep-04 1-Jan-05 Legal
This chart reflects the tenants that have signed leases or are our most serious prospects
at this time. The total sq. footage that is shown if leased is more than the master-lease
Recruiting Physician Tenants 45
agreement calls for, however it is essential to have the executive leadership with the
organizational committee go after these tenants in an aggressive manner. They are mostly
all vital to the campus.
Tier I Tenants
• Cardiovascular: Blue Grass Cardiology, Commonwealth Cardiology, Cardiovascular
Group, and Cardiovascular Specialists.
• Pulmonary: Chest Medicine, and Louisville Pulmonary Associates.
• Orthopedic: Schiller, Bloemer, Stearns and Blue Grass Orthopedics.
• Family Practice: Hurst & Marquees.
• Endocrinology: Duff and Cyrus
• ENT: Louisville ENT
• Education Department
• Cath Lab
Advertising in the Jefferson County Medical Society newspaper and Business First
Newspaper will also provide visibility. I would also recommend that Audubon offer a
discount to the first few tenants who would become anchor tenants. This discount should
Recruiting Physician Tenants 46
be as a rate reduction, or it can be in marketing provided by Faulkner Hinton. I also feel
that if the issue of the cath lab can be worked out with legal as far as a facility charge I
would recommend that it be located on the floor with 2-3 cardiovascular groups. I also
feel that locating the educational department to the new building will assist in community
out reach that will enhance the visibility and marketability of the campus. This is only
possible if space is available. I also further recommend that Audubon hire an additional
educator to seek grants and research dollars. I also suggest that Audubon involve the
educational department in health screenings to attract additional patients to the campus
for the doctors located here. This also will make the educational department a revenue
producer and not just a cost center.
The final recommendation is that further study of the successes and limitations of this
building are reviewed as well as continuing the study of reimbursements to identify
higher margin service lines. Health Care is an ever changing entity, therefore it is
essential to be engaged with the market place in order to stay ahead of the curve.
The following courses were very relevant in this capstone. It is also important to
recognize that Martins Schools Health Care Administration program was instrumental in
my position and in my decision making process. The faculty and other students have
opened my horizons and my understanding of one of the most complex industries in the
• Health Finance
• Health Policy
• Strategic Planning
Recruiting Physician Tenants 47
• Health Economics
• Health Law
2002 Population 1 Mile 3 Miles 5 Miles
Total Population 15,700 108,372 274,498
Male Population 7,588 52,254 130,042
% Male 48.1% 48.2% 47.4%
Female Population 8,182 56,118 144,455
% Female 51.9% 51.8% 52.6%
Median Age 38 36 36
Employees 6,460 181,359 294,826
This above chart relates to the age, sex and number of employees in the 1, 3, & 5 mile
radius of the Hospital.
Income $ 1 Mile 3 Miles 5 Miles
Median HH Income $32,305 $26,687 $27,596
Per Capita Income $20,341 $19,156 $19,054
Avg. HH Income $44,503 $41,317 $43,371
This above chart relates to Income levels in the radius.
Households 1 Mile 3 Miles 5 Miles
Total Households 7,060 50,375 120,491
Avg. Size 2.17 2.05 2.20
The above chart relates to household sizes.
Recruiting Physician Tenants 48
Race 1 Mile 3 Miles 5 Miles
White 90.9% 73.7% 65.0%
Black 7.2% 24.2% 32.5%
American Indian 1.3% 1.2% 1.5%
Other 0.4% 0.7% 0.7%
This chart relates to the specific races in the area.
Ethnicity-2000 1 Mile 3 Miles 5 Miles
Hispanic 1.4% 1.9% 2.2%
Non-Hispanic 98.6% 98.1% 97.8%
Ethnicity-1990 1 Mile 3 Miles 5 Miles
Hispanic 0.7% 0.8% 0.6%
Non-Hispanic 99.3% 99.2% 99.4%
Population Density 1 Mile 3 Miles 5 Miles
1990 Pop. 5,309.2 4,076.6 3,693.5
2000 Pop. 5,090.8 3,875.3 3,533
2002 Pop 5,019.8 3,832.9 3,495
Est 2007.Year Pop 4,856.8 3,742.7 3,415.8
The chart above reflects the density per sq. mile.
Households-2000 1 Mile 3 Miles 5 Miles
Total Households 7,097 50,509 120,889
Recruiting Physician Tenants 49
The chart above reflects that number of households in the area. The chart below will
reflect the income of those households in 2002. The final chart will have the mean
2002 Household $ 1 Mile 3 Miles 5 Miles
$0-9,999 10.4% 16.0% 14.6%
$10,000-19,999 21.2% 23.2% 23.6%
$20,000-29,999 15.1% 15.5% 15.2%
$30,000-39,999 13.5% 12.0% 12.3%
$40,000-49,999 5.1% 4.7% 5.1%
$50,000-59,999 4.2% 3.7% 3.8%
$60,000-74,999 8.3% 6.4% 6.8%
$75,000-99,999 9.2% 6.9% 7.1%
$100,000-124,999 8.7% 6.4% 6.5%
$125,000-149,999 2.7% 2.7% 2.6%
$150,000+ 1.8% 2.4% 2.4%
2007 Households 1 Mile 3 Miles 5 Miles
Total Households 7,016 50,493 120,662
Median Desp $ $33,633 $28,449 $29,585
1. City of Memphis, Tennessee,“The Medical District Master Plan”. April 2001
Retrieved March 2004
Recruiting Physician Tenants 50
2. “Audubon’s Rebound”Courier Journal, Louisville, Kentucky .Business Section
February 2004 Retrieved March 2004, www.courier-journal.com
3. Filer-Smith, “Norton Audubon Medical Campus”. Faulkner-Hinton & Associates
September 9, 2003
4. Fischer, Raleigh News & Observer “New Medical Office Building” July 7, 2003
Retrieved February 2004 www.advisory.com/link to Raleigh News & Observer
5. Norton Health Care Office of Strategic Planning Communications 2003
6. Health Care Advisory Board “Integrated Heart & Vascular Institutes” August 1997,
Washington, DC. Retrieved March 2004, www.advisory.com
7. Health Care Advisory Board “Time Share Agreements” October 1997, Washington,
DC. Retrieved February 2004, www.advisory.com
8. Health Care Advisory Board “The correct PCP-Specialist Mix for Medical Office
Space” December 1997, Washington, DC. Retrieved February 2004,
9. Health Care Advisory Board “Developing Centers” May 2000, Washington, DC.
Retrieved March 2004 www.advisory.com
10. Health Care Advisory Board “Centers Of Excellence” March 2002 Retrieved
February 2003, www.advisory.com
11. Health Care Advisory Board “Value of Medical Office Buildings” March 2002,
Washington, DC. Retrieved March 2004, www.advisory.com
12. Health Care Advisory Board “Real Estate Management Practices” December 2002,
Washington, DC. Retrieved March 2004, www.advisory.com
13. Health Care Advisory Board “Marketing to Physicians” December 10, 2002,
Washington, DC. Retrieved March 2004, www.advisory.com
Recruiting Physician Tenants 51
14. Health Care Advisory Board “Managing Market Research” April 2003, Washington,
DC. Retrieved March 2004 www.advisory.com
15. Health Care Advisory Board Washington, DC Retrieved February 2004
16. Hunt, Harold, (2003) “Medical Market to Survive” Retrieved March 2004 from Texas
17. Norton Health Care, Office of Strategic Planning, Communications & Service Line
Planning, 2003 Louisville, KY
18. Serbin, Carolyn, Feasibility First Step: “The Critical First Step” March 2004
retrieved March 2004 www.Surgicenter.com online.