Document Sample
					                                          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
                   Marketing Manager
                   Norton Health Care
                                                               Recruiting Physician Tenants   2

                                 Table of Contents

Table of Contents: ……………………………………………………………………….. 2

Executive Summary: …………………………………………………………………….. 3

Introduction: ………………………………………………………………………………4

Statement of the Problem: ………………………………………………………………...5

Purpose of the Study: ……………………………………………………………………..6

Research Questions: ………………………………………………………………………6

Definition of Key Terms:………………………………………………………………… 6

Review of Literature: ……………………………………………………………………..7

Methodology: ……………………………………………………………………………15

Results: ………………………………………………………………………………….16

Discussion:……………………………………………………………………………… 26


Recommendation: ……………………………………………………………………… 41

Relevant Courses: ……………………………………………………………………….45

Appendix: ………………………………………………………………………………..46

References:……………………………………………………………………………… 50

Executive Summary
       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:
                                                                   Recruiting Physician Tenants   6

    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.
Research Questions
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.

Strategic Plan
                                                                   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

Plan”, 2003)
                                                                    Recruiting Physician Tenants   9

    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,

Carolyn, 2004)

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

Centers”, 2001)
                                                                  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

Space”, 2000)
                                                                 Recruiting Physician Tenants   13

   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)

   Tenant Mix

 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

agreements”, 1997)

   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)

Organizational Considerations
   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.

Strategic Plan
   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

Dedicated specialists

Central Location
                                                             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

Improving entrance

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%

75,000+ 18.7%

Grade School 2.3%

High School 40.4%

Tech/Vocational 41.4%

College 7.1%

Post Grad 4.3%

White 93.5%

Black 4.5%

Asian 1.4%

Other 0.6%

Payer Mix
Medicare 24%

Humana 23.7%

AHDS 13.1%

Anthem BC/BS of KY 13.1%

Option 2000 10.7%
                                           Recruiting Physician Tenants   22

Aetna US Healthcare 10.6%

United 6.8%

Types of coverage
PPO 30%

Medicare + Supplement 38.5%

HMO 15.3%

Traditional 6.2%

POS 4.8%

No Insurance 3.2%

Top Physicians Visited in Past 12 Months
Urologist 8.1%

Mental Health 8.7%

Chiropractor 8.9%

Gastroenterologist 9.3%

Dermatologist 10.8%

Ophthalmologist 13.7%

OB/Gyn 20.7%

Optometrist 27.7%

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%

Other 15.7%
                                                            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 Type
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%

Location 37.7%

Inpatient Stay (12 Months)

85.8% No Stay

14.2% In Patient Stay

79.7% Aware of Norton Audubon Hospital

Hospital Recommendations
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.

Race Ethnicity
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.

Tenant Mix
                                                                 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.

Organizational Considerations
   There was limited data relating to organizational considerations.
Strategic Plan
  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 &

Norton Hospital.

   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

those costs.

   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.

 Tenant Mix

   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.

Organizational Considerations
   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
(Heart Surgeons)
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
(Cardiovascular)                                                                Planning
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
Total                                66,300

Tier II
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
& Throat)
Total                                13,200

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
(Retail)                                                                        Signature
Cath Lab (Diagnostic Only)            1,500        1-Sep-04            1-Jan-05 Legal
Total                                 8,300

   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.

Tier II

•   Endocrinology: Duff and Cyrus

•   ENT: Louisville ENT

Tier III

•   Education Department

•   Cath Lab

Tier IV

•   Deli

•   Lab

•   Bank

    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.

Relevant Courses

   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

disposable income.

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,

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 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,

7. Health Care Advisory Board “Time Share Agreements” October 1997, Washington,

   DC. Retrieved February 2004,

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

10. Health Care Advisory Board “Centers Of Excellence” March 2002 Retrieved

   February 2003,

11. Health Care Advisory Board “Value of Medical Office Buildings” March 2002,

   Washington, DC. Retrieved March 2004,

12. Health Care Advisory Board “Real Estate Management Practices” December 2002,

   Washington, DC. Retrieved March 2004,

13. Health Care Advisory Board “Marketing to Physicians” December 10, 2002,

   Washington, DC. Retrieved March 2004,
                                                               Recruiting Physician Tenants   51

14. Health Care Advisory Board “Managing Market Research” April 2003, Washington,

   DC. Retrieved March 2004

15. Health Care Advisory Board Washington, DC Retrieved February 2004

16. Hunt, Harold, (2003) “Medical Market to Survive” Retrieved March 2004 from Texas

   A&M University

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 online.