Check property purchases to avoid ugly surprises
Thorough appraisal a necessary headache
Imagine being unaware that the physician practice your hospital purchased a few years ago also included the two apartment buildings across the street. And you did not find out until the city sent you, the landlord, a notice that some very costly improvements must be made to the apartment buildings.
How’s that for a new twist on risk management and health care liability?
If you do not carefully check the liability risks associated with new property, you may be in for some very surprising developments later on. With more hospitals merging facilities and programs, risk managers face a special burden with each property acquisition, says Michael L. Rawson, MA, CHSP, HEM, corporate manager for safety and support services at Intermountain Health Care in Salt Lake City.
"We got notices demanding improvements in our apartment houses, and I had no idea what they were talking about," Rawson says. "After we looked into it, we found out that, sure enough, the practice had bought the buildings across the street as an investment and then we acquired them along with the practice. It was all legal, but I didn’t know until then."
Rawson passed on his advice at the recent meeting of the American Society for Healthcare Risk Management in San Francisco.
Consider liability in broadest terms
Acquiring new facilities and property can be a big headache for everyone involved, and unfortunately, the risk manager often does not dig deep enough to identify potential liability, Rawson says. It is best to think broadly in terms of potential liability, as the experience with the apartment building demonstrates. And don’t be trusting of the other parties, Rawson warns.
"Some physician groups will opt to join hospital groups because they have major capital improvements upcoming that they don’t want to pay for," Rawson explains. He does not contend that that is the reason his hospital ended up owning two apartment buildings, but he has seen other examples.
Regardless of whether the other party is trying to slip a major liability past you or intends to be up front about potential drawbacks, a thorough appraisal report should alert you to the problem. Rawson cautions that the report must be much more than just a financial appraisal.
The appraisal report should describe potential problems with security, capital improvements, and compliance with regulations such as the Americans with Disabilities Act. If an outpatient office building has no wheelchair access, for example, the cost of modifying the building should be considered. And if a building is located on top of a sewer system that causes unpleasant smells, determine how much that will cost to fix.
"Some of these things are not going to show up on a report that is aimed at just giving you a value for the building," Rawson notes. "You need to look at what the property will really cost you, not just how much it’s worth."
The appraisal report should be distributed widely to administrators in your facility so that people with different professional backgrounds can look for hidden problems.
Visit site to look for weaknesses
In many cases, a personal visit to the site in question can reveal problems that otherwise would be overlooked. Rawson’s visits to facilities about to be purchased have revealed problems such as untrained staffers from a physician’s office placing red bag waste in the normal waste deposit. If that practice had continued after the hospital acquired the facility, the hospital would have been liable for the regulatory violation. Rawson’s solution was to secure the waste site so that only trained staffers could have access to it.
Security weaknesses are an important concern, as well. Rawson advises visiting each new property with the "mind of a crook."
"Play the crook and do a walk around," he suggests. "I’m a bad guy. How do I get in? What will I have access to once I’m inside?"
Rawson played the bad guy at a physician practice about to be purchased and found that nearby trees could be used to climb over the outside wall, drop onto the roof, climb through a large roof vent and right down into the facility’s pharmacy.
"I did it myself and found out how easy it was," he says. "If I could do it, anyone could have."
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