Calculating the Cost of Medical Office Repairs, Part I

By Brandon Stokes | Published December 29, 2021

With 22 separate billion-dollar weather and climate disaster events in the U.S. in 2021, the impact on insurance cost and estimating has been significant¹.

But there is now a storm after the storm to worry about. Adding to the climate disasters are the impact of recent supply chain delays as well as a competitive market for labor and skyrocketing prices on materials like lumber — that’s before adding in business interruption costs and lost revenue. 

From a healthcare practice’s structure to the equipment used within the facility, many medical and dental offices come with their own considerations. Understanding how repair costs are calculated is more crucial than ever to keep expenses low when disaster strikes.

The Importance of the Initial Inspection

Our goal after a damaging storm is to repair quickly in order to get the business up and running again. But jumping the gun without a proper inspection of damages could cause more harm than good. The most important step on the road to recovery is the first one — the initial inspection of the damage. 

A multi-layered approach is key here. Beyond the scope of the damage to equipment and property, this initial stage should include a deep dive into the healthcare practice itself. A factor to consider would be understanding which aspect of the practice is the highest priority. 

In a competitive environment where construction resources are hard to come by – whether that be labor or supplies – understanding what the practice offers and how the insured client makes their money will help prioritize which parts of the practice need to be up and running again first.

Current supply chain challenges have put greater importance on this prioritization and require strategic resource allocation from the onset. The quicker experts can assess the damage, and the more information they can gain about the practice, the more strategic we can be with the repair timeline. 

5 Factors that Impact the Repair Costs of a Damaged Medical Office

When assessing the medical office damage and determining the right approach for recovery, there are multiple factors that will impact the overall cost of the repairs.

1. Practice style of the doctor – Not all healthcare practices are built the same. While two doctors with practices across the street from each other may have the same specialty, their equipment, layout, and staff structure could all be different. All of these components impact the financial value of the office and the repairs needed in order to be operational again.
    
2. Specialized cabinetry and the layout of the office – The cabinetry and layout of a doctor’s office is key to the way in which each doctor practices medicine. The manufacturer of the cabinets, placement of the workstations and location of the sinks all come into play in the daily operations and monetary impact to reconstruction. Therefore, the layout must be prioritized in estimating restoration costs.
    
3. Age of the practice and patients – Often, a practice’s equipment and clientele can mirror its age. For older practices, this means aged equipment and a greater likelihood that it will need replacement or repair. There is also the chance that the parts and components of the equipment cannot be matched or sourced for repair. Even if the equipment is only 70% affected by the damage, it may need to be replaced completely. Practices with older clientele will also have infrastructure catering to these groups such as extra high-end cleaning and handicapped accessibility. This could impact the cost of reconstruction as well if this infrastructure is damaged.
    
4. Bringing the office up to code – For practices that have occupied their space for decades, with only minor upgrades or repairs over the years, a complete reconstruction can highlight multiple areas where the space needs to be upgraded to meet current building code. While they may be grandfathered into their existing set up, major renovations after a disaster are not subject to previous building code grandfather clauses. Medical facilities certainly bring more layers of expectation to these codes than other facilities may require.
    
5. Specific equipment on site – This is where major costs can pile up. With the multitude of equipment manufacturers and styles, from x-ray machines to imaging and scanning systems, offices contain many layers and variations of equipment. Two practices of the same size and square footage can have completely different equipment makeups, with varying costs from $400,000 to $3 million. When an insurance policy states that it will bring the practice back to “pre-loss condition,” this can also mean overhauling the practice’s equipment infrastructure, taking what was a film-based records system to a digital system since the lost equipment can’t be fixed. Moving from a paper/film system to digital is no small task — or cost!

For more best practices for estimating repairs for dental and medical offices, contact Brandon Stokes and RMC Group’s Specialized Healthcare Consulting division.

Sources:
¹ CNBC “There are more reasons this year to check your homeowners insurance ahead of severe summer weather,” May 7, 2021.