VA, Legislators Debate Owning vs. Leasing Medical Buildings

By Sandra Basu

Not everything is leased. Last year, site safety manager Jon Thornburgh and Dr. John Baye interacted with hundreds of construction crew members during a monthly safety stand down at the Southeast Louisiana Veterans Health Care System medical center under construction in New Orleans. VA photo.

Not everything is leased. Last year, site safety manager Jon Thornburgh and Dr. John Baye interacted with hundreds of construction crew members during a monthly safety stand down at the Southeast Louisiana Veterans Health Care System medical center under construction in New Orleans. VA photo.

WASHINGTON—Should VA own or lease its medical facilities and, when it does decide to rent, is it overpaying?

These questions were raised last month at a hearing held by the House Committee on Transportation and Infrastructure subcommittee. A VA officials responded, however, that leasing medical space gives VA the flexibility to adapt to changing medical technology, among other benefits.

“Meeting the ever-changing pace of medical advancement is a constant challenge for any medical system,” explained James Sullivan, VA director of the Office of Asset Management. “VA finds that leasing versus owning provides one of the more flexible approaches to meet that challenge.”

At the onset of the hearing, Subcommittee Chairman Rep. Lou Barletta (R-PA) said the process has not always gone smoothly.

“Medical facilities—whether owned or leased—are a critical part of delivering healthcare services,” Barletta suggested. “Unfortunately, the VA has struggled greatly to acquire healthcare facilities on time, on budget and in compliance with the law.”

Sullivan told lawmakers that VA owns approximately 155 million square feet in more than 6,300 buildings. In addition, VA has approximately 25 million square feet of leased space, with terms ranging from a few months to 20 years. Through authority delegated through the General Services Administration, VA can lease for longer periods of time.

Sullivan told lawmakers that VA “does not need more owned legacy assets” to address outpatient access needs, adding, “We have enough old and obsolete facilities. We do not want to add any more to our current portfolio.”

He noted that VA has 24 major medical leases awaiting congressional authorization, many of which were originally submitted to VA’s authorizing committees almost three years ago.

With the flexibility offered by leasing, Sullivan pointed out, VA has the ability when assets become “unneeded or obsolete or do not meet current medical practices to walk away at the end of the lease term.”

While VA still needs owned facilities, he cited advances in radiology imaging and oncology, as examples of evolving technological that VA can better address through leasing.

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  1. Paul says:

    “VA owns approximately 155 million square feet in more than 6,300 buildings. In addition, VA has approximately 25 million square feet of leased space.” And yet parking is STILL inadequate.

  2. Bruce says:

    The plan as suggested would result in the VA overpaying for leases. There must be a way to pay only a small percentage above or below the average rents. Another possibility would be to form a limited partnership with an equity company that owns buildings across the country. If the VA mandates that the buildings be owned by minorities, then all bets are off. Many cities have lower occupancy rates and foreclosures. There are deals out there and many would like the government as a tenant.

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