Retail in Northwestern Hospital, Chicago

Project Summary:

Background

Health care is one of the primary frontiers for developing a responsive, customer-centric approach.  Healthcare also creates physical space that is well-suited for accommodating healthcare related retail and consumer services  to provide greater value to the community.¹

Hospitals have a captive customer base, continuous operating hours and a large catchment area.²  Yet, the majority of hospitals in Emerging Markets and Developing Economies are underserved in terms of healthcare related retail and consumer services. However, healthcare providers are recognizing the benefits of incorporating healthcare related retail and consumer services into their public spaces.  Examples of healthcare related retail and consumer services include: food and beverage, pharmacies, opticians, gift shops, retail of domestic healthcare appliances, gyms, hotels for visitors or for out-patients no longer requiring full-serviced hospital beds, etc.

Project Structure

The 894-bed Northwestern Memorial Hospital (NMH) is an academic medical center in the heart of downtown Chicago, USA. NMH is one of the first and largest hospitals that has incorporated a significant quantity of retail space in its campus (6,500 sqm) that is focused on serving its patients and visitors, hospital employees and local neighborhood.

NMH’s retail properties have street level access and internal access to reach employees, visitors, and the surrounding neighborhood. The retail complex includes more than 20 food service retailers including national brands, a flagship restaurant that’s also open to the public, and non-food retailers such as gift shops, bookstore, florist and a convenience store.³

Key players for delivering improved services  

Northwestern Memorial HealthCare (NMHC) is the corporate parent for an integrated nonprofit health system at over 200 sites across Chicago with 11 hospitals including the Northwestern Memorial Hospital (NMH) which is the primary teaching affiliate of Northwestern University’s Feinberg School of Medicine (FSM).⁴

Mechanism/s for Maximizing Funding for Infrastructure

Ancillary commercial revenues in hospitals, especially in developing countries where healthcare services are heavily subsidized, can provide additional funding for operations and maintenance or for subsidizing healthcare services to patients in social classes.

In 2021, Northwestern Memorial HealthCare earned around USD 7.4 billion  total revenue (patient service revenue, rental & other revenue, and net assets from donor and grants) of which patient service revenue makes up around 92%.  The lease of commercial space is accounted under “Rental and other revenue”, which generated USD 414 million around 5.6% out of the total revenue.⁵

Typical Business Model

Lessons Learned

• Managing the risks

  • Market risk: Northwestern Hospital is situated in Streeterville which is a buzzing neighborhood. With nearly 10,000 employees, 67,000 neighborhood residents, and 3,000 hotel rooms within a five-block radius from Northwestern Memorial Hospital, the retail potential was significant.⁶ The scale of the retail potential may not be as significant in developing countries and would need to be assessed.

  • Operational risk: Northwestern Hospital’s core service is to provide quality health care to its patients. In deciding to incorporate a significant retail component within its medical campus, the hospital management considered that hospital buildings are complicated spaces and commercial real estate for functions such as F&B are a very different type of structure.

Footnote 1: Retail Dimensions of Health Care Part I: Health Care in the Retail Setting

Footnote 2: Retail Dimensions of Health Care Part II: Retail in the Health Care Setting

Footnote 3: Ibid

Footnote 4: Northwestern Medicine

Footnote 5: Financial Statements and Annual Reports of the Northwestern Medicine

Footnote 6: Building on Opportunity: Shop & Dine Northwestern Brings the Right Mix of Retail Offerings to the Healthcare Environment