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Real Estate Bisnow
January 16, 2013 
Will Hospitals Survive?

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With Obamacare cutting medical reimbursements, healthcare systems need a strategy to face tighter margins. That may come in monetizing real estate and reducing leases, we heard at our third annual Healthcare Real Estate Summit last week.
healthcare providers panel
Our who’s who of healthcare providers: Methodist Health System CEO Dr. Stephen Mansfield, Parkland Health & Hospital System senior advisor to the CEO Dr. Ron Anderson, Baylor Health System CEO Joel Allison, and moderator and Winstead shareholder Andy Dow. Joel says healthcare is right in the middle of the debt ceiling crisis. Combine that with the Affordable Care Act and the legislature is simply rearranging the deck chairs on the Titanic for healthcare providers. (And the chairs are covered in that weird doctor's office wax paper.)
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Joel Allison
Baylor garnered more than $100M in profit by monetizing its office buildings, but that may not work for other health systems. Leases are coming due and because of Obamacare, physicians and health systems are looking at how to cut space, reduce leases, and be more efficient. One of Baylor’s strategies is partnering—thus the recent Scott and White merger. Joel says healthcare systems need to find creative ways to stay competitive. Hear it straight from the horse’s mouth here. Space will be needed by healthcare systems, he says, as more physicians are looking to be employed rather than incurring the costs of starting their own practices and dealing with staff and managed care.
Dr Ron Anderson
Parkland’s $1.3B building program has land around the DART station, Ron says, which means opportunities for TODs (on land that is currently parking lots) in a public-private partnership. “We really are in the real estate business,” he says. We have needs for campuses to take distributive care to the community and arrange care for people on a continuum.” The idea is preventative care and support for physicians who work with the denominator population— the sickest people you’ve seen. “We have to look at outcome and educate these patients,” he says. Another concern: the state’s decision not to expand Medicaid. Ron says while more people would be entitled, at least the federal government would foot some of the bill for the next three years because there will still be uncompensated care issues.
Dr Stephen Mansfield
About 75% of a healthcare system’s cost goes toward treatment of chronic illnesses, which requires coordination of health rather than just treatment, Stephen says. Funding for population health management is always an issue, though. One thing Stephen says Methodist doesn’t plan to do is monetize its real estate because the return on the hospital’s assets is better than selling and leasing would be. With a healthy balance sheet, it’s still worth it to manage the offices for the physicians, too, because the existing processes work well.
Winstead's Andy Dow
Andy works with healthcare systems, developers, and investors in transactions involving facilities across the continuum of care, ranging from outpatient clinics and acute care hospitals to post-acute facilities up to skilled nursing facilities. He advises hospitals and health systems on owned and leased real estate, strategies from monetization to strategic JVs with third-party developers and investors to physician alignment.
Chicago Title's Dennis Noebel
Event sponsor Chicago Title VP Dennis Noebel. Chicago Title is on the grow, recently relocating from Bryan Tower and expanding its offices to 13k SF in The Quadrangle and adding eight up-and-comers to the staff in the past year. The CRE industry is improving with capital available and affordable debt options out there.
DIRTT by GL Seaman
Here’s event sponsor DIRTT by GL Seaman’s Christine Fleming, Mary Miano-Sleeper, and Ashley Lowrance. Mary tells us the firm’s pre-fab architectural walls aid rapid construction by creating a custom solution in a shorter time. The accessibility and universal furniture and equipment support of DIRTT walls make them ideal for healthcare. Initial construction, daily operations, and potential reconfigurations occur with the least amount of disruption, waste, and noise. Design opportunities are endless due to the parametric system, she tells us, which is important since healthcare spaces are typically tech intensive and fast changing.
Here’s event sponsor Bury+Partners’ Randy Jepsen, Priscilla Maya, Kelsey Jones, Mac McWilliams, and Deren Wilcox. Bury has experience in healthcare and hospitals, including serving as the project management consultant for the George and Cynthia Mitchell Basic Sciences Research Building at M.D. Anderson Cancer Center in Houston; it also provided civil engineering, project management/construction management, surveying, and sustainable solutions for the first Dell Children’s Medical Center of Central Texas in Austin, which was the first hospital to achieve LEED Platinum certification.

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