Obamacare and Real Estate
The Affordable Care Act may be good or bad for civilization, but of course all you intellectual readers want to know about is: What's the impact on real estate? Fortunately, that's what our full-day National Healthcare Real Estate Summit is all about on Nov. 25 at Philadelphia's Rittenhouse Hotel.
Savills Studley’s Jeff Cooper (here on his recreational vehicle near the Continental Divide in Salmon, Idaho) is speaking at the summit and says insurers' attempts to maintain profitability (they could hike rates, increase deductibles, narrow their physician networks, or lower reimbursements) will impact capital plans. Healthcare systems are well underway in shaping attack plans:
1) Own vs. lease
Some systems want to own buildings to keep costs down, says Jeff, while others lease to avoid maintenance and capital improvements costs. MOBs have the option to lease from a third-party developer, or sell their outpatient facilities and lease back the portion they occupy. Plenty of capital is interested: Savills Studley just repped Duke Realty in a $260M portfolio sale of non-strategic assets, including the 116k SF St. Mary’s Heart Institute, above, in Evansville, Ind. The brokerage is also selling a 14-campus portfolio for a Midwest hospital system that wants to create liquidity to reinvest in operations.
2) More focused properties vs. mega-hospital
Anchor Health Properties CEO Paula Crowley, who's also speaking, was ahead of the curve—her company's been building outpatient ambulatory clinics with a retail feel for 29 years. She says five to 10 years ago, healthcare systems would possibly develop one ambulatory facility, but that's changed. Besides reaching more patients, building outpatient centers throughout an area really expands the brand. For example, the University of Pennsylvania Hospital is building a new facility in Chester County, a new market for the system.
3) Repurposing existing space
Anchor has been working with St. Elizabeth Healthcare in Northern Kentucky, a five-campus system strategically rethinking non-income producing real estate. The Edgewood flagship campus is redeveloping space into a high-end Heart and Vascular Institute (above), which'll open in November, and at the Florence campus, outpatient services are now in the most visible and easily accessible portion of the hospital. (It’s more efficient if outpatients never have to step foot in the inpatient side of the facility.)
4) Efficiency via renovation
DPR healthcare core market leader Hamilton Espinosa, another panelist, who's just wrapping up the $1.5B development of UCFF Mission Bay Medical Center in San Francisco, says such mega projects are scarce these days. Renovations are the norm, he says. Example: Hamilton’s makeover of the Virginia Commonwealth University system's Downtown Richmond portfolio. The team's upgrading 80k SF, which would take about a year as a new build; instead, it’s a 49-month process with eight phases and multiple subphases. Fourteen of the 16 operating rooms need to stay running at all times, and no infrastructure (HVAC, life safety systems, etc.) can be interrupted. He's snapped above with the 2001 World Series trophy from when his Diamondbacks beat the Yankees.
5) Partnering for continuum of care.
Health Care REIT is bringing together hospitals and senior housing operators, says SVP Mike Noto, who's also speaking. Hospitals earn 60% of their revenues from outpatient care, so these partnerships help reduce re-admissions. The REIT—which has a portfolio of 1,200 facilities across New England, the South, Southwest, and West Coast—is looking at markets with universities, great healthcare systems, and enviable reputations like Boston.
6) Team approach
Alignment between physicians, hospitals, and other healthcare providers (nurses, physician assistants, pharmacists, dietitians, and physical therapists, etc.) is key in being able to survive in the current healthcare environment, says Temple University Health System CEO Larry Kaiser, a speaker who's also dean of the Temple University School of Medicine, a thoracic surgeon, researcher, and author. It's critical to deliver care in the most cost-effective setting, which elevates the importance of the outpatient experience and even expanding care to the home using new technology.
Large healthcare providers continue to purchase independent physician groups to bolster their collaborative, multi-specialty care, says HSA PrimeCare prez John Wilson, another panelist. Consumers also expect quickness and convenience in services, leading healthcare providers to look at retail locations they'd never consider years ago for places like urgent care centers. Hear more from these experts and other top-notch speakers at our third-annual National Healthcare Expansion Summit, starting 8:30am at the Rittenhouse Hotel in Philadelphia on Nov. 25. Sign up now!