Obamacare Rollback Would Be 'A Total Mess' For The Healthcare Industry: Experts
The healthcare industry has changed dramatically since the Affordable Care Act became law, and it has shifted how providers deploy resources and administer care. Outpatient services have increased and healthcare groups are increasingly reaching into the neighborhoods that they serve to treat patients.
But the keynote speakers at Bisnow's State of Chicago Healthcare event at the Millennium Knickerbocker Hotel Wednesday believe Republican attempts to roll back Obamacare will undo much of the gains achieved under the ACA.
Freeborn partner David Franek addressed the "600-pound creature in the room" as keynote moderator: what is the significance of the Republicans' ongoing efforts to pass healthcare legislation, and what aspects of the national debate have been missing in news coverage?
Sinai Health System President and CEO Karen Teitelbaum said Medicaid expansion that occurred under the Affordable Care Act has been very good for hospital systems like Sinai. Pre-ACA, Sinai's billing was 65% Medicaid and 15% no-pay. Medicaid expansion allowed Sinai to serve more patients who suddenly had insurance. Teitelbaum's concern now is that if expansion ends, many of those new patients could stop maintaining a continuity of care. One of the proposals in the BCRA mandates that patients who miss a payment may not re-enroll for insurance for six months. The most vulnerable patients will get sicker and it will hit safety net providers the hardest, she said.
"I think it's gonna be a total mess, now that the bill has been revealed," Teitelbaum said.
Rush University Medical Center CEO Dr. Larry Goodman said while healthcare costs have decreased, compared to the ACA's original slope, the ACA is unsustainable. Goodman said it is worse to believe costs can be reduced without a focus on prevention, and that cannot happen if millions of people stand to lose insurance under the proposed legislation.
Goodman said, in the $3 trillion healthcare industry, less than $40B has been spent on prevention by the federal government. While the ACA did not solve the prevention problem, having insurance begins to set the tone, by linking some of those payments through Medicaid/Medicare to outcomes. Goodman said community dollars for people with disabilities who would otherwise be institutionalized would go away, as would money for a prevention fund earmarked toward research for emerging diseases like Zika and Ebola. The president's budget adds to that fund so the CDC can track other pathogens like highly resistant bacteria, which are in all hospitals. So, in addition to the cuts already proposed, the CDC would see an additional 12% cut embedded in both versions.
Illinois would be horribly equipped to handle an ACA rollback, according to our panelists. Goodman said Illinois is a trigger state and funding would be lost three to four years sooner when the state falls below 90% federal funding. That would affect 750,000 people on insurance rolls.
Walgreens Chief Medical Officer Dr. Patrick Carroll said the company is exploring ways to leverage the trend of outpatient ambulatory space. About $200B in healthcare money is moving to alternative space over the next five years: virtual, retail health, urgent care, practically everything outside of a hospital. This trend will continue because patients want affordable, convenient access to healthcare. At Walgreens, 8 million customers frequent the company's pharmacies daily — 2 million interact with pharmacies virtually. Carroll sees virtual health growing in niche areas.
Walgreens is also looking at ways to better utilize its stores to provide ease of healthcare access. Carroll said before he joined Walgreens, he did not realize the impact pharmacies had in these access points, and Walgreens is now looking at how to use the fronts of its stores for health adjacencies. Walgreens is testing a vision center pilot. Carroll said an average diabetic visits a Walgreens pharmacy 30 to 60 times a year. This opens an opportunity to impact care within the store space.
Forum Studio principal Erik Andersen said, for all the ways designing clinics and medical office buildings have improved over the years, it is still wasteful and inefficient to build one-of-a-kind MOBs. Andersen believes the next big innovation in healthcare real estate is prefab, modular construction. Andersen said it is higher quality, cost-effective and schedule-friendly, and that Forum Studio is working with DIRTT Environmental Solutions on developing prefab interior environments.
Loyola University Health System Director of Real Estate Michael Becker said design flexibility is key and Loyola is looking to designs that can be modified at minimal cost. An ongoing challenge in healthcare design is dysfunctional space, especially given all of the technology available to mitigate dysfunction. Example: there are still exam rooms where patient privacy is compromised because an exam table is not strategically located relative to the door. Becker sees a future where virtual reality simulations can identify these issues before a clinic is built.
Gensler Health and Wellness Firmwide Practice Leader Randy Guillot said he is passionate about the clinical workplace because there is a sea change in medical education — an interdisciplinary education is the wave of the future. Existing facilities are not designed to accommodate interdisciplinary medical educations. Gensler is looking at reinventing the clinical workplace model and completed a project for the Shirley Ryan Abilitylab that can be scaled down to the clinic level.
On the investment side, Harrison Street Capital Senior Vice President Mark Burkemper said interest rate hikes have not affected his firm's core fund; most of the assets Harrison Street buys with that fund are unleveraged. But for Harrison Street's other fund, which is used to buy transitional assets and is 65% leveraged, the interest rate activity has affected it quite a bit. Harrison Street is forecasting higher rates going forward and is focusing on acquiring assets with the second fund that can withstand the interest rate environment.
MB Real Estate Managing Director Joe Magliochetti said there is plenty of capital looking to be deployed in the healthcare sector from big firms like Blackstone Group and Carlyle Group to pension funds, endowments and international investors, all attracted to the relative risk-adjusted return. One factor driving this is that the returns in other sectors, particularly multifamily and office, have compressed with an influx of new supply. The challenge with medical office is finding a deal. The smaller size of MOBs is inefficient for a firm looking to deploy large amounts of capital at once. But there are opportunities for smaller investors like MBRE and MedProperties to partner with a Ventas or Harrison Street to efficiently invest.