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How Radical Changes In Delivery Of Healthcare Are Impacting Real Estate


Millennials concern healthcare providers as much as Baby Boomers, which are the two largest age cohorts in the nation. There are 87 million Millennials (more than the 72 million Boomers), and Millennials are more diverse, with 56% white vs. 72% of Boomers. With the Affordable Care Act bringing many of this group into the healthcare system for the first time, healthcare providers are trying to understand Millennials and how to meet their needs.

Bisnow’s SoCal business manager Lucas Netchert (pictured) kicked off a Q&A with the audience at the OC Healthcare Expansion Forum last week, asking panelists what processes are being put into place to serve Millennials. 


Kaiser Permanente (KP) VP of national facilities Ron Smith (above left, with Sanford Smith and Jake Rohe) noted the great number of Millennials among new KP members with the launch of Obamacare and said KP has been using crowdsourcing and focus groups to find out how this group wants to access services.

"We’re getting stuff out of the hospital that doesn’t belong there,” said Hoag Memorial Hospital Presbyterian SVP Sanford Smith, “and we are putting tons of money into virtual consults. But one size does not fit all, so we’re spending more time understanding the specific needs of communities and demographic shifts—everything from age to ethnicity—and then trying to think about what makes us relevant to that population."

“As we’re developing these spaces, we need to be very cognizant of the communities where we’re working,” Ron said, noting KP has a very large development going into the Baldwin Hils/Crenshaw area, so is working closely with community groups and local employers. This is true not only for the finished product, but in developing the site, he added.

Healthcare is both a business and community service, said MOB developer Pacific Medical Buildings’ SVP Jake Rohe. “There’s a dizzying array of metrics that are being analyzed today, especially with big data pushes.” He said it includes genetic data, like from, as well as EHR and information from primary care visits. Jake said the combination of patient demographics and clinical data helps providers implement strategies across a network to address the needs of a population.


A member of the audience asked if walk-in, or minute clinics, are competition or do the panelists welcome them? Ron said KP has experimented with the concept in two communities, working with Target and Walmart. It’s a cooperative effort, with KP providing technology and nurse providers. The results are fairly mixed at this point, he said, though it does provide remote care.

Sanford said the growth of urgent care, walk-in facilities is a really important tool. Hoag Newport Beach is the 34th-busiest ER in the country and the population is only 80,000, he said. “Most of those patients coming in there are not dying. So what we’re doing is build-out of an urgent care network. 

"When people go to our ER and come out of there with a $3k bill, they’re going to be mad at us,” Sanford continued. “So we’ve got to get them trained to go to the proper venue of care." He noted Hoag is rolling out its own Hoag-operated and branded urgent care facilities, because "we’re trying to give people a reason not to come to the ER.”

Sanford said patients are increasingly being held responsible for a larger portion of their healthcare costs, and “if you go to the wrong venue of care, you personally are going to get stuck paying for it.”

Jake said his biggest concern with retail clinics is how they integrate with the patients’ providers. Stand-alone urgent care centers that handle health issues then throw patients back into the system without communication with providers is not good for healthcare. "It’s easy for us to go to Walgreens and get a flu shot or whatever else, but if they’re not talking to Scripps or Hoag or Kaiser, and I’m a patient of Scripps or Hoag or Kaiser, it’s a lost visit,” he notes.


With many newer multi-specialty MOBs owned by landlords, providers are tenants, Jake said. It raises questions about the responsibilities of the landlord and tenants regarding building safety and fire requirements. Jake said he’s been hearing of problems across the country regarding this issue.

Sanford said the latest budget bill passed included some restrictions on hospital-licensed outpatient facilities—it’s all related to reimbursements. He was talking about a new regulation that requires outpatient facilities to be within 250 feet of a hospital to be a hospital-licensed facility and paid a hospital rate.

When that passed, Sanford said Hoag had $100M invested in a facility across the street from the hospital. “Our whole strategy could have changed just like that,” he said, snapping his thumb and finger.

Healthcare regulation is continuously evolving and changing with new regulations, so it’s a function of real estate to be quick to react to these kinds of things and get in front of it if you can, Jake added. His company is building Hoag’s new 150k SF MOB.

Ron said most MOBs are being built off campus. He was referring to KP’s distributed model of providing services close to where members live. The first building KP builds on a medical campus is an MOB, which sends members the message the system is anchoring services in the community and will provide a broad range of primary and secondary care in that facility. “Our biggest challenge is finding large assemblies of land to begin with that first building,” Ron notes.


Another member of the audience wanted to know how KP and Hoag are getting patients to adopt a healthy lifestyle. Ron said KP is investing in a radical redesign of MOBs to provide healthcare at the local, community level.

He said this next generation of facilities has a whole new vocabulary built into it—the waiting room is now a living room or community space with a WiFi charging bar (pictured here at KP's new Manhattan Beach MOB). The organization also is providing farmers markets in areas where people don’t have access to fresh products.

"We are trying to anticipate our members' needs when they are in the space, like things for the children to do, but it’s really a work in progress to see how the space will work from a community point of view," he said.


"We talk about this shift from fee-for-service—the business hospitals have been in—to population health—the business Kaiser has been in," said Sanford. In the traditional model, there’s been no incentive to keep people healthy.

The model is shifting, he said, because the economy doesn’t have the ability to absorb increasing healthcare costs with the aging and growing population. Employers are unwilling to absorb 6% or 9% in annual premium increases, so they’re forcing employees into high-deductible planslimiting choices, and encouraging them to join an HMO, he said.

He said Hoag has partnered with Active Sports and is moving into a healthy workplace space (Kinetic) at Irvine Co to manage all of its fitness programs at its office and apartment communities. Hoag is using that relationship as an access point to establish small clinics for not just urgent care, but also integrated medicine.

"This is helping us understand what people want and what they’re willing to pay for, and what we can can do to impact their care trajectory in the future," Sanford continued, noting it take several years of data collection to figure it out.