This healthcare tax will be of great aid to the working poor and the providers who cater to their health needs. Comprising 22 cents per $100 of assessed value, which is around $44 if you own a $100,000 house, the tax will generate around $15 million annually.  While the tax does put a slight burden on community members, the overwhelming support shows how many people think it will be for the greater good.

Even though this increases healthcare taxation in Kansas City, a stemming cause of the passage of this tax is the uncertainty of national healthcare reform. This tax provides coverage for those who have no health insurance, precisely the same as national healthcare reform. It may take some time for the effects of the Affordable Healthcare Act to be felt, and rather than leave it up in the air, Kansas City decided to take healthcare action now.

The $15 million will be divvied up between the following safety net providers:

·         Truman Medical Centers – about $10.2 million

·         Kansas City’s ambulance care – about $2.4 million

·         Northland Health Care Access – about $480,000

·         Samuel U. Rodgers Health Center – about $480,000

·         Cabot Westside Health Center – about $480,000

·         Swope Health Services – about $480,000

·         KC Care Clinic (formerly the free health clinic) – about $480,000

Granting this health tax renewal shows continued support of taking care of the indigent population in Kansas City and those who provide care for them.

Best,

Jim Ellis

Precise figures are difficult to determine, but multiple sources suggest growth needs. Montecito Research and Analytics demonstrated a need for 70 million square feet of new space throughout the nation. As much as I would love to see that kind of spacing needs, I believe a more realistic estimate is closer to 30 million square feet of additional medical real estate developed.

Newmark Grubb Knight Frank, a New York brokerage, devised a study which found that 65% of the developers surveyed thought development would be greater in 2013 than in 2012. With Colliers International, a global real estate company estimating around 34 million square feet delivered in 2012, 2013 should be promising.

Why is 2013 So Special?

Built-up demand from projects that were previously left on the drawing board, before the economic crises, are being revisited. Developers are reviewing plans that were once just a conception, as aging baby boomers with their advanced medical needs, and soon-to-be-insured Americans are creating demand. As healthcare initiatives unfold across the nation, possibilities for increased patient volume are evident.

A new model of healthcare health systems are embracing is also creating demand. Health providers are migrating to a hub and spoke model which hinges around outpatient care. By acquiring and constructing medical facilities like advanced imaging centers, physician offices, and satellite emergency departments, health systems can strategically coordinate a network of support to cater to the needs of their communities. Not only are patients given enhanced access to care, but the model works as a filter for the parent hospital, providing cost-effective care to patients with less major symptoms. This clears up the emergency room and allows hospital physicians to focus on critical care patients, both of which contribute to the bottom line.

Whether building a new facility, or purchasing already existing medical office space, new avenues are being targeted and arrangements made for considerable growth  in the medical real estate field.

Your Medical Real Estate Adviser,

Jim Ellis

“When its doors are open, the new satellite emergency center will expedite the delivery of high-quality emergency services to patients from surrounding communities,” said Mark Adams, CEO at Ogden Regional Medical Center. Adams had a helping hand in deciding where MountainStar Healthcare was going to develop their second satellite emergency department (ED) location to serve the growing community in Northern Utah. MountainStar Healthcare’s parent system, HCA, tapped into the national trend of seeking treatment in primary care and outpatient clinics. After the success of their first satellite ED, they’re putting in another location to meet the increase in demand for emergency medical services.

Why a satellite ED and not another type of clinic? Satellite EDs can cater to a wide scope of patients’ emergency needs more so than urgent care and ambulatory surgery clinics. Staffed by board-certified emergency specialists, satellite EDs remain open 24 hours, 7 days a week, providing convenient and quality care to people in rural settings as well as urban. Other benefits of satellite EDs include:

• Lessening demand on surrounding emergency departments.
• Decreased wait times for patients.
• Allows emergency crews to deliver patients and return to the field more quickly.
• Better meet the communities growing emergency care needs.

The second theme that’s been dominating healthcare headlines is the growing number of health mergers and consolidations between health systems and physician groups. Health system mergers are taking place continually across the country such as Jewish Hospital & St. Mary’s HealthCare Inc. merging with Saint Joseph Health System Inc. in Kentucky, to the soon to be finalized consolidation of Catholic Health East and Trinity Health, two leading Catholic health systems. The latter merger will result in a health system embracing 82 hospitals and 89 continuing care facilities and home health and hospice programs with operating revenues of about $13.3 billion a year.

Mergers serve to enhance health systems’ ability to develop innovative methods of care, advancing quality measures throughout their now, much larger continuum of care. By pooling together resources, mergers allow for greater standardization, coordination and integration of wellness services. As reimbursement rates are expected to decrease 15-20% by 2014, creating a more efficient and cost effective patient experience will aid in managing population health and sustaining a health organization’s future.

Your Medical Real Estate Adviser,

Jim Ellis

The plan to lower costs, improve quality and increase access begins with primary care physicians.

Primary care providers are being seen in a heightened sense as caretakers to a healthier population. Studies have demonstrated that increased primary care access paves a path toward a healthier nation and consequentially lower per capital healthcare spending such as IBM’s study analyzing their $2 billion spent yearly on healthcare globally demonstrated. Similarly, according to a Watson Wyatt study from 2008-2009, those who have a doctor were more likely to take preventive health measures and health risk evaluations, as well as participate in wellness initiatives.

With competition and reimbursement pressures growing in the hospital marketplace, hospitals are increasing access to healthcare providers. Catering to patients is the trend as health systems across the nation are setting up shop in neighborhood surroundings and developing and acquiring practices to offer the outlying community the same level of healthcare as other communities.

What primary care practices provide is the ability to help hospitals control and reduce overall health costs. Medicare and Medicaid reimbursements are vital for many hospitals and as they continue to dwindle, methods of lowering costs system wide is something of great significance. Hospitals embracing accountability of care through forms like accountable care organizations and value-based purchasing are especially vying for primary care practices as they evolve away from the traditional fee-for-service model.

Compensating hospitals for the quality of care given rather than the number of tests performed, hospitals using an accountable care approach are rewarded for keeping patients out of the hospital. Using a rubric of 25 quality measures as well as how the hospital’s performance changes from a baseline assessment, this system of reimbursement targets primary care physicians, making them pivotal in connecting hospitals’ quality scores with patients’ experiences. The higher patients rates their experience through the healthcare continuum, the greater the hospital’s incentive payment.

Forward thinking hospitals are already positioning themselves around an accountability style delivery model, featuring primary care physicians as a method to manage healthcare costs.

Best,

Jim Ellis

Make the waiting room facilitate productiveness:

“‘Queuing psychologists’—people who study the phenomenon of waiting in lines—say that it’s the perception of the wait that matters more than the actual wait time. Unoccupied time is perceived as wasted, but occupied time is perceived as productive. The solution is not just to reduce the wait time from 20 minutes to 15, but to do a better job of distracting people during those 20 minutes.”

Offer a pleasantry to help pass the time:

“It takes several minutes for tea to steep or to brew fresh coffee, plus another 10 or 15 minutes to drink it. By the time a patient is called into the exam room, he probably hasn’t finished his drink. This leaves him with the perception that he didn’t have enough time, rather than too much. Plus, the patient will be warming up from the cold, waking up in the morning, or de-stressing. All of this adds value, and for just a few dollars a day.”

Provide a shopping experience:

One thing everyone can do to pass the time is shop. This makes medical facilities near malls, and specifically within retail surroundings, ideal for patients so they don’t have to shoulder a wait at all. Some doctors’ offices located in these style environments issue beepers, akin to restaurants, which alert the patient/shopper when the doctor is ready.

“By having a retail area of your waiting room–somewhere people can browse for products that they might need in relation to your medical specialty–you’re able to increase revenues and keep your patients entertained at the same time. This tactic won’t work equally well for all medical specialties, but optometrists are already doing it, and it could be particularly effective for, say, dentists, physical therapists, orthopedists or dermatologists. Most practices should be able to find something to sell, even if it’s just books.”

Wireless Internet

Take a page out of a coffee shop’s book and implement Wi-Fi. Usually scheduled doing work hours, doctors’ appointments can take away from pressing office duties.  “A reliable Wi-Fi connection is a nice bonus for customers who want to get some work done or entertain themselves while waiting. Cost varies, but plans typically start at $50 a month.”

For other techniques on making waiting times more productive, take a glance at David Fried’s post in its entirety.

Best,

Jim Ellis

Photo credit Alex E. Proimos via PhotoPin CC

With an estimated 30 to 40 percent of patients visiting primary care physicians indicating musculoskeletal issues as a concern according to the Department of Orthopedic Surgery at the University of California, orthopedic surgery is a developing field. Some of the more common surgeries are total knee and hip replacements which topped 906,000 in 2009, the latest year which figures from the American Academy of Orthopedic Surgeons is available. Of these thousands of surgeries the demographic utilizing a majority of them are the baby boomers.

According to projections by Drexel University specialist Steven Kurtz this age group will account for a 17-fold increase in knee replacements alone surmounting 994,000 by 2030. Baby boomers are unlike older generations in that as their joints are wearing thin, they want to maintain a high level of activity. Their activeness may be a reason why they need replacements as over exertion accelerates osteoarthritis, the main reason cartilage fades away from joints.

The surgical trend is moving towards minimally invasive surgery. This is a plus for orthopedic surgeons and hospitals affiliated with surgical centers. Surgeons are able to deliver better outcomes for their patients, and more on an outpatient basis, which is a cost effective solution when providing care. On the other hand, a more comprehensive orthopedic treatment approach can be seen with specialty hospitals.

Specialty hospitals provide specialized treatment, care and services to patients. Orthopedic hospitals specifically deliver orthopedic surgical care, rehabilitation, physical therapy, sports performance and more. In a 2012 Health Facilities Management/ASHE Construction survey 14% of hospital executives indicated orthopedic specialty hospitals as a development project, a 2% increase from 2011.

Case Studies:

When constructing state-of-the-art orthopedic facilities one needs look further than Mon’s General Orthopedic Center in West Virginia. Located on the hospital’s campus the 21,700 square foot facility offers four large operating rooms armed with the ability to cater to patients with complex orthopedic illnesses and those in need of specialized orthopedic procedures. The operating rooms also feature a sophisticated equipment management systems organizing equipment and medical services in one location rather than carting equipment between rooms.

However, not all orthopedic centers can be built directly on the hospital’s campus which is why Twin Cities Orthopedics, one of the largest orthopedic groups in the country, developed their orthopedic center proximal to one. This way construction costs were less while there a reliable stream of patient volume was still available.

Best,

Jim Ellis

Due to long-term capital planning, hospitals more so than other building types, are under continuous pressure. Hospital executives are expecting a certain bid, and with an increase in the price of materials, such as steel up 5-7% this year according to different sources, bids can increase prices in the millions. Restructuring a strategic plan is often hard to manage considering initial project designs encompass all aspects required for the hospital to succeed well into the future.  However, situations like this have occurred before and hospitals adapt to their continually squeezing budget by improving efficiency.

Method 1 – Buy Early:

From the middle of 2005 to the middle of 2006 copper and asphalt prices soared, increasing 87% and 48% respectively. In order to be less impacted by the market one community hospital vice president, Ken King, had a different approach and bought early. Throughout the project’s approval process, Mr. King saw prices rising so he began working with his subcontractor, and purchased materials 9 months in advance saving the hospital a significant amount.

Method 2 – Use Alternative Materials:

A substitute to buying early is to select alternative materials. Architects and engineers need to weigh their options, deciding whether it is beneficial to switch say from copper piping to stainless steel or other equally effective materials. Specifically using “green” materials can diminish a hospitals’ carbon footprint and increase cost savings for the long term. A 2007 survey in Building Design + Construction indicated an expected 3-15% premium for operationally beneficial “green” building materials and systems. From my experience I find this to be true. However, factoring for inducements, incentives, abatements, tax credits and energy savings an educated team can construct near par and save millions for the future

The ability to recognize market trends early in the project’s life cycle is key in finding the most cost effective solutions. As prices of materials and level of competition rise, efficiency in implementation and design will follow suite.

Best,

Jim Ellis

Hospital emergency departments (EDs) are costly for everyone: hospital, insurer and patient alike, however outpatient centers such as urgent care and satellite EDs are a very popular alternative among health systems and physician groups.

While urgent care clinics and satellite EDs are different, especially in terms of state regulations, they are both of the ambulatory facility class, and as such, have seen the greatest growth over the last decade or so in terms of new medical real estate development. This is occurring for a variety of reasons, among them: convenience, cost effectiveness and competition.

Useful for patients:

Not only offering substantially lower co-pays, which make it easier for lower income patients to receive care, but these types of outpatient centers offer quick and convenient treatment. Should patients not be able to see their regular doctor, or are seeking treatment during nights and weekends, urgent care and satellite EDs are useful options.

According to recent statistics on the matter, a 2007 American Hospital Association report, only 47% of surgeries were performed in a hospital, down from around 90% in 1981. About 37% were conducted in an ambulatory center and 16% were performed in physician offices. As people continue to choose elective and preventative care measures related to their age, these facilities will be a focal point.

Useful for hospitals:

A 2010 RAND Corp study concluded that around 17% of patients seeking care in a hospital’s ED could be treated at an urgent care or retail clinic. That’s a substantial market that any hospital or physician group could help cater to. With urgent care facilities costing around $250-450 per square foot, compared to around $600 for the average price per square foot for hospital space, these centers are efficiently run and cost effective developments.

Competition for market share is fierce. As hospitals are spreading their reach to attract patients they are doing so right in the face of competing hospitals by constructing ambulatory facilities directly adjacent to a competitor’s main campus. By providing a full range of service lines, a competing hospital is hoping to acquire market share by going straight to the community.

As the trend is moving toward outpatient procedures, business savvy hospitals and physician groups looking toward the future need are analyzing their markets to see if these facilities are a right fit.

Best,

Jim Ellis

Consistently outperforming other real estate sectors, medical office building (MOB) investment continues to thrive as hospital executives are moving ahead with projects that were on the drawing board. Third party developers like myself, especially now, are bringing much of the product to market, as hospitals are reallocating capital budgets.

Financing Projects:

Spending is tight for hospitals in all aspects. Hospital executives are scrutinizing and over analyzing hospital operations which is why any new developments must be well planned, organized and demonstrate a quick turn around. If hospitals don’t want to finance the project themselves, they look toward third party developers to construct medical office buildings.

I’ve noticed an uptick in this form of activity as it allows hospitals to have capital on hand for physician recruitment and acquisition – two of their more pressing items. Since hospitals are in a cost saving mentality, any new developments must warrant a near proven return on investment.

Make way for Ambulatory care:

Urgent care and ambulatory care facilities are a low-cost alternative to hospitals’ emergency rooms where excessive overhead costs and long wait times are all too familiar. Often, these long wait times are caused by non-emergent patients who don’t have a physician themselves or have no where else to go. This is one reason why health systems are adding ambulatory facilities, adjacent to the hospital campus, in order to transfer less urgent cases.

In urgent care surroundings, patients are able to be screened and treated efficiently. These facilities are a great way to capture suburban demographics, provide a reliable referral stream and cater to the community by building closer to them. However, that doesn’t mean on-campus development is over, quite the contrary.

The command of the campus:

As neighborhood outpatient facilities continue to demonstrate favorable returns, the notion of on campus development is not as common as it once was. Let me assure you that while there is great growth in ambulatory style facilities, the campus will continue to be the hallmark of medical development.

The campus is the healthcare hub. With everything so close together, physicians can see more patients, spend time on research and perform other associated duties. The campus model style of development has consistently demonstrated lower vacancy rates, as well as higher rental rates. With so much activity occurring from the hospital and ancillary facilities, developments in this space also helps attract and retain quality physicians.

While the full effects of healthcare reform were a large cause of uncertainty with future development plans, hospitals executives seem to be past their point of contention and are moving, albeit slowly, with expansion plans.

Your Medical Real Estate Adviser

Jim Ellis

Photo credits: spisharam via PhotoPin CC

Where do patients go? When patients can’t find a primary care physician of their own, they typically seek treatment at an emergency room. However, hospital ERs wait times can cause people to leave as well as one 2007 study in the Annals of Emergency Medicine showed only around 80% of patients who entered an emergency room actually stayed and saw a physician. Coupled with the immense overhead costs of treating patients in ERs, hospital executives need alternative methods to treat patients in their communities.

The demand is rising. Take Massachusetts for example which enacted healthcare reform in 2006; instead of a three week period, the wait is about two months according the same Merritt Hawkins survey. The physician attrition rate is part of the increase in demand, but baby boomers needing enhanced medical care and of course, healthcare reform, are the other big players spurring the need for convenient, cost-effective and quick treatment.

3 Ways Hospitals Can Provide Cost Effective & Quicker Care

1)      Acquire Physician Groups: 65% of physicians who changed jobs in 2009 moved into a hospital employment model according to a 2009 poll by the Medical Group Management Association. Hospitals are continuing to compete for physician groups as the rate of solo practices, and simply physicians in the field, continues to drop. Not only is the acquisition and affiliation of physician groups a great way to increase referrals, but to increase the hospital’s geographic footprint.

2)      Outpatient centers: According to a Healthcare Financial Management Association article, community hospitals gross outpatient revenues grew from 19% of all revenues to 38% of all revenues from 1987-2007. Outpatient surgery will especially see an uptick as Baby Boomers’ medical needs drive demand. As a method to extend access to care and provide a convenient treatment location for patients, outpatient centers will likely grow as well.

3)      Retail locations: New types of commercial real estate are being created that otherwise would have been left to office and retail tenants. People are more likely to go to outpatient clinics in shopping areas for minor symptoms than emergency room where waiting lines and tensions are high. Parents can drop off their kids at a physician specialist while shopping around in the same vicinity. Medical retail outlets have been well received among communities, especially by the older population.

The demand for quality physicians and efficient care is only growing. Successful hospitals drive to be ahead of the curve; anticipating the change in direction before it’s too late.

Photo credit: Waldo Jaquith via Photo Pin CC

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