How NJ Healthcare Real Estate Beat Obamacare

With less revenue from inpatient services, NJ healthcare systems are diversifying beyond their hospitals' walls into ambulatory and other medical facilities, partnerships with service providers, and redevelopment. (We think these are sexy topics, yet none of them was major plot line on ER.)

Over 200 attendees joined us at the Newark Club last week for the third annual Bisnow New Jersey Healthcare and Life Sciences Real Estate Summit in Newark. Top healthcare execs told us how they're using these strategies to save money and make the whole healthcare experience more efficient.

Hackensack University Health Network (HUHN) CEO Bob Garrett says the last five years have been an incredible time in healthcare delivery; his system has expanded its reach through investment in ambulatory and urgent care centers. HUHN's also started dabbling in the insurance space (coordinating care, improving patient outcomes, partnering with Aetna to co-brand a Medicare Advantage product, and more), saving the system $11M.

Princeton HealthCare System is changing its campus to more efficiently move people from one level of care to another, says CEO Barry Rabner (who'll also be speaking at our National Healthcare Expansion Summit on Nov. 25 at Philadelphia's Rittenhouse Hotel). There's enormous pressure to get costs down, he says; to do so, it's trained many of its employees in lean sigma techniques (60% of its costs are labor). It's also added co-gen power and other features like thermal storage to its new acute care hospital and is striving to reduce the $65M it spends on "stuff" (drugs, supplies, etc) by $15M in two years. (If Patch Adams were around, they'd get him to charge by the hearty guffaw instead of a little laugh.)

Another strategy: converting old, obsolete retail centers into medical uses, says Health Care REIT SVP Mike Noto (who'll also join us for our national event): "It gives better signage and better visibility," like a former 60k SF supermarket that the REIT converted into a two-story ambulatory, imaging, physical therapy, and family physician center. (An apple a day is harder to find if the doctor converts the grocery store into his office.) One way Health Care REIT is getting into the community is "marrying" its partners, like skilled nursing centers with health systems, to provide a continuum of care, he says.

Array Architects principal Kent Doss expects to see more construction robotics and a performance-based model of building, in which developers hold themselves responsible to the buildings' quality so healthcare systems can focus on what they do best, he says. And, two years after Hurricane Sandy, Bob and Barry described steps they've taken to improve their facilities. Barry says it's added redundancy through co-gen and photovoltaic systems and added diesel plants with two weeks' fuel on the second floor of the new hospital. Bob says HUHN is also looking to add co-gen and has reinvested in backup generators.

Partner Engineering and Science director of engineering Clare Morris Broderick moderated the panel. Both Bob and Mike told her how the doctors coming out of medical school today are much different. Young physicians are more focused on their delivery and "don't want to be bothered with the burden of the administrative process," says Bob—so expect them to roll into more targeted medical groups or align with healthcare systems. "It's more and more of a team sport." Mike says they also expect digital records and easy, flexible access to patients.

Diversification is also impacting NJ's life sciences sector. Advance Realty COO Kurt Padavano says his firm's working on the redevelopment of the former 1.2M SF Sanofi research campus in Bridgewater, now known as the New Jersey Center of Excellence. It's leased and will operate 800k SF (tenants include smaller pharmaceutical, lab users, and drug manufacturers) and will revamp the remaining 400k SF into mixed-use. What was critical, he says, were zoning overlays that allow Advance to reuse what was once a single-use, single-tenant campus; now it's allowed retail, residential, and hotels.

JLL director Daniel Loughlin lead the team that repped Sanofi in the sale of the campus to Advance and CrossHarbor Capital Partners in 2013. He says it's key to get in front of municipalities early to ask for zoning relief. There aren't many tenants out there who can take such a property in one shot. (Other examples are the Roche campus in Nutley and the Merck campus in Summit.) To hear even more, join us for our National Healthcare Expansion Summit at Philadelphia's Rittenhouse Hotel on Nov. 25. Networking starts at 8:30am, followed by expert keynotes and panels. To see our lineup and register, click here.