Healthcare Buildings Take Cue From Retail

Healthcare real estate is taking on a more customer-oriented feel. (With healthcare mimicking retail, how soon till we have Black Lung Friday?) We got the details at our daylong 2014 National Healthcare Real Estate Summit last week at The Rittenhouse. 

Silverado Senior Housing development VP Paul Mullin told the crowd of 300 that retiring Boomers represent a stark contrast from the pre-war generation. State-of-the-art facilities like Virtua Voorhees and Brandywine Senior Living at Voorhees are examples of how health systems can locate assisted living and senior housing facilities near rehab services. According to Ecosystem CEO Andre Rochette, health facilities will stress efficiency in design that goes beyond the popular "green" labels, although LEED and "efficiency" can still happily coincide.

Our Real Estate Strategies panel: moderator John Mugford of Health Care Real Estate Insights, Healthcare REIT SVP Mike Noto, Cushman & Wakefield healthcare managing director Scott Mason, Paul, Princeton HealthCare CEO Barry Rabner and Andre. Barry says to look for more bundled payment plans as providers try to improve reimbursements. Princeton's network is also focused on refining the continuum of care from hospitals to affiliated outpatient facilities.

Health & Human Services assistant secretary Ned Holland (snapped with Healthcare REIT's Julie Herb and Paula Rivera) addressed the effects of the Affordable Care Act. HHS wants to save tax dollars by consolidating his department's 53M SF of real estate. He noted the challenge of bringing on more insured people (10 million more adults through Obamacare since last year) while freezing the escalating costs.

Outpatient care now makes up 60% of the revenue base for Virtua, Virtua Health CEO Richard Miller told the crowd. He also said consumer loyalty is built across the continuum of healthcare, and that thinking in terms of branding is especially relevant to women’s healthcare (because it's the ladies who know how to shop and multitask). Richard also feels that Medicaid's expansion in NJ through the ACA is strengthening the health system’s balance sheet. Our Health CEOs Roundtable also featured Temple Health CEO Larry Kaiser and moderator Scott Mason.

Larry says care will even reach into the home, thanks to telemedicine. Temple Health is carefully studying its outpatient footprint, with new facilities opening beyond the hospital’s North Philly base and into Center City, Oaks and Fort Washington. One area in need of reform, he says, is Medicare’s funding model for teaching hospitals like Temple, as it still emphasizes inpatient care over the growing outpatient field.

Our Future of Health System & Hospital Facilities panel: Main Line Health SVP JoAnn Magnatta, Parkland Healthcare director John Wilson and Columbia University Medical Center AVP Patrick Burke (with moderator Regis Gaughan of AKF). They shared innovative designs from their new facilities. Parkland’s 2.5M SF new Dallas facility has a smaller bed count but more SF devoted to single rooms, in line with the public hospital's vision to make it a hospital of choice, not of last resort. 

In Midtown Manhattan, CUMC was able to sign a 25-year lease with Vornado for a 125k SF outpatient center at 1290 Avenue of the Americas. According to Patrick, that project required creative thinking to contain the rental and build-out costs, including integrated planning and design practices. Meanwhile, JoAnn spoke of Main Line’s push into retail with a new 32k SF center at Exton Mall. On the inpatient side, they’re also downsizing beds and developing hybrid ORs and acuity-adaptable rooms.

Marcus & Millichap’s Ben Appel moderated our Healthcare Real Estate Development Roundtable, joined by Anchor Health CEO Paula Crowley, DPR Construction’s Hamilton Espinosa, Trammell Crow SVP Cheri Clarke Doyle, Cannon Design SVP Rob Masters, ESD SVP Randy Ehret and HSA Commercial Real Estate president John Wilson. Cheri notes that well-branded outpatient networks can offer providers the chance to compete with the established retailers like CVS and Walgreens. The bottom line, the panel agrees: hospitals should use their networks to draw patients into their central facilities.

The Creative Financing panel--moderator Bill Wiebe of CBRE Healthcare, Hammond Hanlon Camp principal P.J. Camp, GE Capital VP Jonathan Buehner, Savills executive managing director Jeff Cooper and Mike Noto--discussed the bond market and monetization. Hospitals won’t want to lose their nonprofit tax status that comes with accessing bonds, notes P.J., but they can gain liquidity by selling their medical office buildings. Mike says that most hospitals don't realize the benefits of bringing in outside management for MOBs, wrongly assuming that it will ruffle their doctors' feathers.

Thanks to all event sponsors, including Mitsubishi Electric, whose cooling & heating systems are ideal for care facilities. Mitsubishi's VRF zoning systems set the standard for efficiency in buildings of all sizes. 

During networking, we snapped the team from Westage. They're looking for development opportunities up and down the eastern seaboard, having focused exclusively on healthcare for the last 16 years. The privately held firm has the capacity to take on deals up to $150M.