In some ways, designing and building healthcare facilities is almost as challenging as keeping the systems running efficiently and effectively, according to the speakers at our recent Seattle Healthcare event. Making projects pencil and providing the best possible design once they do are certainly no easy tasks in a time when uncertainty is the new norm in the healthcare industry.
Right out of the gate, our Healthcare Paradigms panelists took up the question: What is having the largest impact on healthcare design and construction?
In Seattle, California and other markets, construction costs are climbing — mostly because of the cost of labor, the speakers said. Subcontractors can be selective about the projects they undertake. That is a complete turnaround from seven or eight years ago.
It is good that Seattle is a booming market, but that puts even more pressure on developers to contain construction costs. For developers and designers of healthcare facilities, that is especially true, since healthcare space is so specialized and its construction is more labor-intensive than other property types.
Some of the projects on the books do not pencil anymore, the speakers said. No one is going to pursue a project with negative return on investment, certainly not hospital organizations. Some of the healthcare developments that might have made sense only two or three years ago are on hold.
New projects will be built in the Seattle area. The demand is there, and developers will find ways to provide supply. But that is really only the beginning of the challenge.
The way facilities are built influences the way service is provided in healthcare, the speakers said. Newer designs will encourage a more collaborative atmosphere among the healthcare professionals who work there. But that is going to be hard to replicate in legacy facilities still in use, because healthcare facilities are hard to change once they are built, unless flexibility is built into the structure.
There is disagreement about what flexibility means in a healthcare setting, and whether it is even possible to use flexibility to future-proof a healthcare facility. There is also the question of how design can promote efficiencies, because providing care to patients in the most efficient way possible, without compromising the quality of care, is of the utmost urgency considering the current economics of healthcare.
Even a facility’s finishes — the way it looks and feels to patients — has a profound impact on healthcare delivery. A facility that feels harsh and unfriendly has a negative impact. It makes patients feel more anxious at a time when they need to be less anxious, and that complicates their interactions with healthcare providers, often for the worse.
Also, healthcare specialists need to design facilities to take care of the staff who work there. They need to be comfortable in their surroundings, or patient care will suffer.
The speakers on our Providers Perspective panel offered their take on providing healthcare in the current climate. The short answer: tough but doable, especially for healthcare systems always looking to provide better patient-centric care.
Virginia Mason Medical Center President Suzanne Anderson said Virginia Mason has established very aggressive goals regarding patient experience and quality of care in recent decades. She said the health system will focus on doing healthcare differently, constantly evaluating its processes to find areas to improve care, which is at the heart of the Virginia Mason Production System, a process for patient care modeled after the Toyota Production System.
The system extends to all of the Virginia Mason facilities. That includes the hospital of that name, a network of regional medical centers in the Seattle area, and the Virginia Mason Institute, providing training for the Virginia Mason Production System.
Swedish Health Services CEO R. Guy Hudson said it is important that patients receive the same high-quality care wherever they enter the system. One goal is to keep people out of the hospital by focusing on primary care and wellness and prevention. One of the system’s main strategic objectives, he said, is lowering the overall cost of care.
Swedish Health Services has five hospitals, two freestanding emergency departments, and more than 180 primary and specialty clinics throughout the Puget Sound.
The economics of healthcare is challenging, both speakers said. Of special concern right now is the possibility that the expansion of Medicaid under the Affordable Care Act will be rolled back. People newly covered in recent years will be out of the system again, and less likely to access preventive care, and thus cost the system more when they become very sick and seek treatment at emergency rooms.
While Cleveland Clinic Florida is opening a Wellington office, it’s reportedly close to renewing a lease for its fancy medical offices at CityPlace Tower in West Palm Beach.
And the world-class medical provider is wishful about having a hospital presence in Palm Beach County — either through an affiliation with an existing hospital or by building its own facility.
“There are many areas that are growing out to the west that are underrepresented, from a hospital perspective,” said Dr. Wael Barsoum, president of Cleveland Clinic Florida, based in Weston. “So I do think there will be an opportunity to consider putting inpatient beds in that area — and in the northern area of the county.”
Cleveland Clinic isn’t planning to build a Palm Beach County hospital right now, though, especially since the regulatory hurdles are so high.
Instead, it’s focused on a plan to open medical offices in Wellington.
Nonetheless, the medical provider’s expansion isn’t exactly appreciated by Palm Beach County hospitals that have worked to boost the quality and sophistication of patient care.
During the past five years, Robbin Lee, chief executive of Wellington Regional Medical Center, said, Wellington’s care has become so strong, patients no longer need to travel to Miami — or the airport — for their health care needs.
They also shouldn’t be directed to the Cleveland Clinic’s Weston hospital by Cleveland Clinic doctors poaching patients, said Lee, a former ER nurse.
“For (Cleveland Clinic) to come in and say they are going to take patients down to Broward is disrespectful to our physicians,” Lee said of Cleveland Clinic. “It implies all their hard work is not valued. It’s disruption.”
And so it goes in the battle to win the hearts and wallets of Palm Beach County patients.
For the past decade, the county has become popular with out-of-area medical providers eager to gain a toehold in the market.
With Palm Beach County’s aging, wealthy and insured Baby Boomer population, plus the trend toward bringing medical care closer to patients, local and out-of-state medical centers are expanding their presence.
Some are opening up clinic offices, while others are forming partnerships with county-based hospitals that want the cachet and capital of larger players.
Two New York-based providers, Mount Sinai of New York and NYU Langone, are establishing medical offices in West Palm Beach, conveniently across the bridge from wealthy Palm Beach patients.
(Mount Sinai has a partnership with Jupiter Medical Center, a relationship that’s expanding through the soon-to-open West Palm Beach office.)
South Florida players are teaming up, too.
Baptist Health South Florida of Miami-Dade County signed an agreement to merge with Bethesda Health, which has two hospitals in Boynton Beach. The merger, first announced in 2015, is set to be completed on Sept. 30.
Meanwhile, Boca Raton Boca Raton Regional Hospital announced it has embarked on a process of finding a “strategic partnership” with another health care provider.
Cleveland Clinic’s Barsoum said an affiliation with Boca Raton Regional “could be complementary,” but he said there aren’t any talks going on.
Right now, Cleveland Clinic Florida just wants more of the Palm Beach County patient market population. Cleveland Clinic treats patients at medical offices throughout the county, and it handles their in-patient hospitalizations at the mother ship, the Weston hospital.
In 2007, Cleveland Clinic Florida was the first out-of-area medical provider to establish offices in Palm Beach County, opening offices in downtown West Palm Beach. Through the years, it has expanded services and treated a growing roster of patients.
It’s also reaped financial contributions from grateful patients, especially those living in Palm Beach.
Today, Cleveland Clinic has offices at CityPlace Tower and Palm Beach Lakes Boulevard in West Palm Beach, in Palm Beach Gardens and soon, in Wellington.
The Wellington office, in the works for a year, will be in the Village Green Center, at the corner of Stribling Way and State Road 7. The office will feature primary care, gastroenterology, cardiology and other services.
The Cleveland Clinic office is an affront to Lee, who said Palm Beach County hospitals work closely with each other to provide quality patient care.
“They want to put cardiologists and GI doctors here? There’s no need,” Lee said.”There are three GI groups that have been here for years and they are well-respected.”
Lee knows that Wellington Regional is sitting in the catbird seat, east of communities where thousands of homes will be built during the coming decade. Thus, she doesn’t even think of Wellington as western Palm Beach County.
“Wellington sits in central Palm Beach County now,” she said.
During her nearly five years at the medical center, Lee has worked to boost the quality and complexity of services. The hospital has a comprehensive stroke center, lung program, chest resuscitation center and neurointerventional lab, among other services.
The hospital also has an entire program created to treat the polo players who flock to Wellington annually. Player injuries require the services of orthopedic surgeons and other surgeons, plus concussion management, she said.
The hospital is adding more intensive care beds and considering additional growth, including building two more floors on a wing of the hospital, Lee said.
But Cleveland Clinic’s Barsoum still sees potential need in the area.
With the trend in medicine toward convenience, patients at Cleveland Clinic’s Palm Beach County medical offices probably wouldn’t mind having a close-by hospital for some inpatient services.
Barsoum said a “micro-hospital” could fill a need for inpatient care that isn’t complex. Micro-hospitals, featuring from 25 to 50 beds, are for patients who need hospitalization for less severe matters.
This type of hospital differs from hospitals such as Cleveland Clinic’s Weston facility, which sees complex cases. In fact, Weston is adding more critical care beds to meet demand, which means it often treats the sickest patients in the region. For them there are organ transplants, cardiac surgery, cancer treatment and neurosurgical care, among other specialties.
Barsoum said Cleveland Clinic hasn’t done enough research to consider what type of hospital could be suitable for Palm Beach County, if it decided it was interested in building one.
But Barsoum isn’t shy about touting Cleveland Clinic, which he said is enough of a draw that yes, Palm Beach County patients do travel to Weston, where the entire experience is informed by the Ohio headquarter’s renowned reputation.
“(Patients) expect a level of care that is extremely high,” Barsoum said, invoking the Ritz-Carlton hotel brand as an example of stellar service. “It shouldn’t be any different in health care.”
Source: Palm Beach Post
When Physicians Realty Trust announced a purchase of 18 medical office facilities located in eight states for about $735 million last month, the Milwaukee-based REIT didn’t just sweep up prime properties. It won a round in the business of investing in medical office buildings (MOBs), which has become increasingly competitive.
The pending purchase includes the Baylor Cancer Center in Dallas, Texas. In a statement, executives with Physicians Realty described it as an on-campus medical office building consisting of about 458,396 net leasable sq. ft. At a purchase price of $290 million and after closing, the unlevered cash yield is expected to be 4.7 percent.
The intense vying for urgent care centers, surgery centers and other outpatient medical facilities is also driving down cap rates in the sector. Cap rates on MOBs tightened to 6.5 percent in the fourth quarter of 2016, after holding steady at 6.7 percent for the three previous quarters, according to the latest information from Revista, an Arnold, Md.-based property research firm that examines all out-patient medical properties. In its cap rate report, Revista examines a relatively small sampling of four transactions in four quartiles.
Its analysis found that tightening occurred for almost all segments of the market. Among the deals with the lowest reported cap rates in the fourth quarter of 2016, cap rates averaged 4.2 percent, down from 4.4 percent the quarter prior and 4.7 percent the year prior. On transactions in the 25th percentile, with the highest cap rates, cap rates averaged 7.0 percent, flat with the quarter prior. Median cap rates averaged 6.4 percent, down from 6.6 percent the quarter before.
The tightening is an indication of keen interest among domestic and international investors, all vying for purchase opportunities that seem too scarce.
“There has been a lot of demand,” says Hilda Martin, a principal at Revista. “A lot of new investment groups are entering the sector. There is more demand for less and less opportunity, and it’s just very competitive out there now.”
The Private Equity Gaze
Private equity firms are a relatively new investor group that has been particularly eager to scoop up quality MOBs, according to Martin.
“They have historically been running at the $1 billion a year mark in acquisitions,” Martin says. “That has bumped up to $5 billion on an annual basis more recently. There is more interest—and they are not selling as much as they are buying.”
The recent upturn has been in place for about 12 to 18 months, Martin estimates. The interest among those companies is even prompting private equity firms to extend hold periods beyond the customary seven or eight years. The firms are drawn to the medical sector because it is a very stable segment. Medical practices tend to sign long-term leases and have stable occupancy and vacancy rates, too.
Private equity groups are not the only investor group circling the segment. Virtually all institutional investors, REITs, private capital investors and developers recently surveyed by real estate services CBRE indicated that MOBs meet their acquisition criteria, with 97 percent saying they preferred the property type.
The CBRE U.S. Healthcare Capital Markets 2017 Investor & Developer Survey was sent to investors and developers and received 91 total responses. Respondents indicated that:
-Their firms had allocated $14.9 billion in equity to healthcare real estate investment and development for 2017.
The market cap rate for MOBs falls between 6.0 percent and 6.5 percent, according to 39 percent of respondents, making it the most aggressively priced property type.
-They are in the market to be net buyers, according to 78 percent of respondents.
-About 27 percent of investors and developers require a minimum ground lease of 60-29 years for an investment.
-As for how cap rates are expected to move in the sector, the experts see more competition—and potential compression—ahead.
“A lot of companies are looking for sweet off-market deals that no one knows about,” Martin says. “That tends to be the sentiment when people are calling up, ‘Where can I find the opportunity?’”
Coming off a successful year that saw many advances, and with Carlos Migoya set to continue as president and CEO of Jackson Health System, officials of Miami’s Public Health Trust are cautiously optimistic about the future. The trust administers Jackson Health System, which includes Jackson Memorial Hospital and a network of clinics.
“Every year we come here and every year it has improved,” Joe Arriola, trust chairman, told Miami-Dade’s County Commission. “Jackson is better than it has ever been. There have been some exceptional changes, and we’re here with some incredible news: I am happy to say that Carlos Migoya has agreed to stay on for another two years.”
But “we are heading into rough times politically, and the squabbling is just going to get worse. To survive this, we need your help,” Mr. Arriola told commissioners.
“This has been one of the proudest chapters of my life,” Mr. Migoya said. “We have new facilities and are renovating patient care facilities across the system.”
The $175 million Christine Lynn Rehabilitation Center, set to open in 2019 or 2020, is the first project in which Jackson, the University of Miami and the Miami Project to Cure Paralysis have combined their resources in a single facility, he said.
“Research will be actively integrated into patient care, and it will be one of the most sought-after places in the country to recover from an injury,” Mr. Migoya said. “This positions Jackson and UM in a landmark treatment center.” Two old administration buildings will be torn down to accommodate the center, he added.
Jackson West, an inpatient hospital with outpatient and diagnostic clinics, is set to open in mid-2019, he said.
“This is in Doral, the fastest-growing area of the county, and we’ll be able to provide services to that population.” A separate walk-in care center will be six miles away, but also in Doral, he said.
Though he didn’t discuss the upcoming budget with commissioners, Mr. Migoya categorized it as break-even. The ever-rising cost of prescription drugs, salary costs to stay competitive, pressure from insurance companies to lower reimbursement rates, and the uncertainty of national health insurance are among the reasons, he said.
“I expect the coming year to be the most challenging since 2011,” Mr. Migoya said. “We’re getting ready to open new facilities, and doing it amidst storm clouds hanging over health care.
“We’re improving efficiencies and streamlining costs in non-clinical areas,” he said. “Labor and management are in partnership to identify ways to upgrade the patient experience.”
“What’s the plan” for survival? asked Commissioner Daniella Levine Cava. “The State Legislature came back with some dedicated funds, but not at the same level as before.”
“It depends on what the funding is,” Mr. Migoya said. “Every year for the past seven years, we’ve had cuts; last year it was $60 million.” Leaders in the Florida House of Representatives reduced the cut to $19 million.
“But the brand has changed,” he said. “Now, paying patients choose us, and we’re improving efficiencies to get patients home sooner, safely. The key to growth is to turn beds fast, and we want to do that so we can offer more access to everyone in the county.”
Assuming the US Senate passes a healthcare bill, “How much time will you need to know the economic hit?” asked Commissioner Sally Heyman.
“We could end up with some positives,” Mr. Migoya said. Florida turned down the expansion of Medicaid that was part of the Affordable Care Act. “The states that expanded Medicaid could take a worse hit. And some in government are looking for ways to help Florida.”
Source: Miami Today
A post-occupancy evaluation (POE) gathers feedback from facility users to assess how well a building is performing. This evaluation is typically conducted about a year after occupancy and can be used for many purposes, including fine-tuning the facility to increase performance or evaluating the design to inform a new facility. Architects are aware of these benefits, but often struggle to justify the additional cost of conducting one to a client after the project is complete. The costs can be significant if an independent research consultant is involved, which is recommended because researchers can offer standardized, reliable methodologies and eliminate any design team bias.
These circumstances make it difficult for smaller healthcare organizations, which have neither the budget nor the resources for research consultants, to conduct a POE. Recently, Vision 3 Architects (Providence, R.I.) identified a practical and affordable solution to that problem by partnering with students from Roger Williams University’s School of Architecture, Art and Historic Preservation in Bristol, R.I. Together, the team completed one-year POEs for two facilities designed by Vision 3 Architects for Thundermist Health Center. The students served as the research team and helped to guide a future project design based on their findings.
Thundermist Health Center, a community health organization based in Warwick, R.I., provides medical and dental care and health-related social services to low- and moderate-income patients throughout the state. In 2013, Vision 3 and Thundermist began working on the design for the Thundermist Health Center of South County in Wakefield, R.I. The team had previously worked together on the design of a clinic in West Warwick, R.I., which opened in 2011 featuring patient-centered design concepts, including three pods of exam rooms, consultation rooms, and meeting spaces designed around central collaborative team areas.
Before diving into the design of the South County project, Thundermist leaders wanted to evaluate the results of the patient-centered design features in West Warwick to see what was working and what needed improvement. For example, they wanted to revisit the location and quantity of the staff team rooms and how many exam rooms a support team could handle. The team also wanted to see how the existing layouts were affecting patient visibility and staff privacy.
To achieve that, Vision 3 reached out to the university, which was offering a graduate course titled “Environmental Design Research.” The timing worked out well, as the semester was just starting and the professor was looking to partner with an architectural firm that had worked on some local healthcare projects and had a client that would allow students to research their facility. Vision 3 and Thundermist agreed to meet with the students to discuss the project and to provide access to the building to photograph, observe, and conduct interviews, and the students would provide precedent studies and research articles and analyze how the building design performed against the original design goals. Their final exam would be a class presentation of their findings.
The process, including the POE, data evaluations, and final presentation to the team, took place within one semester. The entire team, including the architecture firm, was given a link to the spreadsheet data to review the progress. The class of 16 students had monthly meetings with the design team at the facility, Vision 3’s office, or on campus. They weren’t paid but gained valuable experience and contacts working with a local architecture firm, and, in exchange, provided the client with unbiased feedback on the performance of its building. The professor met weekly with the students, closely monitoring the interview process and data evaluation, and incorporating lessons on the principals of evidence-based design and the role that research plays to validate design decisions.
The students spent about eight weeks observing and interviewing the staff, patients, and visitors using photo elicitation and a standardized interview document and format that was developed and monitored by their professor. The POE looked at different elements of the building in terms of the patient experience. One area of interest was the waiting room design, including acoustics, the check-in and check-out processes, and the layout of reception desks, which placed the staff at high desks instead of behind sliding glass windows.
In general, patients responded favorably to the waiting room, finding the aesthetics and natural light welcoming and the seating comfortable. They also liked the staff greeting them at eye level at the reception desk without a glass window. However, patients reported that they had a difficult time understanding where to stand or line up for the check-in/out process. The staff also suggested that the acoustics of the waiting room could be improved to protect patient privacy and to manage the overall noise level of the space.
In the clinical areas, the POE looked at how the number of medical staff members sharing team rooms affected privacy. The staff said they enjoyed sharing a team area and felt that overall patient care was improved by their collaboration. But the team area, which contained 12 staff members, was often too loud, so they suggested limiting the size of the staff areas to eight people in future designs and implementing a system for asking the room to “quiet down.” And while they liked having the team room central and surrounded by exam rooms, they felt they didn’t have enough access to daylight.
The size and layout of West Warwick’s exam rooms received universally positive responses. Each exam room contained a mobile supply cart that was docked below the countertop, adjacent to the hand sink. The staff liked that the supplies were tucked away when not needed but could be brought directly to the exam table when necessary and that the top of the cart could serve as another countertop. The laptop in the exam room was also stored on a mobile, height-adjustable cart, which allowed physicians access to their laptops while facing patients and could be moved out of the way when not needed. Based on this feedback, the design was duplicated exactly for South County’s exam rooms.
Additionally, the POE of West Warwick studied the facility’s community room, which is used to hold meetings and classes for the staff and patients. The organization wanted to better understand how the space was being used and if this feature was an asset and should be included at the South County facility. West Warwick’s community room earned positive feedback, with respondents reporting that the layout of the room allows for flexibility and the room’s operable partitions enable the room to be divided into multiple spaces to support simultaneous functions. A kitchen in the community room is used for patient education cooking classes and the local community was utilizing the room after hours for local meetings and events.
Informing Design Decisions
Based on the results of the POE performed on the West Warwick location, the Vision 3 design team made several important changes to the design of the South County facility, which opened in 2015. For example, in the waiting room, the reception desk was redesigned to be closer to the main entrance for staff to greet patients directly upon entering the facility and to avoid any patient confusion over the check-in process. The waiting room seating was also relocated to be adjacent to the exterior wall to provide access to natural light and views outdoor. Acoustics were addressed by adding carpeting, upholstered furniture, and acoustic ceiling tiles.
For the staff spaces, Thundermist took the lessons from the POE to redesign the central staff team area to feature four six-person team pods with five examination rooms in each pod. The team staff rooms were relocated to exterior walls to provide outdoor views and natural lighting and are adjacent to that staff’s pod of exam rooms. The layout of the team rooms was also adjusted so that the work areas face the walls for greater staff privacy and a wall cabinet for personal storage was added above each desk. For the corridors connecting the team areas with the exam rooms, patterned glass windows were added to improve access to natural lighting in the corridors and create a visual connection between the team and the exam rooms. Due to the success of the community room in West Warwick, Thundermist included a community room in the design for South County, with a similar room size, operable partition, and kitchen.
In mid-2016, Roger Williams University students produced another POE for Thundermist—this time on the completed South County facility—finding that many of the changes were working successfully. For example, in the waiting area, patient seating, which was arranged in both small and large groupings adjacent to the exterior walls, was providing access to natural light and outdoor views. The location of the reception desk near the entrance was also working well with patients experiencing minimal confusion about where to check-in. However, the acoustics were still a concern, so Thundermist installed a white noise system.
In the staff team pods, the proximity of team areas to examination rooms saved time and steps. Staff enjoyed the improved access to natural lighting and outside views in the room, and the patterned glass partitions between staff areas and the corridors worked well in allowing more natural light into the corridors, while also protecting the privacy of the staff work areas.
Throughout this process, we’ve learned some valuable lessons on conducting a POE. Thundermist and the university worked closely to make sure that facility operations were not adversely impacted by the students’ presence. The initial group tours and building photography took place in off-hours. To encourage participation in the POE, the staff was invited to meet with the students during lunch breaks, while patients were given a hand-out, with photos of the students, that explained the process and informed them that their 15-minute interview would be kept anonymous.
It’s critical that whoever is leading the process—whether a professor or a design team—sets the standards for the research documentation. In these POEs, the interview forms the students used were critically reviewed and trial tested. After the interviews were complete, the students entered the data into a spreadsheet, which included the gender, age range, whether the person was a patient or staff member, the room or space discussed, their frequency visiting that area, the date, the length of interview, and the feedback on the specific space. The team discussed the results, and at the end of the semester, the students presented their findings back to the design team and Thundermist.
Vision 3 plans to continue to serve as an architect sponsor to the Roger Williams University Environmental Design Research class and has recommended the university as an affordable means to provide POEs for other community health center clients. Vision 3 and Thundermist are now redesigning the first Thundermist Health Center in Woonsocket, R.I., which opened in 2005, using many of the lessons learned from these POEs to greatly inform the project. Roger Williams University students will likely perform a POE for the Woonsocket facility a year after it opens. We would recommend that design firms contact their local architecture school and discuss how they can form a relationship that benefits both parties.
Source: Healthcare Design
The aging population and the unknown future of policies are shifting the way health care organizations think about real estate.
National real estate firm JLL recently completed research on the health care industry and how organizations approach real estate with the changing landscape.
JLL Senior Vice President of Health Care Paul Heiserman said it would be impossible to talk about real estate in health care without first acknowledging the growing need to service the baby-boomer bubble, as well as the increasing costs from more advanced services and pharmaceuticals.
“Better services but not cheaper services,” said Heiserman, who is based in Columbus, Ohio. “That’s driving up prices that are really unsustainable.”
Heiserman said employers used to be more willing to take on the full burden of health care costs for their employees, but with the rising prices, the responsibility is shifting some to the patients.
The shift in payment responsibility is causing some pinches at the health care provider level and shifting the focus on where the importance of health care lies, Heiserman said.
A greater importance is being placed on reducing per capita cost, improving the overall population health and improving the overall patient experience, he said.
“Those three slices are driving a lot of what we’re seeing in the health care industry in terms of real estate,” Heiserman said.
JLL’s research concluded with five main trends in health care real estate: building room for change; optimizing their existing real estate; putting convenience first; smarter site selection based on demographics, including the placement of outpatient surgical centers; and advanced management to mitigate risks of more locations.
The trends are ways health care systems are looking to improve patient care while lowering costs, Heiserman said.
The way health care systems value patients is changing, Heiserman said. Where hospitals used to make more money by having more patients in beds, there’s now an added focus on preventive care to keep patients out of acute care, he said.
The change in philosophy is adding to the first trend, which is designing health care space to flexibility.
“We have a major shift right now, and we’re not sure where it shakes out,” he said. “You can’t count on a facility to be a static use for 20, 30 years. Design it in a way it can be converted to something else. In 20 years, what is an emergency room now might be required to be something else.”
Heiserman mentioned a health care client in another region looking to optimize its lab space. The client currently has three labs spread across different locations, not fully optimizing space.
The opportunity to consolidate lab space and eliminate duplicate real estate uses is another trend seen in the industry, Heiserman said. He said in the past, health care organizations often would grow for the sake of growth.
“They would grow whichever way made the most sense,” he said. “That worked well when there wasn’t pricing pressure. Now, it doesn’t make as much sense.”
More health care organizations nationwide are beginning to follow Fortune 500 companies in the way real estate operations are tracked and organized, he said.
“Hospitals aren’t cutting edge,” he said. “When we talk about optimization, now they’re beginning to look at operations and where they make sense. A lot of hospitals are moving administration into less expensive spaces off campus.
“The highest and best use is not administrative use.”
Another trend in health care is the location of services to more convenient locations for patients, Heiserman said.
Service convenience is being seen in Grand Rapids, said Jeff Karger, JLL senior vice president of brokerage in Grand Rapids. He pointed to Spectrum Health opening clinical space in Grand Haven and on East Beltline.
“They’re bringing it back toward the consumer, versus the acute area downtown,” Karger said. “It puts convenience first, so it encourages the patient to participate more.”
To establish those locations, health care systems are turning toward more detailed analytics to discover what move makes the most sense. The analytics are similar to how national retailers might select their next site, Karger said.
Prior to costs rising significantly, health care systems really didn’t have a need to be super selective in their next site, Heiserman said.
“Hospitals operate independently and tend not to go into other regions and tend to be very large and powerful within their community,” he said. “Hospitals were working on an island for many years and maybe didn’t have the need for increasing sophistication, but now with the pressure, they need to sophisticate to increase efficiency.”
The need for efficiency is driven by the growing competitive nature of health care, Heiserman said. Systems must be able to attract a set of patients more capable of paying so they can in turn offer cheaper services to treat a greater population.
“We’re in a largely competitive environment; most markets have quite a bit of competition, and there’s an element of trying to protect but also gain market share,” Heiserman said. “Particularly, market share that pays well, so the hospital can provide better service.”
The future of healthcare real estate is bright with baby boomers aging, but industry leaders weighed in on what could change and why this segment is so unique from an operations standpoint.
“I’m easily bullish [on healthcare real estate]. 100%,” HCP Vice President of Leasing Tom Hulme said. “The market is smoking hot, and I’m absolutely bullish.” Hulme and other healthcare real estate leaders convened Monday at the 2017 BOMA International Conference & Expo to discuss the state of their sector and the unique nature of their arc of commercial real estate. LifePoint Health Senior Director of Real Estate Tammy Moore was equally bullish on the industry based on the sheer fact that there are so many baby boomers aging into the demographic likely in need of healthcare facilities. They were joined by Cambridge Holdings’ Ryan Doyle, who also was optimistic but cautioned ever-changing consumer demands could lead to a bearish climate.
Hospitals in tertiary markets have been closing in the years since the passing of the Affordable Care Act, but the panel was not ready to put the blame solely on the ACA. Hulme said his company did not see business impacted in the last seven to eight years from healthcare reform.
“I’ve read a report saying the United States is over-bedded, so you have to wonder if hospitals are closing because of that,” Moore said.
The panel also discussed the unique nature of healthcare real estate. Moderator and Healthcare Realty Trust Vice President Amy Byrd said medical office buildings have more specialized requirements and often have drastically more visitors than other commercial properties, leading owners or managers to approach operations and design in a different way — down to slight inclines in hallways and how that might affect a visitor.
While healthcare facilities might require more focus on detail, Byrd enjoys the challenges of this property type.
“I feel every day like I’ve contributed to someone’s well-being,” she said.
Delray Medical Center this week will host a ribbon cutting for its new patient tower. The $80 million project has added 96 private patient rooms to the 493-bed hospital, among other features.
The new 120,000-square-foot, four-floor tower has a rooftop helipad and 352 parking spaces. With the newly built structure, the hospital has also expanded services in orthopedics and neurosciences, advanced heart therapies, MRI capabilities, cardiac rehabilitation and other functions.
Private rooms at the new tower at 5352 Linton Blvd. in Delray Beach have 42-inch flat screen TVs, motion-sensor floor lighting and floor-to-ceiling glass windows. They will also come with services such as valet parking.
Its helipad to be placed on the roof will have a dedicated trauma elevator for expedited access to emergency facilities. The hospital says it will result in patients being treated two minutes faster than its current set up.
The ribbon cutting will be held Thursday and the grand opening of the new tower will be July 11.
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