UF Health Neurology Institute Development Gets $20 Million Boost

Edward Jimenez decided to pursue a career in health care management to help find a cure for his father’s Parkinson’s disease.

What once seemed like a nearly impossible goal is now becoming a reality, Jimenez said.

On Friday, Jimenez, the CEO of UF Health Shands Hospital, announced Shands will receive $40 million to start the Norman Fixel Institute for Neurological Diseases, at 3007 SW Wilson Road. The new center will treat patients and find cures for neurologic disorders.

The center will open in July, Jimenez said.

About 150 medical researchers, professors and students gathered Friday in front of what will soon become the institute. Jimenez said Lee Fixel, a partner with the investment firm Tiger Global Management, donated $20 million to the creation of the project. UF will match the donation, which will make the total contribution $40 million.

Lee, Jimenez and Shands doctors have been planning the project for more than 20 years, Jimenez said. Lee said he donated to the project to give it the financial boost it needs to succeed.

Fixel previously invested in Facebook, LinkedIn, Eventbrite and Souq, an e-commerce marketplace run by Amazon.

“Lee is helping what is already great become greater,” Jimenez said. “He has a family and a job, but he still puts helping others first as well.”

The project hopes to raise another $60 million to continue hiring well-known researchers and their teams, Jimenez said. The current $40 million will help continue the building’s construction, which began in November, and allow the institute to recruit five top researchers across the country to begin seeking treatments.

After meeting Fixel two decades ago, Jimenez said the two came up with the idea to start an institute at UF to search for treatments for Parkinson’s, Alzheimer’s disease, Lou Gehrig’s disease, also known as ALS, and other neurological conditions.

“The ability to bring together some of the best minds in medicine can make an exponential impact,” Fixel said.

Florida is arguably hit the hardest by cognitive disorders due to it being the third most populous state with an aging demographic, said Kelly Foote, a UF neurology professor and co-director of the Norman Fixel Institute for Neurological Diseases.

The Normal Fixel Institute for Neurological Diseases will be able to find a cure for the millions who are diagnosed, Foote said.

“We are looking for the smartest and are trying to identify five researchers that are willing to come,” Foote said. “But most importantly, willing to make a lasting impact in the lives of others.”

Source: Alligator.org

Florida House Readies Renewed Push On Hospital Regulations

While the Republican-controlled House is taking aim again at Florida’s certificate-of-need laws, a top state official testified this week that many new hospitals are going through the existing regulatory process with little problem.

Florida is one of 35 states that have laws designed to require health-care providers to justify the need for certain types of new facilities and services. Some GOP lawmakers, including House Speaker Jose Oliva, R-Miami Lakes, have argued that such regulations unnecessarily drive up the cost of health care by artificially restricting the market and maintain that the state should take more of a “free market” approach to health care.

Molly McKinstry, a deputy secretary for the Florida Agency for Health Care Administration, told House members that in recent years most new hospitals have gone through the state’s current process without getting bogged down in regulatory fights. Those fights, which often include a hearing before an administrative law judge, can drag out for one to two years.

McKinstry said 25 acute-care hospitals received initial approvals over the past seven years. Of those 25 hospitals, 13 were approved without competitors challenging the certificates of need backed by regulators. Nine other hospitals were ultimately approved, and only three did not receive the final go-ahead.

Florida has scaled back its certificate-of-need laws several times over the last two decades. Rep. Cary Pigman, an Avon Park Republican who chairs the House Health Market Reform Subcommittee, told members of his panel that they can expect another CON rollback proposal during the 2019 session, which starts March 5.

While Oliva has sounded off on what he calls the “hospital industrial complex,” his counterpart, Senate President Bill Galvano, R-Bradenton, has been more cautious, urging against complete deregulation of the health care market.

House leaders in recent years have repeatedly called for eliminating or scaling back certificate-of-need laws, which also apply to such thing as building nursing homes. The effort also had support from former Gov. Rick Scott but ran into objections in the Senate.

The issue has divided the hospital industry in the past, with some hospitals favoring changes in the CON process and others opposed. Also, the Florida Health Care Association, a major lobbying group for the nursing-home industry, has made maintaining the CON process for nursing homes a priority for the 2019 session, according to information posted on its website.

McKinstry’s hospital figures didn’t include the last round of CON preliminary approvals that were announced in December. In an unusual move, the Agency for Health Care Administration approved eight CON applications for new hospitals, The state approved two new hospitals in Miami Dade County, a 100-bed acute care facility planned by the Public Health Trust of Miami Dade — which operates the Jackson Health System — and an 80-bed facility planned by a subsidiary of its competitor, the Hospital Corporation of America.

The agency also approved competing CON applications for new hospitals in Seminole and Orange counties.

Source: News4Jax

AdventHealth Plans Freestanding ER In Lake Nona

AdventHealth plans to build a freestanding emergency room with a helipad in southeast Orlando’s Lake Nona community
The 18,488-square-foot facility will be built on 6.54 vacant acres at 10093 Lake Nona Blvd., which is west of Narcoossee Road, south of Lake Nona Boulevard and north of State Road 417, according to a draft agenda for the Feb. 14 meeting of the Southeast Town Design Review Committee. The project, owned by Adventist Health System/Sunbelt Inc., is seeking approval as a standalone emergency room.
The new facility is part of a growing trend in the area to build more freestanding emergency centers. Freestanding emergency centers typically are owned and operated by licensed hospitals. The facilities are not connected to a main hospital campus but offer the same comprehensive 24/7 emergency services. The number of such facilities is on the rise in Florida, in part due to overcrowded ERs, and partly due to a desire to grow hospital system revenue. Hospital systems eventually may also expand them into full hospitals if they can prove the need for a facility. For example, HCA Healthcare Inc.’s Oviedo ER, built in 2013, became a $109 million, 64-bed hospital called Oviedo Medical Center in 2017.
The state had only 26 freestanding ERs in 2016 and that number has grown to 41, according to the Florida Agency For Health Care Administration. The total count will rise to 50-plus with the Central Florida projects in the works and may go even higher, since they fulfill a strategy for hospital systems to grow revenue by bringing emergency care closer to outlying, typically affluent suburbs, where people are more likely to be able to afford health care.
This is the sixth such facility AdventHealth has in the works or already has built.
AdventHealth broke ground on another freestanding ER in Oviedo last November. The Orlando-based nonprofit health care provider will open the 19,000-square-foot AdventHealth Oviedo ER by fall 2019. The facility at 8100 Red Bug Lake Road will include two kid-friendly patient rooms, imaging technology like X-ray, CT scan and ultrasound equipment, as well as a medical laboratory.
AdventHealth, which also has freestanding ERs in Lake Mary and Winter Garden, plans to build a $12 million, 14,000-square-foot freestanding ER in Deltona as well as a $15.6 million, 19,000-square-foot freestanding ER in Waterford Lakes that’s expected to open in second-quarter 2019 and have 300 temporary construction jobs and 100 permanent medical jobs at full buildout.
Its $65 million, 97,000-square-foot freestanding ER in Winter Garden opened in February 2016. That outpatient facility, which broke ground in 2013, brought 269 new jobs to the area, $14 million in additional annual payroll and a $23 million boost to Orange County’s gross domestic product, Winter Garden City Commissioner Colin Sharman previously told OBJ.
Meanwhile, AdventHealth system’s Altamonte Springs-based parent company Adventist Health System bought roughly 15 acres on the north and south sides of Lake Nona Boulevard in December 2017 for $9 million. The land is adjacent a vacant 67.24-acre site Adventist bought in 2016.

“Florida Hospital [AdventHealth] plans to build medical office space on the newly acquired Lake Nona property,” AdventHealth previously said in an email to OBJ. “We are expanding our presence in the Lake Nona area to meet the health care needs of this fast-growing community in the years to come. Florida Hospital’s goal is to make health care easier to access by having facilities located within 10 miles of 90 percent of the Central Florida population.”

AdventHealth parent Adventist Health System is the second-largest employer in the area with more than 83,000 employees for 2018. The health care system operates nearly 50 hospital campuses and hundreds of care sites across the U.S. in almost a dozen states and serves more than 5 million patients each year.
Founded in 1908, the $3.36 billion nonprofit AdventHealth system headed up by CEO Daryl Tol provided $45.3 million in uncompensated health care in 2016.

Source: OBJ

Hospital Closes Purchase Of Former Herald-Tribune Building

The Sarasota Memorial Health Care System has closed on the purchase of the former Sarasota Herald-Tribune building on Main Street where it plans to relocate more than 300 support-services personnel.

The hospital’s $17.3 million project includes renovating the three-story, 72,408-square-foot building on 3.8 acres at 1741 Main St. and constructing a one-story parking structure.

Moving the employees will free space for growth on the hospital’s main campus and improve “interdepartmental efficiencies” among support service departments scattered in different buildings, according to hospital officials.

The hospital paid $10.68 million for the building, spokeswoman Kim Savage said Wednesday. The proposal approved in October included $2.26 million to build the parking platform on top of the existing parking lot to add 90 spaces to the current 240 ground-level parking spots. The hospital board on Tuesday approved entering into a contract with A.D. Morgan Corp. of Bradenton to design and build it. Construction is estimated to take 10 weeks.

“We hope to move employees into the building this summer, but our plans depend on the amount of time it takes to obtain necessary permits and build the parking platform,” Savage said.

Once that construction and the building renovation is completed, employees will be moved over four to six weeks, she said. They will primarily work daytime hours Monday through Friday.

“Purchasing the former Herald-Tribune building is a good move for the hospital and the community,” hospital board member Tramm Hudson said. “It will allow us to expand clinical areas to better serve our growing community and relocate about 300 non-clinical staff members who now work in multiple sites to one downtown location.

“We believe centralizing those team members will enable greater collaboration and efficiencies as well as provide additional parking on our main campus for our patients and visitors,” Hudson said.

Local developer Wayne Ruben signed a contract in June to buy the building, most recently listed for $13.95 million, with unspecified plans to redevelop the property. Officials say he approached the hospital last summer about buying the property. Sarasota Memorial had been looking into constructing a new support services facility at its Clark Road campus.

Built in 2006, the building was first listed for sale at $18.1 million when it was fully leased to the Herald-Tribune and IberiaBank. The Herald-Tribune moved to the SunTrust building next door in February 2017 and the building has been vacant since SNN News Now left last month.

It had been owned by an affiliate of Halifax Media Holdings of Little Rock, Arkansas, which sold the newspaper to New Media Investment Group and Gatehouse Media in early 2015. The New York Times Co., a previous owner of the newspaper under which the building was constructed for about $18 million, sold the property for $17.4 million in 2012. It was designed by the Miami firm Arquitectonica with almost 2,000 panes of glass.

“It’s a terrific addition for that end of Main Street,”′ said Ian Black, whose commercial real estate firm’s Steve Horn represented the seller along with JLL’s Brent Miller.

The Sarasota Memorial Health Care System, an 839-bed regional medical center, is among the largest public health systems in Florida. It has more than 5,000 staff and 900 physicians, primarily in its main campus at 1700 S. Tamiami Trail.

Its growth has created space challenges. For example, the perioperative suite and cardiology department at Sarasota Memorial Hospital are hampered by their current space and lack of room to expand, hospital staff said in its recommendation to buy the building in October.

Under the plan, Sarasota Memorial plans to consolidate administrative functions that now are at four locations. Supply-chain management, corporate compliance, the First Physicians Group central business office and clinical business systems would be moved from the main campus.

The “revenue cycle” operation, which includes patient financial services and registration, will move from Hillview Street. The corporate finance department will relocate from Bee Ridge Road, and physician IT services will come from the Doctors Gardens building south of the hospital across Arlington Street.

Source: Herald-Tribune

Boca Raton Regional Hospital Seeks To Raise $250M, Expand Campus

Boca Raton Regional Hospital has launched a campaign to raise $250 million for expanding, including the construction of a patient tower on its campus.

The announcement came as the nonprofit hospital prepares for a merger with Miami-based Baptist Health South Florida. That affiliate is expected to be finalized in summer 2019. However, BRRH will maintain its identity.

Its fundraising campaign has showcased how the Boca Raton hospital has one of the deepest donor networks in South Florida. It has already raised $115 million, with donations coming from board members Christine E. Lynn, Stanley and Marilyn Barry, Richard and Barbara Schmidt, Elaine J. Wold, and Louis B. and Anne W. Green.

“We stand at the threshold of an extraordinary future for Boca Raton Regional Hospital, one borne of a powerful and visionary long-term plan,” said BRRH President and CEO Jerry Fedele, who will retire after the Baptist Health deal is consummated. “As always, our supporters of the Hospital have demonstrated their spirit, commitment, and unflagging devotion by helping ensure these plans become reality. We all owe them a debt of gratitude for the sophisticated level of healthcare we will all enjoy as we move forward with this transformative initiative.”

The hospital hopes to expand its campus with a seven-story patient tower. This 180,000-square-foot building would include surgical suites, a patient lobby, and three floors set aside for future growth. The 400 rooms in the current hospital building would be converted to all private rooms with a major renovation, plus a 20-bed observation unit would be added.

BRRH also plans to build a 972-space parking garage.

“We’ve all come together in the spirit of Gloria Drummond, whose pioneering spirit helped build this hospital, to help take us to the next level as a healthcare provider,” said Lynn, chairman of BRRH. “We hope and expect those who care deeply about sophisticated world-class healthcare will embrace this effort and help us bridge the gap between the $115 million we’ve raised to date and the $250 million we need to move forward. Our community has always been there for the hospital, as demonstrably as the hospital has been there for the community.”

Source: SFBJ

Doral Getting First Hospital As Population Continues To Rise

It is a $250 million project that brings Doral its first hospital.

Nestled right up next to the Palmetto Expressway and 25th Street, the Jackson West Medical Center is rising fast.

That’s not surprising considering that up 300 workers could be on the site at one time.

With an expected finish date of May 2020, the 100 bed hospital may look out of place in the midst of a warehouse industrial area.

“You have over 60,000 people who live here already full time, and approximately 50 to 70,000 people daytime that work here,” said Carlos Migoya, President of Jackson Health System.

Migoya says that the 585,000 residents living in and around the Doral, Sweetwater and Miami Springs area have dealt with increasingly frustrating traffic.

“The fact is Doral has grown tremendously and if you look at the five year plan, you will have more than 100,000 people living here,” said Migoya.

Other hospital organizations went to court to try and halt the project, saying that Doral was already well served by existing hospitals.

“If you live in Doral, the closest hospital here is seven miles,” said Migoya. “Seven miles in Doral is like dog years because of the traffic.”

The hospital will include an adult and pediatric emergency room, diagnostic center, outpatient clinics, a children’s clinic, a separate office facility and the 100 bed inpatient hospital.

Construction costs are covered by a bond issue and funds from Jackson Health System, which Migoya says is now earning money.

“The demographics here, the growth in Doral, there has been a need for a complete medical center,” said Migoya.

Source: CBS Miami

Healthcare Network Of Southwest Florida Breaks Ground On New Center Near Golden Gate

Officials with Healthcare Network of Southwest Florida have been determined for seven years to bring a new medical complex to fruition in the heart of an area where residents face hardships acquiring medical care.

Shovels are hitting the ground Tuesday to begin construction on the Nichols Community Health Center near Green and Collier boulevards in East Naples on the edge of Golden Gate.

Supporters of the nonprofit Healthcare Network and community leaders will celebrate the start of the $15 million complex with three floors that will offer a full array of medical, mental health, dental health and support services like a drive-thru pharmacy.

Healthcare Network has raised a little more than $7 million and hopes to raise the rest during the 15-month construction, said Mike Ellis, president and chief executive officer of the nonprofit.

Healthcare Network was founded in 1977 in Immokalee and has 22 locations today throughout Collier County, including mobile services.

“We need to get this built for the community,” Ellis said.

The three-story complex will be named after Naples philanthropist Jerry Nichols for his substantial gift for the project. Nichols, a wealth management adviser, moved to Naples from Ohio more than 40 years ago. He has been, along with his late wife, Arlene, a major supporter of education, children and veterans in the community.

Ellis said the building will be “program central” because it has just about every type of outpatient care needed, from women’s care to pediatric services, from dental care to behavioral health.

The opening is targeted for spring 2020. Healthcare Network continues to seek philanthropist support to generate the remaining $7.5 million for the construction.

“We can sustain ourselves, but capital projects are where we need help from the community,” Ellis said.

Stephen Wheeler, vice president of development, said the project is exciting and that the community support has been amazing.

In addition to the gift from Nichols, the size of which is not being disclosed, there’s been support from other individuals and the Moorings Park Foundation Senior Services Center, Wheeler said.

Despite Healthcare Network’s lengthy history in the community, many are unaware of its mission and the opportunities to help, he said.

Many Moorings Park employees are likely future patients of the Nichols center, and the retirement community’s human resources office is helping coordinate to make that happen, he said.

The Nichols center’s patient base is 50,000 adults and 12,000 children in the surrounding region.

“We see 60 percent of the children in the community,” Wheeler said.

The center will have 65 employees once it is fully operational. Services will be added incrementally over three years, when it is projected to reach full capacity, according to Ellis.

Source: Naples Daily News

HCA Healthcare Buys 100 Acres In Estero For $52.5 Million

HCA Healthcare purchased nearly 100 acres in Estero for $52.5 million at the end of December, property records show.

The Nashville-based health care system bought the land for a planned hospital in Estero that state regulators approved last year, said Debra McKell, a spokeswoman for HCA West Florida, a division of HCA.

The land is bordered by U.S. 41 to the west, Williams Road to the south and Via Coconut Point to the east. Hertz Global Headquarters sits directly south of the property on Williams Road.

Property records show Fawcett Memorial Hospital, based in Port Charlotte, purchased the 100-acre property Dec. 20 from Estero North Point LTD. Fawcett Memorial Hospital is one of 15 hospitals that belong to HCA West Florida.

A deed for the purchase lists the hospital’s address as One Park Plaza in Nashville, which is the HCA headquarters. McKell confirmed HCA made the purchase. McKell said the land was acquired for the planned hospital and to “explore other uses as well down the road.”

The property purchased by HCA is currently zoned for commercial uses, Estero Community Development Director Mary Gibbs said. HCA would have to rezone the property to allow any medical uses, Gibbs said.

In June, HCA received approval from state regulators to build an 80-bed hospital in Estero. Lee Health also received approval from the state to build an 82-bed hospital at Lee Health – Coconut Point, its $140 million medical campus now open in Estero south of Coconut Road.

Both health care systems have filed legal challenges to each other’s hospital plans.

The 100-acre property purchased by HCA is less than 5 miles north of Lee Health – Coconut Point in Estero, which opened in early December. Also nearby is Collier County-based NCH Healthcare System’s medical facility that recently opened in Bonita Springs, just south of the city’s border with Estero.

The Lee Health – Coconut Point complex had no impact on HCA’s decision to purchase the property in December, McKell said.

“I don’t think we follow other health systems to determine where we’re putting something,” McKell said.

Lee Health has been working with Estero for more than a dozen years to build a hospital in the community, said Mary Briggs, a spokeswoman for Lee Health.

“We think we have the best location. We’ve already built the complementary outpatient services that serve the hospital,” Briggs said. “We’re just moving forward our plans to build that facility.”

Former Florida governor and now Sen. Rick Scott led what was then known as Columbia/HCA between 1987 and 1997. He left amid a federal investigation into its Medicare billing practices, which ultimately forced the company to pay $1.7 billion in penalties and fines between 2000 and 2002.

HCA formerly operated the now-demolished Southwest Florida Regional Medical Center and what was once known as Gulf Coast Hospital. Lee Health acquired both in 2006 in a $535 million deal.

Estero’s Village Center

The 100-acre property purchased by HCA is within Estero’s village center.

Estero has planned the village center to be a walkable, mixed-use downtown for residents and businesses in the community. Land in Estero’s village center stretches from near Coconut Road to just north of Broadway.

Estero Mayor Jim Boesch said the purchase by HCA is great news for the village.

“We’ve waited long for that 100 acres to come to pass,” he said.

Boesch said development on the property will add to the momentum happening in the village center.

He pointed to construction of the Genova condos at the southeast corner of Corkscrew Road and Via Coconut Point and Estero’s pending purchase of 62 acres along the Estero River at the northeast corner of Corkscrew Road and U.S. 41.

The village is expected to close on the Estero River property Monday, Jan. 14.

“My prediction is U.S. 41 and Corkscrew Road will be the center of town,” Boesch said.

Source: Naples Daily News

Expansion Spree: Cleveland Clinic Is Opening New Facilities And Buying Others

Thirty years after moving beyond its Midwest base and founding a Florida outpost, Cleveland Clinic has taken a giant leap here this year with a round of acquisitions and expansions that will take it from 155 beds in Weston to 1,058 beds across five Southeast Florida hospitals and a geographic range eclipsing that of its Ohio home.
In October, Cleveland Clinic Florida inked deals to absorb the non-profit Martin Health, a system with three hospitals in Martin and St. Lucie counties, and the non-profit Indian River Medical Center in Vero Beach in Indian River County.

“Our footprint in Southeast Florida is geographically going to be much bigger than our present footprint in northeast Ohio,” says Cleveland Clinic Florida CEO Dr. Wael Barsoum. Indian River lies 128 miles to the north of its base in Weston in Broward County. In Ohio, Cleveland Clinic’s main campus, plus 11 regional hospitals and 18 fullservice family health centers, all lie in a seven-county region within a 30-mile radius of Cleveland.

The two Treasure Coast hospital deals were Cleveland Clinic’s biggest by far, but the year also has seen it expand in Palm Beach and Broward. It opened a medical office in Wellington in March. In north Broward, in July it opened a 73,000-sq.-ft. family health center. In Weston, its Florida base for 17 years, Cleveland Clinic opened a tower and an expanded emergency department that total 221,000 square feet. In Fort Lauderdale, it opened a concierge medical practice this year and imported as its lead doctor a Cleveland Clinic Ohio internist who had been the personal doctor for doctors there, including Barsoum.
Hospital and health system mergers and acquisitions last year totaled a record 115 nationally, according to Illinois consulting firm Kaufman Hill. Driven by Obama-era health law changes and by a desire for negotiating power with insurers in the face of rising costs and decreasing reimbursements, hospitals have gone after scale. Stand-alone hospitals in particular have faced a squeeze.
Barsoum says Cleveland Clinic has cut $1 billion in costs in the last five years from its $8-billion system. “To stay at the top of the hill, you have to be thinking about what’s coming and to an extent be our own disruptor,” he says.
Investment rating service Moody’s says that while Cleveland Clinic is an international brand with strong cash flow and “exceptional fundraising capabilities,” revenue growth is constrained in northeast Ohio. In part, that’s what’s driving the geographic expansion in Florida and also the opening of a 200-bed hospital in London. (Cleveland Clinic also has sites in Toronto, Abu Dhabi and Las Vegas.)
At Martin Health, Cleveland Clinic has promised to invest $500 million over five years. The two already had teamed up on heart and vascular care. A Cleveland Clinic Florida cardiothoracic surgeon joined Martin Health to perform heart and lung surgeries at Martin Medical Center. At Indian River, Cleveland Clinic promised to invest $250 million over 10 years. Indian River board Chair Dr. Wayne Hockmeyer has said Cleveland Clinic’s reputation will be a “powerful recruiting tool” for top-quality doctors.
In its report, Moody’s mentioned more “potential acquisitions” in Florida. Barsoum says the organization is open to the idea. “We recognize health-care organizations, to be successful, need some level of scale,” he says. “We are regularly approached by health systems and hospitals, and we are open to talking with them. If there is a community or hospital that wants us and they are like-minded and a clinical fit, then we look forward to exploring those options.”
Cleveland’s Expanding Reach
Indian River Medical Center and Martin Health have recently joined Cleveland Clinic Florida.

 

Cleveland Clinic Florida, Weston
Beds: 205
Employees: 3,067
Revenue: $500 million
Staff size: 259 physicians; 2,808 others
Campus: Main campus in Weston with locations in Coral Springs, Fort Lauderdale, Parkland and Palm Beach County

 

Indian River Medical Center, Vero Beach
Beds: 332
Employees: More than 2,000
Revenue: $290 million
Patients: 15,300 admissions
Physicians: 320
Campus: IRMC includes the Welsh Heart Center and Scully Endoscopy Center within the facility; separate buildings on the campus: Scully-Welsh Cancer Center, Health and Wellness Center, Wound Care Center

 

Martin Health
Beds: 521
Employees: 4,500
Revenue: $559.6 million
Patients: 34,418 admissions, 117,112 emergency department visits
Staff size: 504 physicians on medical staff, 150 employed physicians
Campus: Three hospitals (two in Stuart, one in Port St. Lucie)

 

Source: Florida Trend

Outpatient Centers On The Rise As Average Asking Rent For Medical Office Buildings Reaches Record High

The U.S. outpatient care center sector has grown robustly in recent years as asking rents for medical office buildings continue to rise and health systems seek to provide a better patient experience at a lower cost, according to a new report from CBRE.

The U.S. average asking rent reached its highest level on record in Q2 2018, rising 1.4 percent year-over-year to $22.90 per sq. ft., due to tight market conditions and the completion of new, high-quality space.

“Rents increased in two-thirds of the markets tracked by CBRE and grew fastest in some of the markets with the lowest vacancy rates, including Nashville, Manhattan, Louisville, Seattle, and Indianapolis,” said Andrea Cross, Americas head of office research, CBRE.

In addition to rising rents, health systems have increasingly turned to lower-cost outpatient centers—which enable them to provide lower-cost services closer to where patients live—due to higher capital costs stemming from mergers and acquisitions and a surge in in employer-sponsored, high-deductible health plans requiring patients to pay larger out-of-pocket amounts.

The total number of outpatient centers grew more than 50 percent to approximately 41,000 from 2005 to 2016. Outpatient center employment has more than doubled since 2003, and grew 3.5 percent year-over-year in October 2018, compared with 2 percent annual growth in overall healthcare employment.

“Healthcare systems are increasingly catering to patients as consumers—rather than simply users—of healthcare services,” said Mark Lamp, executive managing director, Healthcare, CBRE. “They are creating outpatient facilities that provide a more ‘hotel-like’ experience—and at a lower cost than the more expensive hospital services—with technology-enabled check-in, abundant natural light and incorporated outdoor spaces, and patient care concierges trained to support guests with any needs.”

Capital Markets Trends

Trailing 12-month transaction volume decreased to just below $12 billion in Q2 2018 but remained not far off the cyclical high of $14.2 billion.

“Medical office properties have shifted from a specialty asset class to a core asset class,” said Chris Bodnar, vice chairman, Healthcare Capital Markets, CBRE. “Institutional and cross-border investors have ramped up their medical office acquisition activity, with cross-border investors on pace to record their highest annual level of net acquisitions in at least a decade in 2018.”

Development Trends

Medical office development strongly correlates with population growth, with Phoenix, Houston, Dallas/Ft. Worth and Atlanta among the top markets for total completions from Q3 2017 to Q2 2018, along with Minneapolis/St. Paul, a leading healthcare cluster. Houston, Minneapolis/St. Paul, Atlanta, Chicago, the Inland Empire, Kansas City and Boston rank among the top markets for square footage under construction.

After nearly 60 percent growth in medical office completions between 2011 and 2017, under-construction levels have started to slow, with lower levels of new supply in the coming quarters likely.

“Many hospital systems have slowed their development activity to reexamine their operations, including how to adapt their real estate strategies to provide a better patient experience at a lower cost,” Ms. Cross added.

To download a complete copy of the report, please click here.

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