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Page 10 — Health Care Properties Quarterly — July 2017
St. Francis Medical Center Expansion | Colorado Springs, CO
The power of ingenuity...
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ENRICHING
Community
People
Ideas
Broker Insights
H ealth care is in a state of
extraordinary change; as a
result patients, providers and
payers alike face a serious
problem, uncertainty.
In this period of macro-instability,
our nation’s providers and health
care executives have little concrete
information to rely upon when guid-
ing their strategic decisions. Lease
terms, strategic relocations, opera-
tional cash flows, hospital align-
ment and more are all victims of this
uncertainty. The ability to accurately
forecast the future of health care is
tough.
Considering how difficult the next
few weeks are to predict, how can
even the most informed physician
or CEO make reliable decisions?
Furthermore, how can health care
developers, financiers and innovators
bring services to the
community when
the very defini-
tion of health care
revenue is a topic
of debate? In our
effort to strategize
more effectively,
we’ve begun to see
immense value in
big data and phy-
sician-based data.
Data helps physi-
cians make more
informed decisions,
because they rely
upon the two most reliable founda-
tions of health care: demand for
services and the production trends
of providers themselves. Ultimately,
these two core datasets enable health
care decisions to transition from
thoughtful speculation to reliable cal-
culation.
Regardless of the Medicare Access
and CHIP Reauthorization Act, Better
Care Reconciliation Act or the future
of Medicare and Medicaid, demand
for services provides a reliable and
predictable forecast for future growth.
The inelastic nature of health care
demand serves as one of its primary
value points for investors and provid-
ers alike, yet the threat to reimburse-
ments drives uncertainty for any
strategic decision. Utilizing access
to big data, we have found a basis of
certainty for our tenants, asset own-
ers and capital markets players alike.
The approach to underwriting a
tenant’s ability to fulfill its obligation,
or to its margin considerations, is an
understanding of how many proce-
dures may be in demand for the term
of its occupancy.
Now, decision mak-
ers who are capable
of drawing calcu-
lated conclusions
regarding the num-
ber of procedures
needed for five
and 10 years into
the future for any
specific location
are well-situated
for success. Any
range of special-
ties, inpatient and
outpatient pro-
cedures alike, are
now calculated forecasts, which may
give practices a head start in the race
for value-based care. In turn, provid-
ers may be able to justify long-term
leases and investors to justify com-
pressed cap rates in today’s market.
That, in conjunction with physician
data, enables reliable and calculated
decision-making.
The demand for health care is a
reliable benchmark from which we
can guide strategic decisions. Howev-
er, the performance of practices and
their individual physicians ultimately
drives revenue for any party invested
in health care. Demand estimation
data in conjunction with the full
breakdown of every U.S. physician’s
Medicare volume from the past three
years allows us and health care pro-
viders to dramatically improve one’s
ability to underwrite risk. Data such
as a physician’s Medicare payments,
charges, hospital and ambulatory
surgery center affiliations, and more
are an invaluable component in
enabling calculated decisions. Physi-
cian tenants, health systems and
medical office building owners alike
may understand their competition,
their patient base and themselves far
better than before.
Tenants can strategically locate
within any market knowing that the
security of their revenue is upheld
by calculated metrics instead of
thoughtful speculation. Building own-
ers can now mitigate risk via the
understanding of every tenant phy-
sician and their immediate patient
access. Investors are capable of
underwriting opportunities across the
entire nation with never-before-seen
precision. All the while, health care
participants, providers and patients
alike are exposed to unprecedented
turmoil via health care legislation.
Despite that uncertainty, investors
and providers are still forced to make
lasting decisions, which may only be
optimized by the use of effective data
and market knowledge.
Does this all boil down to analyzing
data? We think so.
Ultimately, health care legislation
is only accountable to the people and
communities it impacts. Until we
all have a clear vision of what lies
ahead, our capacity as health care
real estate brokers to guide effective
strategy decisions will default to the
two core principles of our industry:
demand for services and physician
volume. These guiding principles and
the data that unlocks their potential
may be some of the only reliable fac-
tors in guiding health care’s future.
In the end, the capacity to make
calculated decisions enables the
well being of our communities as a
whole.s
Samuel White
Associate broker,
Healthcare Practice
Group, Cushman &
Wakefield, Denver
Stuart Thomas
Associate vice
president,
Healthcare Practice
Group, Cushman &
Wakefield, Denver
The inelastic nature
of health care
demand serves as
one of its primary
value points for
investors and
providers alike.