Colorado Real Estate Journal - September 16, 2015
One thing seems perfectly clear about the future of healthcare – no one knows exactly what the delivery model will look like in coming years. Our smartphones, however, could hold the key, as they and other mobile devices will continue to drive how caregivers interact with, monitor and even treat patients. The pending “disruptive” impact of technology on the delivery of medicine and, subsequently, healthcare real estate was a common thread during many of the 26 keynote addresses and panel sessions at BOMA International’s 2015 Medical Office Buildings & Healthcare Real Estate Conference held April 29 – May 1 in Cleveland. For the second straight year, BOMA held the country’s largest healthcare real estate conference that attracted approximately 1,000 attendees, with brokers, developers, property managers, architects, physicians and health system administrators descending upon Cleveland’s new Global Center of Health Innovation, a massive facility that is home to a permanent showroom of medical products. This year’s conference, perhaps more than any of the previous annual gatherings, had an eye to the future. Setting the tone for the conference was opening keynote speaker Daniel Kraft, M.D., a physician, scientist and entrepreneur who gave a dizzying presentation of the numerous mobile innovations and smartphone apps that allow patients to transmit health data to healthcare professionals, monitor their own illnesses and treatments, check their hearts, test their eyes for disease, receive check-ups and much more. The potential bad news is that such innovations could, over time, reduce the need for certain types of facilities, Kraft noted. For example, he said, myriad heart monitoring apps currently on the market, such as the AliveCore heart monitor, could replace the need for cardio catheterization labs. “These applications and innovations are not part of healthcare in the distant future,” he said. “They are already being used today, or will soon be in use.” However, the good news for those in attendance was the optimism of the professionals who served as panelists, many of whom noted that the future of healthcare real estate is promising because there will continue to be a need for facilities in which caregivers can visit with, treat and operate on patients. In fact, several panelists state that, in this new age of medical technology, there likely will be a wave of new development in coming years, as aging and poorly located healthcare facilities are replaced with technologically advanced, efficiently designed and eco-friendly outpatient buildings and clinics in retail-like settings close to where people live, work and shop. With this in mind, much of the conference centered on how developers, architects, medical office building owners and others can assist health systems as they go about building community-based ambulatory networks in order to grow their businesses and attract new patients during an era when they are likely to see reductions in federal reimbursements. “Healthcare, for the first time, has become a consumer-centric industry,” said panelist Gina Weldy, vice president of Real Estate for Northwestern Memorial HealthCare in Chicago. “We need locations that are accessible, convenient and transparent, and our goal is to get patients in the door and make them a part of our continuum of care.” As attendees learned, other types of technology, such as heat mapping, are being used to help health systems and developers find the ultimate locations for healthcare facilities. “Technology allows us, as well as architects and developers, to use a variety of tools to find the location where a health system or group practice can get the maximum exposure and visits and, as a result, increase business,” said fellow panelist Rebecca Baron, the national director of Strategic Real Estate Planning & Transition for Catholic Health Initiatives. Joan Sabba, an architect and partner with NBBJ, added that “using all of the public data available concerning demographics, patient patterns and behavior and many other factors allows us to determine what size a building should be, in exactly what location, and what services and types of physicians should be in the building.” And a variety of experts made it clear throughout the conference that the demand from investors looking to acquire healthcare properties is as strong as ever, as pricing has risen to historic levels for medical office buildings, specialty hospitals and clinics, long-term care facilities and a variety of others that are affiliated with quality health systems or groups. As health systems face financial strains and more stringent requirements for keeping people healthy, some are at least considering selling a portion of the facilities they own in order to raise capital for growth, upgrade their credit ratings and get out of the business of owning real estate. A few health system administrators provided details about their recent sales, or monetizations, of facilities. One involved Harrisburg, Pennsylvania-based PinnacleHealth’s sale and partial leaseback of eight buildings to ARC Healthcare Trust II for $174.1 million. William H. Pugh, Pinnacle’s chief financial officer, described the monetization as a way to take advantage of a strong market and garner capital to help fuel planned growth. “Typically, the mindset of many health system CEOs is to own and control their properties,” Pugh said. “But they’re not thinking of what can be gained by such a sale and how it can add value to an organization.” According to the experts, however, traditional hospitals are unlikely to see as much expansion as other healthcare property types in the future. As panelists noted, any new projects are likely to be replacement facilities with fewer beds than the originals. “The need for hospitals will always be there,” noted Jeff O’Neil, director of Engineering Services for Pennsylvania Hospital. “But with so many advancements, they might evolve into being more like long-term acute-care facilities where patients will recovery after accidents, serious illnesses or transplants.” Nemours Children’s Hospitals, for example, which has facilities in five states, is expanding its use of telemedicine and growing its ambulatory network of clinics to be within 15 minutes of where patients live in order to grow its business, said Jeffrey Kent, managing director of Facilities for the Nemours Foundation. For more great insights on the healthcare real estate sector, make plans to attend the 2016 Medical Office Buildings and Healthcare Real Estate Conference May 3-5, 2016, in Orlando, Florida. About the Author: John B. Mugford is the editor of Healthcare Real Estate Insights magazine at Wolf Marketing & Media LLC. Visit www.wolfmediausa.com