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Industry Partners

     
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- Haworth Health Environments  
- Lillibridge  
- nora systems  

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Specified Technologies  
     
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HCI CHICAGO'S PRESIDENT

 Mark S. Johnson

     
 

 
     
 

HCI Door Prize Drawing

 
 

 
     
  To join HCI-Chicago contact:
Mary Basel Christopher
Kimberly Murphy
 
     

Attendee Comments

     
  "The format - professional, yet casual and inviting"

"The broad overview of all the connecting components of healthcare, real estate, & political climate. Also, the informal back and forth of the panels"

"Information presented in a way I could understand, not too much statistical stuff"

"Networking"

"The Healthcare Real Estate Market should have this type of gathering like other industries"

"How fast and informative it was"

"The Town Hall"
 
"All good impactful presenters; data from Mike Hargrave hit home on geographies; Obamacare info hit both personally and professionally; great "town hall" type discussions"

"First two guys (Jimmy Lee and Jeffrey Hill of Trexin)"

"Very convenient, good varied content"

"Financial realities- these guys were awesome! Overall great job"

"The panels led to some very interesting discussions"

"Having all of these specific spheres representing the healthcare market be accessible in one space provided immediate value"

"Appreciated the many different topics that gave you a bit of information on each"

"Healthcare construction"

"The first presentation (Lee and Hill of Trexin)"

"Super educational, lots of trends and things to consider"

"Content"

"Better understanding of influences/factors impacting HC"

"Loved the content and the knowledge of all invited speakers; The size of the conference & the number of attendees was great. Made it easier to network and not feel overwhelmed"
    
"The financial realities segment was very informative"
   
"Data from Mike Hargrave provided real wealth of knowledge"
  
"Overviews of trends"
 
     
     
     
     
    Midwest 2017 - Post Summit Recap 
 
 

 

 

 

 

   Key Takeaway Messages

 

 
  Midwest Healthcare Real Estate 2017 Post Event Wrap Up, April 25, 2017, Chicago, IL
  Reported by Amy Eagle, a freelance writer based in the Chicago area. She specializes in health care topics, and is a regular contributor to Health Facilities Management.
 
  Financial Realities of the Healthcare Marketplace Ė Why the Goal Posts Keep Moving
 

Takeaway Messages:

  • The transition from fee-for-service reimbursement to value-based payments is creating closer relationships between payers and providers. The relationship between the two has grown from affiliation (fee for service) to engagement (pay for performance) to coordination (shared savings and bundled payments), and finally transformation (shared risk and shared value Ė coordinated care across the continuum).

  • Expect insurance carriers to pull back if the Affordable Care Act is replaced with a law that eliminates individual mandate or subsidies without a plan in place to mitigate the effects. Given insurance carrier timetables, material changes to the individual market are unlikely until 2019.

  • The economic pressures on provider organizations, and the focus on provider accountability for value, remain unchanged. Revenue pressure is growing and providers must demonstrate differentiated value to an increasingly consumer-driven population.

  • Payers and providers are becoming creative in designing alternative payment models and value-based contracts. They are pursuing patient/member/consumer engagement more than ever and striving to pursue operational efficiencies to reduce diminishing margins. Mobile technologies are providing alternatives to clinic visits and improving patient access.

  • Ambulatory practices and facilities are being redesigned for more technology, more patient-focused care, greater efficiency and higher patient satisfaction.

 
  Connecting the Dots between Real Estate, Design, and Construction Disciplines in Next Generation Medical Buildings
 

Takeaway Messages:

  • Before you start a project, make sure you have all the necessary information (example: is a large portion of the site a designated wetland).

  • The health facility landscape is changing, and todayís hot topics include multispecialty clinics, efficient clinic designs and access (such as parking issues).

  • The entire project team, including the architect and contractor, should be on the same page regarding new standards of care delivery and flexible facility designs that will last into the future. Providers are using buildings more intensely; architects and contractors need to understand how this impacts parking, way finding and the overall patient experience.

  • Early engagement of all team players can make a huge difference in the type of project delivered. Let contractors know whatís important to the owner from the start.

  • Community engagement in a facility project is a great opportunity to differentiate a healthcare organization from other providers. Local residents become re-engaged when invited to see the facility after itís built. People who feel they played a role in a hospitalís development can become stakeholders for life.

 
  Whatís Driving the Midwest Healthcare Real Estate Market
          

Takeaway Messages:

  • The medical real estate sector in the continental U.S. is a nearly $10 billion business, comprising nearly 40,000 properties (5,000 inpatient/33,000 outpatient) covering 3 billion square feet (1.7 billion inpatient/1.4 billion outpatient).

  • Sixty five percent of the outpatient sector is user-owned (hospitals/health systems/providers). Ten percent is owned by REITs, 10 percent by the government and 15 percent by private investors.

  • Outpatient building occupancy is stable long-term. Between Q1 2009 and Q4 2016, average occupancy was virtually unchanged, with an overall growth of 2.2 percent.

  • Net operating income (NOI) for investor-owned outpatient buildings is growing and the annual transaction volume of medical real estate in the U.S. is strong at $3.3 billion, although below the 2015 peak of $3.6 billion.

  • The buyer landscape for medical real estate has changed. REITs and private investors comprise the bulk of medical real estate buying, with 54 percent and 44 percent of the market, respectively, for Q4 2016.

  • Outpatient capitalization rates are compressing and hospital cap rates are leveling off. (NOI/Cap Rate=Value Ė building value increases if NOI goes up or cap rate goes down.)

  • The U.S. healthcare construction pipeline is strong, with nearly 1,400 properties under construction for a median construction value per project of $24 million. Most hospital projects are expansions.

  • Rents in the Midwest are slightly less than those in the rest of the U.S.

 
  Donít Pay Twice! How Healthcare Systems Can Avoid Costly Problems When Acquiring Medical Facilities
 

 

Takeaway Messages:

  • Healthcare mergers and acquisitions are on the rise.

  • M&A decisions are based on business needs, such as achievement of scale, financial performance, geographic or service line expansion or to stave off being acquired by a larger system. Building conditions are seldom part of this decision. But not considering building conditions as part of an M&A decision can be costly.

  • Buildings conditions to consider include: condition of physical premises; human capital, such as existing staff levels; contractual and lease obligations; and regulatory and licensing issues.

  • For due diligence, check the building location and surrounding area; mechanical, electrical and low voltage systems; interior and exterior damage; codes and ADA compliance.

  • Facility assessments should be performed as part of the development of the business case for an M&A decision (as opposed to after terms are negotiated, as is typical).

 
  Driving Down Construction and Operational Costs Ė How a GPO Does It
 

Takeaway Messages:

  • Group Purchasing Organizations (GPOs) help healthcare providers realize savings and efficiencies by aggregating purchasing volume and negotiating discounts with manufacturers, distributors and other vendors.

  • GPO committees give member organizations a voice in every step of contracting decisions.

  • Expenses related to facilities make up 5 percent of a healthcare enterpriseís budget. Every dollar saved on these expenses goes directly to the bottom line.

  • One dollar saved in facility operation is equal to the margin derived from $25 to $40 in patient revenue.

 
  Perspectives from the Nationís Largest Owner of Medical Buildings
 
 

Takeaways from the Lillibridge Panel Q & A:

Q: Are medical clients moving to strip retail locations, versus traditional medical office building developments?
A: There are capital needs to consider in repurposing retail locations. The space will need to be reconfigured. For example, the washroom may need to be relocated, or the space may need to be equipped with its own washroom. Thatís a first cost difference. Operationally, organizations may need to bear the cost of housekeeping, maintenance, plumbing, lighting and repairs. They will be servicing their own needs and overseeing the management of these services. There are also a variety of operational nuances to consider that can be big differentiating factors, such as parking and visibility issues.

Q: How realistic is it that empty big box stores will be leased to medical users?
A: Itís pretty unrealistic. This would require a wholesale shift in thinking. Shopping malls are governed by use; medical use as an anchor spot is generally considered inconsistent with a first-class shopping center. Also, big box stores cover thousands of square feet. Medical practices that require that much square footage are few and far between. A medical tenant just isnít equivalent to a retail tenant. Small imaging centers or specialty practices, like plastic surgery, may find a home in these locations. But overall, a wholesale migration of medical use to shopping areas is unlikely.

Q: Would you like to see greater participation by tenant brokers?
A: Yes. Brokers on both sides of the equation speak the same language, know the market and set realistic expectations and timeframes.

Q: What advice do you have for tenants regarding the qualifications for a tenant representative or office broker?
A: Look for a good listener with the experience to identify reasonable market requests (versus outlandish requests). A broker who knows the market can get you the best deal.

Q: What information do you follow to monitor the health of the industry?
A: Demographics, uncertainty regarding the future of the ACA and continuing consolidations are key. Funding for the NIH, changes to the FDA approval process and drug pricing are other areas to watch.

Q: Where is ďMain and MainĒ today? Whatís the best location for medical developments?
A: A prime location has controlled-environment adjacency to the main hospital. You cannot underestimate the value of the physician referral network and the hospital brand/marketing. On campus, as close and attached as possible to the main hospital, is ideal.

Q: What are your thoughts on virtual care?
A: Itís coming, but itís going to take some time for physicians and patients to become accustomed to it. Great efficiencies will make this type of care part of the future. It may have a slow adoption curve, although doctor-to-doctor communication may be more immediate than doctor-to-patient communication.

Q: What are the specific metrics you apply to evaluating properties?
A: We look at where we have healthy high growth markets and hospitals with good bond ratings.

Q: How do you determine who will make a good tenant?
A: It depends on the amount of capital we have to invest. If weíre investing more capital weíre more likely to require additional collateral. Itís a credit evaluation.

 
 
Tips, Tricks & Hidden Traps to Avoid Ė In-the-Field Experts

Flooring: Tom Hume, nora systems

  • Tip: Flooring installations carry a high risk of added cost and delay. Educate project management, particularly about benchmarking sterile space installation.

  • Trap: Pay attention to the total amount and type of patching compound required for a project.

 


Fire Protection Systems: Kelly Mason, Specified Technologies
  • Tip: Design for sustainability; conventional methods do not provide a return on investment.

  • Tip: Involving fire protection professionals in pre-construction can prevent problems later in a project.

  • Trap: Donít just be reactive to issues involving fire-stopping. Health facilities are under more scrutiny than other building types in this area, especially concerning protocols for people coming in and out of the building. Outpatient facilities have the same issues as inpatient facilities, there are just fewer walls.

 
  HCI Chicago Leadership Team:  [L to R] Jeff Perry, Johanson CC; Carla Lyons, Lillibridge; Jenny Hansen, Showalter Roofing; Mark Johnson, Avison Young; Toni Gatz, BOS Business Office Systems; Mary Basel Christopher, Haworth; Manish Shah, KTGY Architecture