A comprehensive new white paper written by Duke Realty focuses on micro hospitals, rehab hospitals, site selection, CMS payment policies, expansions/development and more
INDIANAPOLIS, March 14, 2017 – When it comes to healthcare, much of the focus these days is on the fate of the Patient Protection and Affordable Care Act (PPACA) – and rightly so. Yet despite the uncertainty surrounding the legislation, hospital and health systems still have organizational objectives to meet and must remain focused on making effective, strategic decisions when it comes to their facilities. So while providers can’t ignore the possible ramifications of healthcare reform on their building plans, there are other key industry trends that also are important considerations.
Duke Realty’s predictions of trends to watch this year are included in a comprehensive new white paper that is available upon request. (Please see below for details.) The paper was written by Keith Konkoli, Duke Realty’s Executive Vice President of Healthcare, and Jared Stark, the firm’s Senior Vice President of Healthcare Development.
Here are some highlights of the trends explored in the white paper and how they affect healthcare real estate strategy:
More health systems will develop convenient micro hospitals
Last year, the healthcare real estate industry saw an increase in the development of micro hospitals, and we expect this trend will proliferate in the coming years. Micro hospitals are smaller than typical hospital campuses and, thus, easier to navigate, but usually offer the same type of healthcare services found in larger hospitals. Micro hospitals also are usually more convenient and accessible because they are located in neighborhood settings and smaller communities where people live and work. For health systems that are considering developing a micro hospital, it’s important to use the services of either experienced third-party firms or in-house staff. These experts can help them understand the differences and similarities between micro hospitals and traditional hospitals and the challenges in developing this alternative model.
Health systems will continue to develop rehab hospitals to avoid readmission penalties
As things stand now under the PPACA, hospitals still face financial penalties for above-average rates of readmissions for certain “preventable” conditions covered by Medicare. Because studies suggest that patients who receive post-acute or home care are less likely to be readmitted to acute care hospitals, more and more providers have been considering or offering high quality post-acute rehab services to reduce these penalties. Providers that are considering developing new rehab hospitals, especially those that have limited experience with this model, often find it beneficial to partner with an experienced rehab hospital operator. Experienced operators can yield a number of benefits, including post-discharge patient care quality, speed to market, cost efficiency and name recognition/branding, making it worthwhile to pursue such arrangements even if the readmission penalties are reduced or eliminated as part of the repeal or replacement of the PPACA.
More providers will implement expansions rather than new builds as part of their real estate mix
Healthcare facility expansions are expected to be more prevalent than new ground-up developments this year. While building new or replacement facilities sometimes is the best option in a health system’s long-range development plan, expansions are an attractive alternative. They usually require less capital than new construction, and enable the system to bring new and expanded services to market more quickly. A medical facility expansion also makes a great deal of sense if the provider already has the “ideal” location where there is a strong demand for new healthcare services and the site is highly visible and accessible and near other in-demand services.
The industry will continue to see changing attitudes toward site selection and challenges with ‘site neutrality’
In the current environment, health systems are focused on providing expanded services in a lower-cost, higher-quality and more efficient manner. As a result, off-campus, multispecialty outpatient facilities near where people live, work and shop are more in demand. So providers have found it necessary to familiarize themselves with a different kind of real estate – retail – and identify sites with characteristics that are critical for a successful retail location. One of the most important issues related to healthcare real estate site selection is “site neutrality” rule, which affects reimbursement rates for hospital-affiliated, off-campus facilities. This policy can have a big impact because it can substantially reduce Medicare reimbursements for health systems and hospitals that are considering acquiring physician practices or building new off-campus hospital outpatient departments (HOPDs) that are more than 250 yards from an existing hospital campus.
Payment policies will continue to be top of mind rather than possible major changes to the PPACA
Regardless of what happens with the PPACA, most healthcare providers are moving forward with the real estate strategies they developed during the past several years. Providers are most concerned about the payment policies being enacted by the Centers for Medicare and Medicaid Services (CMS). How Medicaid will be funded and distributed to the states is probably the most important issue. In addition, population health, bundled payments, risk sharing and MACRA (Medicare Access and CHIP Reauthorization Act) are more top of mind at the operational level than what might become of the PPACA. Providers don’t see these policies changing and are adapting strategies for dealing with them.
More health systems will apply best practices from other industries to their healthcare real estate strategies
For some time, hospitals and health systems have worked hard to lower their failure and error rates, often by studying and applying best practices used by other industries. Now we’re seeing more and more providers using the best practices of other industries, such as the general office, hospitality and travel sectors. They’re looking, specifically, for “high reliability organizations” (HROs) with systems and processes that could translate into the healthcare arena. HROs are institutions that consistently make fewer mistakes than others working in the same field despite conditions that are stressful, fast-paced or full of risk. Many healthcare institutions are working to become HROs by adapting best practices from other industries such as airlines, power plants and utilities. For example, airlines use comprehensive checklists and many hospitals have adopted that practice and have seen a decrease in their failure rates.
To obtain a copy of Mr. Konkoli’s and Mr. Stark’s complete white paper, which includes a more detailed analysis of these trends and issues, please contact Helen McCarthy at 317.708.8010 or email@example.com.
About Duke Realty
Duke Realty is a national commercial real estate company specializing in the ownership, management and development of medical office properties, complemented by a large portfolio of industrial assets. Duke Realty (NYSE:DRE) owns, maintains an interest in or has under development 139 million square feet of space in more than 21 top-tier markets nationwide. The healthcare segment of Duke Realty’s portfolio totals more than 6.7 million square feet, and includes properties ranging from medical office buildings to rehabilitation facilities and from ambulatory care centers with diagnostics, oncology and surgery services to one of the nation’s largest cancer centers. Duke Realty also has on-staff a team of healthcare professionals who are well-versed in the unique demands of medical providers and have proven experience in providing hospitals and physician groups comprehensive planning, development, ownership and facility management services. More information about Duke Realty’s healthcare real estate capabilities is available at www.dukerealty.com/healthcare. Duke Realty also can be followed on www.dukerealty.com/healthcare. Duke Realty also can be followed on Twitter, LinkedIn, Facebook and YouTube.
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