Commercial Investment Real Estate is the magazine of the CCIM Institute, the leading provider of commercial real estate education. CIRE covers market trends, current developments, and business strategies within the commercial real estate field.
Issue link: http://cire.epubxp.com/i/128835
Development Model Shifts During the last several years, there has been a fundamental shif in the way many medical providers deliver care. Instead of housing all healthcare functions under the roof of an acute care hospital or on its campus, many services — such as outpatient visits, blood tests, imaging, rehabilitation, and some surgeries — are now performed in medical ofce buildings, ofen away from the main hospital campus. Tese facilities are more cost-efcient for providing outpatient services. Tey also allow hospitals to have greater reach when it comes to referring patients to the more expensive and ever more specialized acute care hospital. MOBs are typically found in suburban commu- CCIM.c C CIM.com CCIM.com CCIM.com C . nities where the population of privately insured individuals is growing. Ofen insurance plans for these patients provide higher-margin revenue sources when compared to Medicare and Medicaid programs. For some health systems and providers, having a high number of privatepay patients can make a meaningful diference on the bottom line. As such, MOBs become the "spokes" that surround a hospital campus "hub," and help health systems to both capture higher patient volume and also provide a greater continuity of care. Under the hub-and-spoke model, healthcare systems ofen work with third-party developers or construction groups to build medical ofce facilities because standard ofce space is typically not designed with appropriate structural support systems to handle clinical services. Te majority of space in these buildings is used by physicians' practices and healthcare service providers connected to the system building the facility. However, space may also be leased out to other complementary healthcare providers such as pharmacies, imaging centers, and physical therapy groups. To help fund non-real estate initiatives or make other capital investments, healthcare systems are ofen willing to construct and then sell medical facilities to real estate investment trusts or private equity groups while continuing to use the facility. When third-party development groups build these facilities, they will ofen look to sell the asset so they can redeploy the capital into new projects. Hospitals will ofen give themselves some level of control over future ownership decisions through the use of ground leases or buy-back provisions. A Mckeone Carolyn/Getty Images; Robert Dupuis/Getty Images T Te re-election of President Barack Obama and last year's favorable Supreme Court ruling on the Patient Protection and Afordable Care Act have removed some uncertainty as to whether or not the healthcare law will take efect. While some provisions have already been implemented, the majority of them are scheduled to begin Jan. 1, 2014. Tis outcome has created greater clarity for healthcare providers, who continue to adjust not only to new rules but also to changing preferences among consumers. Additionally, this situation creates considerable opportunities for real estate investment in the healthcare sector, and transaction volume is likely to remain lively in the near term. Te private sector spent almost $30 billion on all types of healthcare construction in 2012 according to the U.S. Census Bureau, up 4.1 percent from 2011. Although construction slowed late in 2012 as healthcare providers waited to see the outcome of the election and the Supreme Court's decision, the sector in general and medical ofce buildings in particular are poised for growth as these same healthcare providers push forward on needed expansions. Several factors are driving this growth. May June 0 3 May Jun 2013 May | June | 2013 a 23 23