Obamacare Here to Stay?

Is Obamacare here to stay?  A lot of commentators certainly think so, particularly after the election results.  Assuming it is here to stay, that's gotta be good for healthcare real estate development ... right?

Here's an article from Sahil Kapur (Yahoo News) that presumes Obamacare is here to stay and discusses some of the challenges remaining.  Not exactly real estate related, but interesting.

Obamacare Is Here To Stay -- But Big Challenges Remain

By Sahil Kapur |

Now that President Obama has secured re-election, allies and foes alike agree that his health care reform law is here to stay. The legislature, the executive, the judiciary and now the electorate, in its own way, have ratified it. And as more popular provisions of the law take effect in the coming months, rolling them back will be an increasingly dicey political proposition.

But that doesn't mean it's smooth sailing for the ACA from this point forward. The law is vast and complicated and sure to encounter implementation problems -- and many of those problems won't be fixable unless Republicans agree to participate constructively.

The key elements that have already taken effect include the guarantee of free preventive care, a ban on insurers from denying coverage to sick children, a partial closing of the Medicare prescription drug coverage gap and letting people under 26 remain on a parent's policy.

Over the course of the coming months and years, the law will introduce payment reforms and other programs intended to hold the growth of health care costs down at sustainable levels.

But the vast bulk of the law takes effect in 2014, just over a year from now. And that's when some of the biggest challenges will manifest.

Starting that year, no insurance company will be able to turn away customers or charge them higher prices because of their health status. Most Americans within 133 percent of the poverty line will be able to enroll in Medicaid, and those between 133 percent and 400 percent of the poverty line will be entitled to federal subsidies to purchase private insurance. Nearly all will be required to buy insurance on a regulated exchange in their state or pay a tax penalty.

Implementation of the law still faces obstacles -- mostly because Republicans will oppose, or have a difficult time, engaging it constructively. So far, the GOP has been single-minded in its quest to repeal the law entirely, which means that as problems with the law arise, fixing those glitches and guarding against failures will be a heavy legislative lift.

One key challenge is that many Republican-led states have vowed not to implement their own insurance exchanges (though some were likely holding out until the election results came in). If a state doesn't build its own exchange, the law empowers the federal government to step in and build one unilaterally. But it's unclear how easy that will be for the federal government, and some GOP governors believe it's too politically toxic to be perceived as abetting the law -- however irrational it may be, as a policy matter, to cede control to Washington.

Another obstacle is that the Supreme Court made the law's Medicaid expansion optional for states. Even the reddest states have a huge incentive to accept it, because the federal government will initially cover the entire cost of the expansion, and then provide matching funds at an extraordinarily high rate of 90 percent. But some Republican governors like Rick Perry of Texas insist they won't play ball. If those sorts of promises hold, the number of people the law is meant to insure will be reduced by millions.

The Supreme Court validated the individual mandate, but separate lawsuits challenging the requirement that insurance policies cover contraception without copays are making their way through the courts. Again, the Supreme Court is expected to have the final say.

The law also calls for the creation of a Medicare cost-cutting panel -- the 15-member Independent Payment Advisory Board -- which will target provider reimbursements if and when Medicare costs grow faster than a sustainable threshold level. However, IPAB commissioners will require Senate confirmation, and Republicans will easily be able to block all of them, unless President Obama resorts to recess appointments, or Senate Democrats reform the filibuster rules to fast-track presidential nominees.

Apart from that, the Affordable Care Act will also lower Medicare reimbursement rates to hospitals and private insurers by some $716 billion over the next 10 years. In return, Medicare will be fully solvent for an additional eight years -- until 2024.

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Size Matters

No surprise here!  The trend in MOB development is "bigger is better" ... and North Carolina is no exception, as this article from ModernHealthcare.com discusses.

XXL MOBs

Medical office buildings grow in girth

By Ashok Selvam

Posted: September 15, 2012 - 12:01 am ET

 

While new medical office buildings have been added to the landscape across the country, the ongoing trend toward larger multispecialty practices is driving the need for supersized physician spaces.

These new facilities need to be big enough to house far more than a single physician group, yet still inviting enough to make patients feel comfortable, and functional enough for clinicians and staff. Poorly designed space can discourage the very collaboration necessary in the post-reform environment of patient-centered care, observers say.

Northwestern Memorial Healthcare is among the systems pushing the trend. The Chicago-based system last year purchased a 130,000-square-foot office building in the northern suburb of Glenview, Ill., with plans to convert it into medical offices. The facility, slated to open in March, represents Northwestern's commitment to better coordinate care, says Dr. Daniel Derman, president of Northwestern Memorial Physicians Group. He sees having everything under one roof as advantageous, offering “the most efficient way” to take care of a patient population.

Derman says he's not surprised by the escalation in medical office building size, given the increasing focus on ambulatory care. Outpatient care continues to account for a larger portion of hospital revenue, surging from about 10% in the early 1990s to currently about 60%. Older, smaller facilities typically can't accommodate the growing number of services offered on an outpatient basis, especially an expanding menu of surgical procedures and diagnostic imaging such as CT and MRI. Renovation or retrofitting such space often is cost-prohibitive, experts say.

And still larger facilities are being developed. For example, the Capital Health Medical Center-Hopewell, Pennington, N.J., includes a 329,200-square-foot medical office facility. The building opened in November 2011 and features imaging services, an oncology center and a center for digestive health.

“You're seeing a lot more centers built around specialties,” says Andrew Quirk, senior vice president and national director at Skanska USA, the construction management firm for the Capital Health facility. “You're going to start seeing more dedicated outpatient treatment centers for cancer that are huge into proton therapy.”

Quirk also expects to see more free-standing emergency departments. “I think it's a good way for hospitals to introduce themselves into the community and to take immediate care of the people they are serving,” he says.

Some of Skanska's larger medical office projects include Carilion Clinic's 210,000-square-foot Riverside Center in Roanoke, Va., which had its latest wing open in 2009. It includes internal medicine, orthopedic and neurology practices.

“I can tell you that our average size of MOB that we have seen more often than not is in the 30,000- to 60,000-square-foot range,” Quirk says. “We are now seeing them routinely greater than 100,000 square feet.”

Another project is the 60,000-square-foot University of North Carolina Health System's physician's office building in Hillsborough, which is expected to open in the spring of 2013. The number of physician practices has yet to be determined, officials say, but services are likely to include oncology, urgent care and diagnostic imaging.

Another factor leading to the need for expanded medical practice spaces is the surge in physician employment by hospitals and health systems. And those providers are likely to continue to hire more doctors, says Keith Konkoli, a senior vice president for healthcare at Indianapolis-based developer Duke Realty. Given the growing numbers, bigger office buildings just make sense, he says.

“They need places to work and they need to get all the physicians together,” Konkoli says. “You need the services behind them to support their practices.”

Duke Realty's projects include the 114,000-square-foot physician office building that is connected to the Baylor Medical Center at McKinney (Texas). The new medical office building opened in July and houses more than 10 physician practices.

Konkoli also cites St. Joseph Regional Medical Center in Mishawaka, Ind., which includes a four-story, 205,600-square-foot multispecialty facility that features an MRI facility, wound-care center and a pediatric clinic. The medical office building, which Duke developed and built, opened in 2009 and houses five of St. Joseph's physician practices.

St. Joseph Regional Medical Center in Mishawaka, Ind.

These larger buildings are going up across the county, not confined to specific regions where strong population growth might be a major factor. “With all of the CEOs and CFOs that I've talked to about this across the country, it's neat to see it's not just a regional thing, it's a national response.” Quirk says.

Konkoli says it has taken some time, but during the past decade, physician integration has continued to improve with a increased focus on collaboration. The patient experience also improves through the convenience of having multiple specialties in the same building, which often provides more cost-effective settings. That's especially important with shrinking reimbursements, he says.

Even though buildings are trending larger, it's often the case that the work spaces are getting smaller as providers push for efficiency. Physicians from different practices share more waiting rooms, back-office space and nursing stations: “It just operates more efficiently. It's an open collaboration,” Konkoli says.

Building larger offices also represents a more efficient way of spending money, since the cost of managing real estate continues to rank as a major expense for hospitals. Based on data from Chicago-based real estate management firm Jones Lang LaSalle, real estate represents 40% to 50% of hospital systems' assets, making it the third-largest expense, behind payroll and supplies.

The combination of a decline in provider reimbursement and rising demand for capital makes strategic planning more important for hospitals and health systems, says Shawn Janus, the firm's managing director. Larger medical office buildings are typically more cost-effective versus construction of new full-service hospitals, he says.

One way construction costs differ between types of facilities is with HVAC systems, as hospital filtration requirements are more stringent compared with office buildings, Janus says. Medical office buildings don't have to adhere to those higher standards, which means lowered costs, he says.

Hospitals and health systems are also employing the new “one-stop shopping” medical office venues to cater to patients' on-demand lifestyles.

“As a consumer, I would much rather be able to see my doctor, have my ambulatory surgery and have my rehab—everything—at one facility very close to where I live,” Janus says.

Those interviewed for this story struggled to come up with negatives to the larger medical office space. Konkoli believes that eventually building size could be capped once they approach the size of larger hospitals. Some medical office buildings are already eclipsing the size of smaller hospitals.

“You could say that with being big you lose efficiency, and you look much like a hospital again,” Konkoli says. “Typically, you're not going to have any bed component. I just think it's a matter of what's being delivered and the number of physicians and what can be efficient in the space.”

The availability of capital also dictates fewer hospitals and more office buildings, Janus says, pointing to an increase in the number of mergers and acquisitions. Smaller hospitals are seeking the stability and increased capital of larger systems.

Declining reimbursements mean physicians are also affected by the availability of capital. It's more difficult to find financing to build their own office facilities versus working in a larger spaces owned and operated by hospitals and health systems, Skanska's Quirk says.

Building in flexibility has always been key to designing offices, and the larger buildings offer even more adaptability, Quirk says. Compared with building a hospital, larger outpatient office space is a cheaper alternative that's more inviting for patients, he adds.

And they might offer amenities not found at your typical community hospital. Quirk says more office buildings will include health clubs or spas, citing one example of a retail component that's also becoming more familiar in medical offices to keep the customers happy.

While it's easy to see the trend toward larger buildings, the focus shouldn't just be on size, Derman says. The fate of the patient experience lies with how building designers use the space to help clinicians deliver a higher quality of care and services. “The size of the building, the size of the hospital does not dictate the experience,” he says.

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