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How Central PA Health Systems are Rethinking Real Estate

Posted on March 21, 2018 by Mike Kushner in Blog, Guest Blogger, Healthcare, Local Market, Trends No Comments

Major changes are taking place in America’s health systems and we are starting to see the impact of some of these changes right here in Central Pennsylvania. Hospitals are no longer the desired “hub” for healthcare, rather free-standing emergency rooms, 24-hour emergency care centers and walk-in clinics are helping to keep people out of the hospital, while expediting their care.

Additionally, telemedicine is reshaping the need for brick and mortar facilities, placing a new emphasis on health systems acquiring “virtual” real estate. These emerging trends are intended to increase access to quality healthcare while allowing health systems to reduce overhead.

To help us answer some of the most important questions surrounding the changes taking place in Central PA’s health systems, we interviewed two guests who are highly knowledgeable on this very topic.

Christian Caicedo MD, MBA, CPE, FACHE is the System Senior Vice President and President of the Cumberland Division at UPMC Pinnacle. Paul Toburen, also with UPMC Pinnacle, is the Senior Vice President of Facilities and Support Services.

With a combined, vast experience in health systems operations, Dr. Caicedo and Mr. Toburen collaborate to lend their insights into how Central Pennsylvania’s health systems are rethinking the way they use commercial real estate.

Omni: Looking at how Central PA’s health systems currently function, what are some of the biggest challenges?

Christian/Paul: One of the most critical challenges we face in Central PA is access to care – not just any access, but the right kind of access. It’s a moving target we are trying to hit. Patients want access to fairly and competitively priced healthcare, in the right setting, with quality resources and skilled staff.

The challenge stems from the fact that we are all trying to live in two worlds: the fee for service world and the value based world. We can’t have it both ways and also provide access to quality healthcare to everyone in Central PA. There has to be a compromise somewhere.

Omni: As Central PA’s health systems see more and more value in serving the outpatient market, what strategies must be implemented to make this shift?

Christian/Paul: The key to shifting our focus to better serve the outpatient market is to make simple and immediate access to healthcare available to patients right where they are. Rather than asking patients to come to us in traditional office and hospital environments, we need to have access points in the work place, malls, retail spaces, home, etc. Health systems are now trying to acquire more virtual real estate than they are brick and mortar locations. This is evident by the more than 120 rural hospitals who have shut their doors since 2005!

Omni: With the use of telemedicine becoming more prevalent in our health systems, what are the pros and cons of diagnosing patients in their home?

Christian/Paul: The pros, as we touched upon above, will be the ease of access and convenience to the patient. It will allow physicians to see more patients in a day, reducing patient wait time and reducing patients exposure to germs and infections. Additionally, telemedicine is a great option for Medicaid recipients.

The cons, well that will evolve as the technology changes. Currently there are limitations as to the level of evaluation one can conduct via the virtual encounter. As technology evolves, (i.e. Haptic pressure feedback) we will have greater ability to perform better virtual exams and arrive at an accurate diagnosis through telemedicine.

Omni: Specifically, how will telemedicine impact brick and mortar healthcare facilities?

Christian/Paul: Simply put, the growing use of telemedicine will diminish the need for brick and mortar facilities and drive the demand for virtual real estate. If done thoughtfully and strategically, this should be a win for both patients and health systems. Speaking from the health systems standpoint, we can save a lot of overhead while providing patients with faster, more convenient care. Hospitals will stay play an important role in the overall health system, it’s just going to look a little different in the future.

Omni: What Central PA health systems do you feel are leading the way in rethinking how they use real estate?

Christian/Paul: We believe all Central PA health systems are rethinking the way we use real estate. The cost of construction continues to escalate. We are now looking at lease agreements versus building-to-own along with repurposing existing buildings to accommodate our current needs, but having flexibility for future needs as well. Speed to the market is critical in today’s healthcare industry, as we must accommodate the patients’ needs.

Given the transformation taking place in Central Pennsylvania’s health systems, and health systems worldwide, how do you feel about the changes taking place and where they will lead us in the future?

Join in the conversation by sharing your thoughts or questions!

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More about Christian Caicedo: Christian Caicedo MD, MBA, CPE, FACHE is the System Senior Vice President and President of the Cumberland Division, UPMC Pinnacle. He is the former Vice President of Operations and Medical Director for West Shore Hospital, and Interim Chief Medical Officer, Pinnacle Health System. He has served as Executive Director of Emergency Services and served as Clinical Director for Community Campus Emergency Department, Pinnacle Health System. Dr. Caicedo also served as medical director for Swatara Emergency Medical Services, and was a member of the Swatara EMS board of directors. Currently, he serves as Medical Director for Susquehanna EMS.

More about Paul Toburen: Paul Toburen is currently serving as Senior Vice President for Facilities and Support Services for the UPMC Pinnacle Health System. Paul oversees fourteen departments with a primary focus on Construction Management and Real Estate. Paul has obtained his MBA and MS and is a member of the ACHE, ASHE, COAA, IFMA among other organizations.

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The Success of Urgent Care Clinics Mostly Depends on Real Estate

Posted on August 1, 2017 by Mike Kushner in Blog, Healthcare, Local Market No Comments

When it comes to healthcare, there is no shortage of demand for convenient and cost-effective providers. As a result, the American Healthcare System has shifted its focus toward creating outpatient urgent care clinics as a low-cost alternative to hospital emergency rooms.

The Urgent Care Centers industry now represents one of the fastest growing segments of the American Healthcare System. There are 340 walk-in clinics and 209 urgent care centers located in Pennsylvania alone. Depending upon where you live, it may feel like there is an urgent care clinic on just about every street corner, but the strategy behind choosing the right real estate space for an outpatient clinic is well researched and carefully considered.

Real Estate Strategy for Urgent Care Locations

Urgent care clinics are commonly located in retail settings that offer high visibility and foot traffic. Shopping centers and free-standing buildings that are located near big box stores, restaurants and food/drug retailers are among the most attractive spots. It’s vital to the success of the clinic that its location be easy to find, have free and convenient parking, and appear clean and attractive.

Aside from the physical aspects of the real estate space, urgent care clinics must also consider the demographics of the market they will serve. A highly viable market will demonstrate substantial health needs that are not currently being met by hospitals’ emergency rooms, due to limited access and long wait times. Next, the market should also have a favorable payer mix of patients who are either covered by insurance or have the ability to pay out-of-pocket.

In addition to these industry-specific considerations, traditional real estate data should also be taken into consideration. The number of residential homes, income levels and location of competitors will also have an impact on determining the best location for an urgent care clinic. As a business that relies hugely on walk-in traffic, the look and location of a clinic is as important as the care it provides.

PinnacleHealth Enters Urgent Care Industry

In Central Pennsylvania we have seen the success of a growing urgent care group that was founded in Silver Spring Township in 2010. AllBetterCare Urgent Care Center opened its first location on the Carlisle Pike and now has two more locations in South Middleton Township (Cumberland County) and Susquehanna Township (Dauphin County). The company says it has seen almost 100,000 new patients since its founding, which makes sense as to why PinnacleHealth announced its affiliation with AllBetterCare that will be completed this fall. The two healthcare businesses share the same desire to reduce unnecessary emergency room visits and decrease emergency room wait times for patients.

Pinnacle’s move into a new sector of the healthcare system aligns with its overall growth strategy to diversify its healthcare services and enter new markets across Pennsylvania. The company recently acquired four mid-state hospitals including Carlisle Regional Medical Center (Cumberland County), not far from two AllBetterCare locations. Pinnacle has also committed to construction of a new campus in York County which will replace the existing Memorial Hospital and continues to work on an affiliation with the University of Pittsburgh Medical Center.

Diversifying Pinnacle’s healthcare services and facilities also means diversifying its real estate portfolio. Affiliating itself with AllBetterCare will serve to help Pinnacle reduce the burden on its hospitals, alleviating the need to expand emergency rooms or construct new facilities that would come at a much larger cost, and risk, than simply making outpatient urgent care clinics more readily available. The partnership between AllBetterCare and Pinnacle is a step in the right direction, not just for the businesses’ bottom-line, but for access to quality healthcare for hundreds of thousands of patients across Pennsylvania.

Have you used an outpatient urgent care clinic? What about the facility and its location made you choose it over another option? Share your insight and experience by leaving a comment!

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In the Wake of the Failed Merger, 6 Ways PinnacleHealth and Hershey Medical Center Can Harness New Growth

Posted on November 3, 2016 by Mike Kushner in Blog, Healthcare, Local Market No Comments

As shared by the Central Penn Business Journal, the Hershey-Pinnacle merger was recently opposed by the Federal Trade Commission (FTC) and the Pennsylvania Attorney General’s Office. The reason for this decision was explained as the Dauphin County-based hospitals are direct competitors, and that their union would eliminate competition in the Harrisburg region. For Harrisburg area residents and employers, a reduction in (or elimination of) competition may result in lower quality and higher cost health care.

While this ruling is a huge blow to what PinnacleHealth and Hershey Medical Center surely felt was a smart business move, it’s not likely stop the two entities’ from pursing alternative business growth opportunities.

The ACA has made the healthcare environment a market share game. So health systems are pursuing volume drivers for their systems, which means putting primary care and urgent care clinics in strategic locations. Among the popular pathways to growth for hospitals and health systems, we expect to see Pinnacle Health and Hershey Medical Center employ some or all of the following opportunities in the near future.

Increase in ambulatory care facilities (i.e. freestanding urgent care, outpatient surgery and imaging centers and emergency care centers). Out-patient centers are an important and cost-effective alternative to higher cost inpatient-focused acute strategies. A health system can greatly increase the number of patients it can see and treat in a day through the operation of freestanding urgent care locations. This follows the trend of the new hub and spoke healthcare delivery model where the hub of a single network branches out into various locations to increase accessibility and efficiency.
Recruitment or acquisition of medical groups that are in-market, but not fully aligned with the hospital. As healthcare reform continues, the number of insured patients seeking access to care will also increase. Therefore, it’s important for a health system to have the added capacity to monetize this growth. Additionally, patients often choose to follow their physicians regardless of hospital affiliation, meaning those with the most aligned physicians will grow the most.
Clinical program development and service expansions or extensions. Health systems that actively seek opportunities to expand the scope of services they provide, such as adding new procedures, diagnostic categories, or subspecialties into their portfolio, are well positioned for growth. The complexity of healthcare and health insurance incentivizes patients to seek all of their care from a single organization, when possible. The more services a health system provides, the less likely a patient will seek care from a competing network.
Geographic market expansion to establish additional locations of care. More and more, healthcare is beginning to look and act like typical retail marketplaces. One example is a preference for convenient venues and access locations. Health systems that extend their reach geographically can raise their growth trajectory. Most importantly, each location should consider its targeted populations so that the services provided meet the most common demands of that specific area.
Merger or acquisition of another hospital or health system (including assets, “book-of-business,” and affiliated provider network). Establishing new locations through merger or acquisition is a fast track to growth. While the Hershey-Pinnacle merger was shot down, it’s not unlikely that they will seek out other possible mergers that do not conflict in the same way. Let’s face it, mergers provide a lot of benefits, including access to efficiencies through combining resources, and the opportunity to grow market position in key centers of excellence, institutes or hallmark clinical programs.
Joint ventures. When market entry or start-up costs pose challenges, joint ventures remain a viable pathway to growth. While the legal nuances are about as complex as a merger or acquisition, with careful evaluation, the benefits can outweigh the effort. One of the biggest advantages of a joint venture is that it creates shared obligation among the parties involved so that everyone is working toward its sustainability and success.

Some Final Thoughts

Due to the changes imposed by the ACA, healthcare is moving toward a new kind of hub-and-spoke model where the focus is for more care to be delivered in the outpatient setting where costs can be reduced, access can be increased and preventative and post-acute care can be administered in a more efficient manner.

While other health systems have successfully teamed up to expand their reach, such as Penn Medicine and Lancaster General Health; Johns Hopkins Children’s Center and WellSpan Health; and Holy Spirit and Geisinger Health System, these partnerships cover entirely separate markets, unlike the proposed merger between PinnacleHealth and Hershey. If there’s anything that can be learned from the failed merger, it’s that an emphasis needs to be placed on better defining geographic markets to avoid the perception of conflict in the future.

What are your thoughts on the failed Hershey-Pinnacle merger and how this will impact their growth strategy for the future? Join in the conversation by leaving a comment!

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The Obamacare Effect on Local Real Estate

Posted on September 6, 2015 by Mike Kushner in Blog, Commercial Real Estate, CPBJ Articles, Healthcare No Comments

Note: This article was originally published by the Central Penn Business Journal. Click here to read the original version.

No matter your age, income or current bill of health, in some way or another, we will all be impacted by the major changes taking place in the health care industry nationwide.

The Affordable Care Act, or Obamacare, represents the most significant overhaul of the U.S. health care system since the passage of Medicare and Medicaid in 1965.

While it’s easy to predict the industries where these waves of change will come crashing down the hardest, less obvious industries, like commercial real estate, have also felt the impact of these ripples — and there are more to come.

For real estate investors, the big question is what impact this regulatory overhaul of health care mandates, subsidies and insurance exchanges will ultimately have on the commercial market. The best clues can be found in the emerging trends taking place in local health care real estate across the region.

Simply put, there are two major trends we should be watching closely right now.

Monetization

Noncore real estate, such as medical office buildings and outpatient facilities, have become a common asset that health care systems are monetizing first to help stay financially afloat. Selling off real estate and consolidating square footage is a necessary tool for health care systems right now. Here’s why.

1. Provide an infusion of capital for core investments. Selling off noncore real estate assets can provide health care systems with a quick and significant infusion of cash, allowing them to reinvest this capital back into essential items like construction, renovation and upgraded medical equipment.

2. Focus on strategic growth. Rather than holding on to an underperforming or noncore real estate asset, health care systems are selling them off and using this money to prioritize physician recruitment and retention, clinical expansion and growing their market share.

3. Strengthen balance sheet. The capital gained from monetization will improve liquidity — and a health system’s balance sheet as a result — allowing it to earn a better credit rating.

4. Reduce legal and regulatory exposure. More properties mean more opportunities for a costly violation. Health care systems benefit from reduced legal and regulatory exposure by monetizing their noncore real estate assets.

Mergers and Acquisitions

Some of Central Pennsylvania’s largest health care systems have engaged in discussions regarding merging or acquiring another facility. Specifically, four different mergers have already taken place or are currently in the works, each for unique reasons, but with the same goal in mind — to rein in costs and expand access.

1. PinnacleHealth (JC Blair Health System) and Penn State Hershey (St Joseph Regional Health Network). The most compelling reason for this merger is the projected economic savings. The recurring long-term savings is estimated to be at least $86 million annually through avoided capital and operating costs.

2. Holy Spirit and Geisinger (AtlantiCare Regional Medical Center and health care system, Shamokin Area Community Hospital, Bloomsburg Health System and Lewistown Hospital). In this “affiliation,” a small Catholic health system formally joins with a large, technologically-advanced system in an effort to continue to make health care accessible and affordable to the most people.

3. Lancaster General and University of Pennsylvania Health System. One of the largest benefits of this merger, aside from their entry into a new market, is the ability for patients to receive treatment at one facility and follow up at another. LG Health President and CEO Tom Beeman identified health care reform as the driving force behind this merger.

4. WellSpan (Good Samaritan, Ephrata Community Hospital and Philhaven).Wellspan/Good Samaritan is primarily focused on physical health while Philhaven specializes in behavioral conditions and mental health. Combined, these organizations will be better equipped to serve a broad range of patients at a fraction of the cost of trying to add these specialties independently.

The future

The velocity at which the health care industry is changing cannot be overestimated. While we are already experiencing disruption and change resulting from health care reform, technology, big data, regulatory and other impactful forces in the health care industry, I believe it is simply too soon to accurately predict the full impact these changes will have on the commercial real estate industry.

Despite the many uncertainties surrounding the hot-button issue of health care reform, there is one certain conclusion I will draw. Health care systems are prepared (and have already begun) to proactively make changes to their real estate in an effort to stay afloat.

They will do whatever it takes, even if this means selling off large properties or merging with/acquiring another health care system. We should be prepared to continue to see health care systems tighten up and team up to make their services efficient and competitive.

While there are many more changes yet to come, ones that are sure to be both positive and negative, the real estate industry should remain ready to quickly react to the changing needs of health care systems during this time.

Posts tagged "hospital"

Monetization

Mergers and Acquisitions

The future

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