Is Obamacare Hurting or Helping On-Campus Real Estate?

Kuzmanovich: “The combination of changes in healthcare reimbursement across all payor groups is driving down healthcare funding for all healthcare providers. This is pushing care into lower-cost settings, both on and off campus.”

IRVINE, CA—The Affordable Care Act alone is not directly impacting the use of on-campus hospital real estate , Colliers International ‘s Mary Beth Kuzmanovich tells GlobeSt.com tells GlobeSt.com. In this preview to an upcoming Real Estate Forum feature on on-campus healthcare real estate , we spoke exclusively with experts in the field about how Obamacare has impacted this particular segment of the industry. GlobeSt.com: How has Obamacare affected the use of on-campus hospital real estate, and how will it continue to change due to this legislation? Mary Beth Kuzmanovich, national director of healthcare services, Colliers International, Irvine, CA: The Affordable Care Act alone is not directly impacting the use of on-campus hospital real estate. The combination of changes in healthcare reimbursement across all payor groups, including private insurance and government funding ( Medicare, Medicaid , federal and state), is driving down healthcare funding for all healthcare providers. This is pushing care into lower-cost settings, both on and off campus. Last fall, there was change in legislation that eliminated hospital-based billing for ambulatory surgery centers outside the hospital. This had a significant impact on the financial performance of hospital-owned, off-campus surgery centers. John Smelter, first VP investments, Marcus & Millichap, San Diego: It has not affected anything. Basically, the future of Obamacare is in the hands of who is elected next, and whether it’s repealed or if we have revamped the program or have a different version of ACA in the future is still to be determined. I think everybody feels that there is a change needed. There are a lot of people who feel we’re in this pretty deep right now, so we are probably not going to see a lot of change. Everyone has a different opinion. All we know is the large majority—from the hospital’s perspective, from the physician’s perspective and from the patient’s perspective—are not happy with ACA. Because everyone is paying more, there is cost cutting, and it is working in reverse of what we had hoped. It has not been effective. It is not accomplishing what we hoped. There are more people insured, but there is a huge cost that is being paid right now. The key with Obamacare is that it hasn’t affected anything yet, and we don’t know what the future holds, but the future is really about demographics more than anything and basically the population health. The question is, how do the hospitals manage population health—i.e., the aging demographics—and how are they setting themselves up strategically to do that? Mergers and acquisitions are big with hospital systems right now, and that will continue. The key for any hospital right now is to try to get more patients, more hospitals and physicians, improve their quality of care and be more cost effective. With that in mind, Obamacare fits into that a little bit, but hospitals have to do that even with the demographic shifts regardless of ACA. Travis Ives, director of brokerage services, principal, healthcare practice group, Cushman & Wakefield, San Diego: The Affordable Care Act was an attempt to increase access to care while reducing the per-capita cost and improving the overall quality of outcomes. The increase to access has already come through the expansion of Medicaid (known as MediCal in California), which meant millions of newly insured patients should theoretically stop using the emergency room for care and seek diagnostic and preventative care from a physician that will keep them out of a hospital bed. In the long run, this should reduce the overall number of hospital beds required and increase space needed for outpatient services. The attempt to reduce cost and improve outcomes will come from a fundamental shift in how the government insurance programs (Medicare and Medicaid) will pay providers for services rendered. If successful, the government expects private insurers to follow suit. The new payment models are an attempt to reward quality rather than quantity. Providers will need to coordinate care across specialties, and patients will have the ability to grade them on outcomes, all of which will impact the providers’ payment for services. The need to coordinate care and the ability for the patient experience to impact reimbursements is driving consolidation within the industry, leading to few tenants occupying larger blocks of space. Eric Fischer, managing director, Trammell Crow Co., Washington, DC: There have been a handful of key outcomes from Obamacare. The lead-up to the Affordable Care Act, in conjunction with the recession, had a relatively chilling effect on hospital expansion and development. Now that there is stability and a better understanding of the positive and negative implications of Obamacare, many health systems are swiftly repositioning and addressing stalled projects and clinical initiatives in response to market dynamics. Secondly, the emphasis on primary care, in conjunction with lower-cost care, has pushed all non-essential services and functions to less costly or more convenient patient-centered locations. The prolific growth of strongly branded free-standing emergency departments or comprehensive (health-system-integrated) ambulatory-care centers is a direct result of shifting services off hospital campuses. Our sense is that this trend will continue to grow over the next several years.