NexCore Faces Permit Challenges Amid Healthcare Sector Demand

For many companies, elevated interest rates and uncertainties around policies following the election remain problems. While those are also issues for NexCore, the painful authorization process for projects is what is really causing headaches for the healthcare real estate developer.Jim Hartmann, executive vice president of real estate development for the company and a speaker at our annual healthcare event in December, told GlobeSt.com that it’s been tougher to get permits and approvals for projects in the last 12-36 months.In fact, NexCore, which operates a range of healthcare properties including medical office buildings, and cancer centers, was required to send out its drawings to California for permit approval in regards to its project in western Colorado.“Western Colorado doesn’t have the staff for the people working at the government, the city municipality, to review drawings,” Hartmann said.“Then they’re outsourcing that, so you just become a number in the queue where previously you’d have a relationship with the reviewers and planners and you go down to the city, but some municipalities don’t even take meetings anymore. It’s all web-based.”He added the long process can increase budgets for projects.SENIOR DEMAND IN SUNBELTWhile the regulatory waters can be a pain, Hartmann refers to the current state of the healthcare sector as a market “where there’s demand for services”- especially in some Sunbelt states.“There’s a growing population of baby boomers still and people that need care,” he noted.“And I think that holds true throughout the country. States like Florida do have a lot of people that retire, [and in] Arizona, [where people] move down there and then have to find a provider.”Areas that might be experiencing a slowdown that Hartmann specifically listed were Southwest regions. This is because reimbursement rates are lower.“They don’t allow groups to have managing care organizations or MSOs, where they’re managing in coming together and negotiating contracts with CMS in Medicare and Medicaid, so that makes it harder on the independent physicians to get rates that reimburse them at a higher rate because they don’t really have any leverage.”COST-FREINDLIER TIMES AHEADWhile uncertainties remain in the healthcare space, NexCore is currently focused on teaming up with market leaders who work with hospitals.Looking ahead, Hartmann believes that CMS, which covers more than 160 million Americans, will push healthcare operators to provide surgeries in outpatient centers, rather than in hospitals. The transition could be more efficient and cost-effective, according to Hartmann.“Surgery centers have higher acuity, more robotics, things that typically were done in an inpatient setting are now being done at an outpatient one and it’s more efficient,” he said.And as the Federal Reserve is expected to cut interest rates further, NexCore thinks that construction and capital costs will level off.