MDNews - Long Island

Shifting Reimbursement Spurs New Look at Care Settings Evicting the Devil from the Details of Leasing Benefits of Setting Up Shop in Underserved Areas T H E T R E N D T O WA R D value-based reimbursement for medical services is likely to continue, analysts say, and that has implications for healthcare real estate. Writing in Becker's Hospital Review, attorneys for health law fi rm Hall, Render, Killian, Heath, & Lyman PC, and the Director of Real Estate Valuation Services for VMG Health predict further growth in outpatient care, owing to the lower cost of such services and to patients' preference for outpatient settings. Meanwhile, average hospital occupancy rates are in decline, dropping from 77 percent in 1980 to 64 percent by 2008 and 61 percent by 2014. "An increasing number of hospitals are seeking to use unused fl oors or wings by leasing this space out to another provider for uses such as long-term acute-care, inpatient rehab, skilled nursing, hospice or behavioral health," the authors state. ■ — Steve Barrett W I T H O U T C L O S E AT T E N T I O N to the contract, leasing medical offi ce space risks becoming a long day's journey into a nightmare. Repurposing unused space in malls, grocery stores or other traditional retail sites is often cost- effective, Brooks R. Smith, a Partner at Bradley Arant Boult Cummings LLP, writes on the website for Virginia-based NAIOP, an association of commercial real estate developers, owners and investors. However, he recommends keeping a few points in mind: + Medical tenants may make signifi cant improvements to these types of facilities. The lease should clearly identify who owns those improvements once a lease agreement ends. + Zoning regulations with little impact on medical construction on a hospital campus could have serious implications for the same project in a shopping center, as could other tenant leases that limit the activities permitted in the center. + High power utilization is common in medical facilities. That makes it vital to bring utility costs into negotiations. ■ — Steve Barrett HANDLED PROPERLY, THE decision to establish medical facilities in areas where providers are scarce can be enormously satisfying and a smart move fi nancially, according to PCI|HealthDev. A white paper by the Dallas-based healthcare real estate development firm notes some key benefits of such projects. + An ample patient base: Many medical needs have gone unmet in underserved rural areas, creating pent-up demand that helps new healthcare facilities stay busy. + Low overhead costs: Building, refurbishing, leasing or purchasing facilities is typically less expensive in less populated markets than in more competitive urban environments. + A warm welcome: Local governments understand the benefits of expanded medical care and may provide economic incentives to attract providers. ■ — Steve Barrett value-based reimbursement for medical services is likely to continue, value-based reimbursement for medical services is likely to continue, analysts say, and that has implications for healthcare real estate. analysts say, and that has implications for healthcare real estate. Becker's Hospital Review Becker's Hospital Review & Lyman PC, and the Director of Real Estate Valuation Services for VMG Health predict further & Lyman PC, and the Director of Real Estate Valuation Services for VMG Health predict further growth in outpatient care, owing to the lower cost of such services and to patients' preference for growth in outpatient care, owing to the lower cost of such services and to patients' preference for Meanwhile, average hospital occupancy rates are in decline, dropping from 77 percent in 1980 to Meanwhile, average hospital occupancy rates are in decline, dropping from 77 percent in 1980 to 64 percent by 2008 and 61 percent by 2014. 64 percent by 2008 and 61 percent by 2014. "An increasing number of hospitals are seeking to use unused fl oors or wings by leasing this space "An increasing number of hospitals are seeking to use unused fl oors or wings by leasing this space out to another provider for uses such as long-term acute-care, inpatient rehab, skilled nursing, out to another provider for uses such as long-term acute-care, inpatient rehab, skilled nursing, hospice or behavioral health," the authors state. hospice or behavioral health," the authors state. to the contract, leasing medical offi ce space risks becoming a to the contract, leasing medical offi ce space risks becoming a Repurposing unused space in malls, grocery stores or other traditional retail sites is often cost- Repurposing unused space in malls, grocery stores or other traditional retail sites is often cost- effective, Brooks R. Smith, a Partner at Bradley Arant Boult Cummings LLP, writes on the website for effective, Brooks R. Smith, a Partner at Bradley Arant Boult Cummings LLP, writes on the website for Virginia-based NAIOP, an association of commercial real estate developers, owners and investors. Virginia-based NAIOP, an association of commercial real estate developers, owners and investors. Medical tenants may make signifi cant improvements to these types of facilities. The lease should Medical tenants may make signifi cant improvements to these types of facilities. The lease should clearly identify who owns those improvements once a lease agreement ends. clearly identify who owns those improvements once a lease agreement ends. Zoning regulations with little impact on medical construction on a hospital campus could have Zoning regulations with little impact on medical construction on a hospital campus could have serious implications for the same project in a shopping center, as could other tenant leases serious implications for the same project in a shopping center, as could other tenant leases High power utilization is common in medical facilities. That makes it vital to bring utility costs High power utilization is common in medical facilities. That makes it vital to bring utility costs decision to establish medical facilities in areas where providers are decision to establish medical facilities in areas where providers are scarce can be enormously satisfying and a smart move fi nancially, according to PCI|HealthDev. scarce can be enormously satisfying and a smart move fi nancially, according to PCI|HealthDev. A white paper by the Dallas-based healthcare real estate development firm notes A white paper by the Dallas-based healthcare real estate development firm notes some key benefits of such projects. some key benefits of such projects. An ample patient base: An ample patient base: areas, creating pent-up demand that helps new healthcare facilities stay busy. areas, creating pent-up demand that helps new healthcare facilities stay busy. Building, refurbishing, leasing or purchasing facilities is Building, refurbishing, leasing or purchasing facilities is typically less expensive in less populated markets than in more competitive urban typically less expensive in less populated markets than in more competitive urban Local governments understand the benefits of expanded medical Local governments understand the benefits of expanded medical care and may provide economic incentives to attract providers. care and may provide economic incentives to attract providers. 2 0B U S I N E S S O F M E D I C I N E 2 0

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