Keeping up with changes in health care real estate

Neil Carolan, senior vice president of business development and leasing at Rendina Healthcare Real Estate

Photo by Steven Meckler

As real estate management becomes an increasingly important function in the modern health care organization, health facilities professionals must ensure that broad property portfolios are administered correctly. This month, we talk with Neil Carolan, senior vice president of business development and leasing at Rendina Healthcare Real Estate and a former hospital administrator, about the challenges health care organizations face.  

Why did you move from hospital administration to health care real estate?

As my 30-year career in health care evolved, I became more involved in the management, planning and strategic development of the real estate platforms for the health care organizations I served. With the implementation of the Affordable Care Act and the start of value-based care, I saw the need for health systems to develop more ambulatory facilities and plan for other, nonhospital delivery locations. Recognizing that health care was facing a major shift in reimbursement and care delivery models, I felt my strengths in the real estate arena could be beneficial to health care systems.

How has health care real estate changed since you became involved with it?

Thirty years ago, health care real estate consisted of a medical office building (MOB) next to or attached to a hospital, providing a convenient location for private-practice physicians to see patients while remaining close to the hospital. These MOBs were mostly for single-specialty physicians and each suite was configured with an office, a waiting room and some exam rooms. Health care real estate has evolved over the years and more rapidly in the past five years, so that the traditional MOB has changed forever. Today, health care systems need ambulatory facilities that are extensions of the hospital. Today’s MOBs may house same-day surgery centers, imaging, long-term acute care and inpatient rehabilitation, along with a full continuum of other services.

How have the skills of the health care system-based real estate professional changed over the past 10 years?

There are health care-based real estate professionals who came up through the health care system with on-the-job training and those who were real estate professionals recruited by health care systems to work within the system structure. In the past, the majority of the duties were in the area of leasing and client satisfaction. Ten years ago, there was little thought about the role of strategic real estate planning or the need to develop or design facilities that were going to provide for a higher level of care delivery. The tenants of 10 years ago were primarily physicians in private practice. Rarely, if ever, were there traditional hospital services being offered in a medical office building. Today, the real estate department of a health care system has broad responsibilities. Foremost, they need to be well-versed in the ever-changing legal requirements of the Centers for Medicare & Medicaid Services, Joint Commission, Stark regulations and all other regulatory agencies. They must have a strong financial background and valuation skills as well as being good at negotiation. They are developers, leasing agents, designers and strategic planning experts all rolled into one department.

What role does real estate play in the move toward value-based care?

Value-based care dictates the delivery of care in the most cost-effective, clinically appropriate, patient-friendly setting. Because hospitals provide the highest levels of care, they are often the most expensive care setting. However, many patients may be able to have their needs met in a less acute environment, such as a physician’s office, urgent care center, ambulatory surgery center or other ambulatory setting. In terms of health care real estate, this has meant designing and developing inpatient alternatives that deliver the most value, as defined by the value equation of quality over cost over time. The implication for health care real estate professionals is the need to innovate and understand the impact of value on how health care systems function under this new paradigm.

How have smaller off-site ambulatory facilities changed during this transition?

The older, traditional off-site ambulatory facilities today are being repurposed to provide a more invasive and procedural type of care, or they are being replaced with more modern facilities. These changes also require that the buildings be redesigned for better patient flow and a more comprehensive menu of clinical services, so they can offer a full continuum of care for the patient. Additionally, there is greater emphasis today on the need for ease of access for patients, patient safety requirements and the implementation of ancillary services that provide for a more positive patient experience. For example, with a growing senior population, wayfinding becomes a major issue as does having adequate elevators along with gurney-sized elevators for emergency transport situations. Having ample seating in both the lobby and waiting room is also an important factor. I know of one ambulatory facility in a retirement community that put electrical outlets on the exterior of the building so that the seniors could plug in their golf carts while at the facility because the majority of patients did not drive cars. 

How have MOBs been changing during this transition?

The traditional medical office building rarely exists as we once knew it. The MOB is now really the ambulatory facility and has all the attributes of an ambulatory facility. In the value-based care model, the two terms are interchangeable. So, instead of small, traditional-style suites for physician offices, MOBs are full of practices with varied needs. This has led to dramatically different types of design and construction. MOBs today tend to have larger suites and are far more advanced from a technology standpoint. The addition of the electronic health record (EHR), computerized imaging and lab results, and other testing require an information technology that did not exist 10 years ago. Structurally, other facility design items often need to meet a higher code requirement based on the higher level of services being provided. Again, there is also the need for ease of access and better wayfinding.

How is the rapid growth of health care technology affecting real estate?

Under a value-based care model, outcomes measurement is critically important. That means health care facilities must allow for more advanced information technology and EHR systems than in the past. As a result, the real estate design must factor in optimal structures for tracking outcomes, infection rates, referrals to higher levels of care, and both patient outcomes and patient satisfaction.This requires new design for data rooms, the placement of data connections and the overall implementation of the information technology (IT) network. This must be a cooperative process between the real estate department, the tenants and the health system IT department. Additionally, as rapidly as technology in health care is changing, there must be a plan for growth and implementation of new technology as updates become necessary.