In 2010 when the Patient Protection and Affordable Care Act (PPACA), more often referred to as Obamacare, was passed by Congress, the health care industry was thrust into a whirlwind scramble that left many health systems and private physicians pumping the brakes on growth strategies until they could determine how the PPACA was going to affect their industry.
OPTIMISTIC ABOUT THE HEALTH CARE REAL ESTATE MARKET
Three areas that are creating a bullish environment in health care real estate are the upholding of the government mandate, physician reimbursement cuts and the creation of Accountable Care Organizations (ACOs).
• With the mandate’s passage, it is anticipated that an estimated 32 million more people will be covered via a health plan beginning in 2014 (there are currently an estimated 46 million uninsured Americans). That increase in patient volume alone has physician practices and health systems trying to figure out how they will be able to accommodate such an influx of patients.
• In addition to more patients, physicians are seeing their Medicare reimbursement rates cut, which trickles over to the commercial insurance reimbursement which is often a percentage of Medicare. So now physicians are charged with seeing more patients and getting less reimbursement.
• The third challenge facing providers, this time more focused on health system providers, is the creation of
ACOs. While the details of an ACO are quite complex, the basic breakdown is that providers are incentivized by utilizing less while focusing on quality measures like fewer readmissions. For the patient who comes to the local hospital for an inpatient stay, the hospital’s reimbursements will go down every time that patient comes back to the hospital for treatment within the same episode of care.
FORECASTING GROWTH FOR BLOCK HEALTHCARE DEVELOPMENT (BHD)
Within BHD, our approach is to continue to evolve with the changing health care landscape and provide our investor community an opportunity to share in what is truly a growth market in commercial real estate. Since the establishment of BHD in third quarter 2011, the principals have brought opportunities totaling over 110,000 square feet of health care real estate to our investment community via single asset LLC syndications. Each of these syndications has provided strong returns to our investors that continue to look for opportunities in this sector.
The outlook for 2013 will be a continuation of the growth BHD has seen since its inception. Creating relationships with the key stakeholders being affected by the PPACA will translate into development and acquisition opportunities for us to bring to our investor community. In addition to the traditional healthcare real estate, such as medical office buildings, additional opportunities will be sought after in the growing Assisted Living and Memory Care health care submarket.
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| Wyandotte Medical Building, a 7,543 sq. foot build-to-suit medical building developed by Block Healthcare Development in Kansas City, Kansas, will be the home of DaVita Dialysis. |
Click here to review the entire KC 2013 Market Report!
Contributing Author:
Stephen Bessenbacher,
Vice President,
Block Healthcare Development
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