Report: MOB Sector Boosted By Demand And Capital

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The medical office sector was firing on all cylinders before the arrival of COVID-19, and it appears to be well-positioned for a robust rebound post-pandemic, according to a special report by Marcus & Millichap.

In the third quarter forecast titled Beyond the Health Crisis: National Medical Office Outlook, the company notes that the adaptation of patient care and the ongoing rise in health-care needs will buoy demand for medical office buildings despite the disruption brought on by the coronavirus.

“The medical office sector is being tested as operators navigate new challenges created by COVID-19. Medical office was once perceived to be a more resil­ient asset class during a downturn, but the unique uphill battle faced by health-care providers due to the pandemic has choked revenue streams and considerably shrunk margins,” according to the Marcus & Millichap report.

The national vacancy rate rose to 8.9 percent, marking an increase of 40 basis points from the second quarter of 2019. Project abandonment and delays caused construction activity to drop 1 million square feet year-over-year. Additional projects will be postponed or canceled in the upcoming months; however, this will help stave off any threats of overdevelopment in the sector.

Other fundamentals, such as rental rate trends, serve as indicators of strong performance ahead. Most REITs reported a solid level of rent collections even though many tenants pursued deferrals and rent relief. Additionally, rent growth continued its pre-pandemic upswing, climbing to an average of $25.22 per square foot.

A New Age In Health Care

Well in advance of the appearance of the coronavirus, the U.S. health-care industry had begun to decentralize, providing more medical care in outpatient facilities instead of hospitals.

“Excluding some major surgeries, off-campus properties now offer the highest quality of care and complex procedures, driven by the need to provide equal levels of service across a metro,” according to the Marcus & Millichap report. “New hospital and expansion projects continue to target suburban areas as a demographic shift has caught the attention of health systems, placing more modern facilities and specialized care closer to patients’ homes. As these medical districts expand, the need for nearby outpatient clinics and supportive services generates demand for medical office space.”

Telehealth, via phone or online video, increased dramatically as a result of social distancing, and while experts expect the use of virtual care options to continue to rise in the post-pandemic environment, they do not expect it to result in a reduction in the need for medical office buildings. According to the report, the need for certain in-person visits will remain, as will the need for labs and imaging, all of which will translate into continued demand for medical office accommodations.

Finally, the coronavirus has not changed the fact that the considerable Baby Boomer population continues to age, and it’s doing so in an era when medical technology and advancements are supporting longer lifespans. As Marcus & Millichap notes in the report, the population of citizens aged 65 and older will expand by 30 percent over the next 10 years.

And with age comes more visits to the physician’s office. Individuals in the 55-64 age range make an average of 4 physician visits annually, but the number of yearly visits rises to 5.9 for those in the 65-74 age range and jumps to 7.6 for those 75 and older.

“Despite the short-term costs, the health-care industry will be one of the quickest to bounce back from the pandemic since the care needs of a growing and aging population continue to increase,” Marcus & Millichap asserts in the report. “Medical services are returning as states move through reopening phases, and pent-up demand from postponed procedures and office visits provide a positive outlook.”

Read the full report on Marcus & Millichap’s website.

 

Source: Commercial Property Executive

Acceleration Of Telehealth Adoption Set To Reshape Healthcare Real Estate

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The next time you visit your physician, your appointment may very well be virtual from the comfort of your own home.

Telehealth, or telemedicine, was an emerging part of healthcare delivery long before COVID-19. Now, the pandemic has catapulted the concept into national awareness. Changes in insurance reimbursement have expanded the availability of telehealth, with new implications for healthcare real estate occupiers, owners and investors.

What does “telehealth” mean, exactly? It encompasses electronic, interactive services ranging from a simple phone call or email with a clinician to a virtual exam with a caregiver for the purpose of diagnosis, intervention or ongoing care management. It’s enabled by such platforms as Doxy.me and NextGen Healthcare that make it easy to accept payments or insurance information in conjunction with an appointment.

Despite the convenience and effectiveness of telehealth, and the growth of secure telehealth platforms over the past decades, its pre-pandemic use was limited because of insurer reimbursement restrictions, Health Insurance Portability and Accountability Act (HIPAA) patient data privacy requirements, and practitioner concerns about malpractice.

However, when states began to enact stay-at-home orders in early March in response to the pandemic, telehealth gained new attention among policymakers as a solution to providing healthcare without further jeopardizing patient health. As a result, provisions in the Coronavirus Aid, Relief and Economic Security (CARES) Act lifted restrictions on where, how and with whom Medicare patients can access virtual care.

For the first time ever, there may be a critical mass of patients and practitioners alike able to tap the benefits of telehealth, mostly substituting onsite appointments with simple e-visits. Now, Medicare patients can access telehealth services from their own homes and healthcare providers can deliver service from any healthcare facility. Telehealth visits can take place via any phone with audio/video capabilities, using common consumer platforms such as FaceTime and Skype. Also important, first-time patient visits via telehealth are now eligible for Medicare coverage, too. Any healthcare professionals eligible to bill Medicare for their services can now bill Medicare for telehealth services, too.

From Stopgap Service To Structural Change

The acceleration of telehealth adoption may have been forced out of necessity during the pandemic. However, its use will likely continue to grow even after the pandemic fades.

In the post-pandemic era, the ease, efficiency and convenience of telehealth care will increase patient commitment and retention, and potentially lead to more in-person appointments for follow-up care. Telehealth also improves compliance with prescribed treatment plans, including follow-through on required appointments.

Also critical, telehealth enables patients in even the most remote and underserved locations to access care. And, it may prove to be especially well-suited for remote management of long-term chronic conditions such as allergies, diabetes and multiple sclerosis, and for monitoring such treatments as infusions and pacemakers.

As medical technology continues to advance at a rapid pace, an increasingly sophisticated suite of implantable and wearable devices, or even robotic telemedicine carts, will enhance home monitoring and management capabilities. Healthcare providers who implement this device-enabled “hospital at home” concept can help patients maintain their long-term health safely.

Telehealth’s Impact On Healthcare Real Estate

Clearly, telehealth usage has surged in 2020 to occupy a much more prominent place within the care spectrum than ever before. However, it’s important to keep the trend in perspective. According to FAIR Health’s private healthcare insurance claims data, only 0.17 percent of all services, or less than one-fifth of 1 percent, were provided via telehealth in the first quarter of 2019. In 2020, first quarter usage jumped to about 7.5 percent of services. April and May usage—data is not yet available—is forecasted to be higher than previous months. Thus, while telehealth usage has grown dramatically, its role in the healthcare service delivery spectrum continues to be secondary.

Yet, the long term may reveal a different story. As healthcare providers look to drive down costs while boosting reimbursements, telehealth’s role will likely become more prominent. As a result, many healthcare providers will need to reconfigure their facilities to provide HIPAA-compliant, technology-enabled spaces for the provision of telehealth and remote health monitoring services.

In light of the telehealth trend, the following are four steps healthcare occupiers, owners and investors should consider for the future of their facilities:

Develop telehealth care provider suites. Although patients will be able to participate in telehealth calls and remote health monitoring at home, practitioners will still need space for calls or electronic communications, as well as for remote monitoring and diagnostic equipment. Medical office buildings could provide suites for technicians and nurses to virtually manage intensive care, emergency and home care patients, for example. These spaces would require Internet redundancy, appropriate lighting, screens and acoustics, and assured patient-caregiver privacy for HIPAA regulatory compliance.

Reconfigure public spaces. Even as healthcare providers transition more basic care and monitoring services to online delivery, patients will still need office visits for advanced treatments, extensive physical evaluations and for use of advanced diagnostic equipment. However, the pandemic already has led healthcare providers to rethink their waiting room management to allow for social distancing. For instance, some providers ask patients to wait in their cars rather than in the waiting room and use text messaging to alert patients of their appointments.

With widespread adoption of digital patient registration and text messaging, less waiting room space will be needed even after the pandemic. An onsite kiosk, for example, could be used by patients to register upon entry, and possibly could support healthcare service delivery in other ways.

Reconfigure and repurpose healthcare delivery spaces. Many facilities will require interior reconfigurations, renovations and build-outs to support the transition to telehealth services. The adoption of telehealth care delivery will likely reduce the number of physical exam rooms needed in a healthcare facility and will free up square footage for other purposes. With less space required for physical exams, facilities can prioritize space for high-value imaging, diagnostics, injectables, wound care, advanced and acute treatments, obstetrics and laboratory services.

Pursuing The Possibilities Of Telehealth

As pandemic-related financial losses continue to mount across the healthcare sector, telehealth offers the potential to provide efficient, effective patient care while maximizing productivity-per-square-foot of healthcare real estate. For some healthcare providers, telehealth adoption could dramatically reduce the need for office space or increase the need for different kinds of spaces, depending on the services provided. Whatever the situation, healthcare providers, owners and investors have always been adept at adaptation—and many are already positioned to pursue the possibilities of telehealth.

 

Source: GlobeSt

Developer Pursues Plans To Build New VA Outpatient Center In Daytona Beach

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An Ohio developer hopes to break ground early next year on a new Veterans Affairs Outpatient Center here.

The proposed 131,000-square-foot center would replace two smaller nearby VA facilities when it opens in either late 2022 or early 2023.

A rendering of what the new VA Center would look like. (CREDIT: News-Journal/Clayton Park)

Developer Rustom Khouri III said his company is still waiting to find out if it will be awarded the federal government contract to build the project. That decision is expected in the next 30 to 45 days.

“We’re very optimistic,” said the director of business development for Carnegie Management & Development Corp. “We’re already going through the zoning approval process with the City.”

Khouri and officials from Harris Civil Engineers in Orlando just presented plans for the project. The developer-initiated neighborhood meeting was held via a Zoom videoconference call.

Carnegie put the 78-acre site under contract late last year to purchase from Volusia County Schools for $4.5 million. The mostly wooded site is on the west side of Williamson Boulevard, directly south of Daytona State College’s Advanced Technology College.

The developer is based in the Cleveland, Ohio, area. To date, Carnegie has developed a dozen facilities for the U.S. Department of Veterans Affairs in multiple states. This would be its first in Florida.

“We want this to be a best-in-class healthcare facility for veterans in the Daytona Beach area,” Khouri said.

Khouri declined to estimate how much the project would cost to build. He said that would depend on the amount of the federal government contract when or if it is awarded.

Al Bogna, vice president of real estate for Carnegie, told Volusia County School Board members in November of last year that the project could cost between $60 million and $70 million to build.The project is expected to create 300 construction jobs. Carnegie submitted its proposal to the federal government after the General Services Administration in early November issued a request for bids from developers.

The U.S. Department of Veterans Affairs wants a larger outpatient center that could serve as a one-stop location for veterans in the Daytona Beach area. The GSA request for bids specifies that the new VA outpatient center would need to be within the area between West Granada Boulevard to the north, Dunlawton Avenue to the south, Tymber Creek Road to the west and Ridgewood Avenue to the east. Khouri said he is unaware of bids from any other developers for the VA project in Daytona Beach.

The two older VA facilities the project would replace are the William V. Chappell Veterans Multi-Specialty Outpatient Clinic off Dunn Avenue and the Westside Pavilion Uniform Mental Health Services Annex at 1620 Mason Ave. The two clinics have a combined total of roughly 74,000 square feet of space.

“The current space in these facilities is insufficient to meet the projected needs of the veteran community,” the GSA’s request for lease proposals stated. “The new facility … will provide a single location in the Daytona Beach area to serve the outpatient needs of veterans and their families.”

The proposed new VA outpatient center would provide primary care, mental health, and specialty medical care services. It would include a medical lab, a pharmacy, physical rehabilitation facilities, and eye and dental clinics.

“It would also offer prosthetic and sensory aid devices and radiology and speech pathology services,” said Khouri. “The center would include an on-site canteen. Some veterans in the Daytona Beach area drive more than an hour to Orlando for VA services.”

Volusia County is currently home to more than 50,000 military veterans, according to the most recent Census Bureau estimates.

“A new VA outpatient center is certainly much needed in this area,” said Khouri. “It’s a high-growth market, both in veterans and overall population. When we came down to this market almost two years ago, we came into contact with several veterans who voiced a need for something like this.”

The campus for the proposed VA outpatient center would include more than 50 acres set aside for “future growth.” The 24 acres where the center would be built would include a “flag pole plaza” near the entrance, surface parking for 750 cars, as well as gardens, trails and a large storm water retention pond.

“We’re trying to create a campus feel,” said Khouri. “The North Williamson Boulevard corridor is really beautiful. We want to maintain a lush tree line along Williamson as well as being environmentally sensitive.”

“Plans call for adding trees to the campus as well,” said Abdul Alkadry, a project manager with Harris Civil Engineers.

The new VA outpatient center is expected to generate approximately 1,400 daily car trips to and from the facility. Plans call for the construction of two new entrances off of Williamson. The stretch of North Williamson Boulevard where the VA outpatient center would be built is currently being widened from two to four lanes. The proposed project is just north of the LPGA Boulevard corridor that has become a hotbed for new home construction and commercial development activity in recent years.

Khouri said he believes the widening of Williamson should be more than enough to accommodate the extra traffic the VA outpatient center would generate.

“We’re very hopeful and confident we can deliver a product that will be able to serve veterans and be a positive addition to the community,” Khouri said.

 

Source: The Daytona Beach News-Journal