Posts

Brevard Commission Approves Zoning Change For New Merritt Island Hospital, Wellness Village

/in , , /by

Health First Inc.’s $508 million plan to build a new hospital and “wellness village” off State Road 520 on Merritt Island took a big step forward this week.

The Brevard County Commission voted 3-0 on Tuesday, July 19th, to approve a required zoning change and a series of waivers for the project. Commission Chair Kristine Zonka abstained from the vote because she is employed as a certified family nurse practitioner with Health First Medical Group.

The County Commission approval puts Health First on track to break ground on construction of the project in early 2023 and to open the massive facility in 2025.

This artist rendering shows the education center that is part of Health First’s planned wellness village on Merritt Island (RENDERING CREDIT: Health First)

The planned seven-story, 120-bed hospital on the site would replace the current six-story, 150-bed Cape Canaveral Hospital on State Road 520 in Cocoa Beach, which would close when the new hospital opens. All 120 rooms in the new hospital would be private.

Health First held a community meeting with local residents on April 25 to detail its plans. It received unanimous approval for its zoning change and waivers from the Merritt Island Redevelopment Agency on April 28, then from the Brevard County Planning and Zoning Board on May 9.

The project also will include various medical offices, an education center, retail and restaurant space, a spa, a fitness center, a child day care center and other facilities, as well as a parking garage. It will be built on a 15-acre site across State Road 520 from Merritt Square Mall, and will include what Health First describes as “a park-like setting” between the various buildings.

Kimberly Rezanka, an attorney representing Health First, told the county commissioners that Health First is seeking private bonding totaling $508 million for the project, and is not asking for any public financial support. About 1,000 people will work at the Merritt Island complex.

Rezanka termed it a “transformational project. It is an amazing project.”

This illustration shows what the Health First envisions for a new seven-story hospital and separate “wellness village” off State Road 520 on Merritt Island. In this plan, the hospital is on the right, and the medical office building is at the upper center. (IMAGE CREDIT: Health First)

During County Commission public comment on the item on Tuesday, MIRA Chairman Marcus Herman called Health First’s project “a very exciting plan” that is “simply amazing” and will be “a game-changer for the area.” Herman said Health First has worked with MIRA and community residents to address various concerns about the project, such as those related to traffic, noise, drainage, parking and public transportation.

In her public comment, Cocoa Beach resident Mary Jane Nail said she is glad to see that Health First is building a facility that’s going to be very beneficial to the public. Brevard County is devoid of wellness education, promotion and living.

“So I’m delighted, delighted to see that they’re going in that direction,” Nail said.

Separately, Health First also is planning to build wellness villages in Melbourne and Palm Bay.

In a statement issued after the vote, Health First said “The Merritt Island campus will showcase Health First’s transition from an era focused on sick care to an era of providing healing-well and living-well services.”

This artist rendering shows what the Health First new hospital off State Road 520 on Merritt Island would look like. The 120-bed facility could open as early as 2025. (RENDERING CREDIT: Health First)

Matthew Gerrell, Health First’s chief executive officer for retail services, said Health First’s planned Merritt Island complex is designed with the consumer in mind, providing our community what they want, when they want it — with an added bonus of being in one central location.

“We’re still at the leading edge of traditional treatment — sick care,” Gerrell said. “But here we’re offering progressive preventive care, as well as related lifestyle-supporting services — healing well and living well. This project is the next evolution and transformation of Health First, where we’re going to continue to provide healing-well services, such as hospitals, ambulatory surgery centers, medical office buildings. But we’re going to add in living-well services, such as retail, healthy food options and child care. We will not have a fast-food restaurant. We will not have a doughnut shop. There will be no bar or alcohol in this village. But we will have an educational center, which will allow folks to come in and get free education on how they can make sure they keep themselves healthy. Health First is here for the community, and we want to make this community better by improving and transforming healing-well and living-well services.”

This artist rendering shows retail area that is part of Health First’s planned wellness village on Merritt Island.. (RENDERING CREDIT: Health First)

Jonathan Flyte, Health First senior vice president for facilities construction, said this concept “allows us to make a dramatic change in the character of the entire area, by providing significant new green space and important health and wellness services.”

What Health First’s Project Includes

These are the component’s of the planned Health First hospital and wellness village on Merritt Island:

• Seven-story, 320,000-square-foot hospital. The hospital pad will be elevated 13 feet to provide protection from potential storm surge, and the hospital would be designed to withstand a Category 4 hurricane.

• 21,500-square-foot central utility plant containing heating, ventilation and air-conditioning equipment, as well as emergency generators

• 120,000 square feet of medical offices

• 2,800-square-foot spa

• 7,500-square-foot child day care center

• 5,700-square-foot restaurant

• 19,100-square-foot education center for health and wellness education

• 2,900-square-foot coffee shop

• 2,000-square-foot market/juice bar

• 5,800 square feet of mixed-use retail space

• 700-square-foot concierge tower.

• 20,000-square-foot fitness center.

• Two stories of enclosed parking, plus surface parking lots, totaling 947 spaces. The wellness village components would be constructed above the parking garage.

• A helipad to handle helicopter landings and takeoffs for the transport of patients with serious medical conditions to the hospital’s emergency department or from there to another hospital.

‘Important Next Step’

The zoning change the County Commission approved involved a change of zoning classification from BU-1 (general retail commercial) and BU-2 (retail, warehousing and wholesale commercial) to planned unit development.

Most of the accompanying waivers dealt with building height and building setbacks. With the waivers, the designs allow for the clustering of the buildings and facilitate creation of green space.

“It’s an important next step for us,” Lance Skelly, Health First’s system director for public and media relations, said after the vote. It’s “a key step for us to start getting this work underway.”

Health First now will seek other regulatory approvals for the project, including from the Florida Agency for Health Care Administration.

Site plan approval for the project also would be needed from various Brevard County governmedepartments.

Health First said it will soon begin the construction process, fencing the site, razing the current structure and beginning the groundwork required for the new complex.

Health First is Brevard’s largest health care provider. It operates Cape Canaveral Hospital, Holmes Regional Medical Center in Melbourne, Palm Bay Hospital and Viera Hospital. Its operations also include health insurance plans, a multispecialty medical group, and outpatient and wellness services. The company has about 9,000 employees.

MIRA District Boundary Issue

In a separate action, the County Commission voted 3-0, with Zonka abstaining, to ask county staff to begin the process that could lead to removing the Health First wellness village site from the Merritt Island Redevelopment Agency district. The proposal was introduced by County Commissioner John Tobia.

If the wellness village site stays within the MIRA district, county property tax revenue generated by the complex would be available for use by MIRA for its projects. If the wellness village is removed from the MIRA district, this tax revenue would be available for the county’s general fund.

Tobia said he believes hundreds of thousands of dollars a year would be at stake. Although the new hospital would be tax-exempt, other phases of the project — such as its retail components and parking facilities — would not be tax-exempt.

Tobia said he is exploring this change in the district boundaries in part because he has issues with how MIRA spends its money, including his contention that the agency does not do enough to attract more affordable housing to the area.

Tobia cited a $20,788 “Welcome to Merritt Island” sign MIRA purchased as an example of misplaced priorities. He said his proposal’s goal is “stopping MIRA from getting more money,” and potentially directing more county property tax money into affordable housing programs.

Herman and MIRA board member Jack Ratterman both spoke during public comment on this item in defense of MIRA’s efforts to improve the area and in opposition of Tobia’s proposal.

Before any change in the MIRA district boundaries could take place, the County Commission would need to have another vote to approve the change.

 

Source: Florida Today

Investors Plan To Put More Money Into Healthcare

/in , /by

The I-word, inflation, is bad enough. But then there’s the R-word: recession. And some forecasters see the potential coming forward, according to the latest CNBC Fed Survey.

Not that it’s a given, but the trifecta of inflation, more hawkish Fed monetary policy, and issues coming out of Russia’s invasion of Ukraine have increased the bet to a 33% chance of one in the next 12 months.

That may be what a new CBRE survey picked up on. Distributed to “approximately 500 of healthcare real estate’s most influential healthcare real estate trusts (REITs), institutional healthcare investors, private capital investors, and developers throughout the United States” and responses coming from about a fifth of them, 85% believed that the healthcare real estate industry is “recession resistant.”

“Survey results suggest a very significant increase in capital allocated to healthcare real estate for 2022,” the report said. “In 2021, the total capital allocation provided by respondents in our survey was $10.9 billion, while actual transaction volume for 2021 ended at nearly $16 billion. This year, the total capital allocation from those unique firms who provided a figure (65 out of 86 firms) totaled $17.1 billion, which represents a 57% increase compared to 2021.”

This year, the firms that gave a capital allocation reported $17.1 billion going into 2022, a 57% increase. Given that, CBRE expects investors to allocate at least $25 billion in capital to the sector. Market caps are likely to drop with the capitol going in, and 96% of respondents expected cap rates on Class A on-campus to be below 6% this year, while 79% anticipate the average cap rate will drop below 5.5%.

“This can be ascribed to the ongoing increase in demand for high-quality healthcare real estate, the resiliency of healthcare real estate during the pandemic, and new funding sources actively exploring alternatives to traditional real estate products, such as office, industrial, multifamily and retail,” the report reads.

Similarly, the life science sector is also tremendously strong, with record level venture funding of $32.5 billion in 2021 and in 2022 40% of respondents thinking that life sciences properties, especially those housing biotech or pharma, should see a cap rate below 5%.

As might be expected from these numbers, a big majority—84%—plan to be net buyers of healthcare real estate, including all healthcare REITs and institutional investors that responded. Only 26% of current owners will be net sellers. With that much demand and low interest in dropping net ownership, that describes a coming challenge to obtain additional properties, meaning likely higher prices.

 

Source: GlobeSt.

2021 Health Care Real Estate Year In Review

/in , , /by

This was another dynamic year for the health care industry and for health care real estate, which is demonstrating remarkable resiliency and innovative success in the face of unprecedented challenges.

Below is a summary of a number of key 2021 takeaways and trends that were discussed during our 2021 Health Care Real Estate Year in Review webinar, now available on our podcast channel by clicking here.

Academic Medical Centers

Academic medical centers (“AMCs”) (or health systems affiliated with an AMC) continued to lead large-scale “destination” medical center development projects in 2021. Several multi-billion-dollar projects anchored by AMCs were either announced or broke ground this year in regions across the country. The projects include a range of uses, including new outpatient clinics, ambulatory surgery centers, inpatient hospital expansions and, in some cases, non-medical uses such as housing and fitness facilities. The health care campus of the future is here!

Ambulatory Surgery Centers

Ambulatory surgery centers (“ASCs”) have come into their own with many of the major health systems looking to acquire or form partnerships with ASC owners and operators. This is driven, in part, by payors and patients demanding that more surgical services be provided in lower acuity settings. In 2021, over 200 new ASCs were opened or announced according to Becker’s ASC Review. Florida, Arizona, New York, Texas, Pennsylvania and Michigan topped the list with the most new announcements. In other ASC news, the trend towards convergence of payor, provider and operator continues. A number of for-profit payors and providers have gone on ASC buying sprees this year.

Supply Chain And Labor Shortages

Supply chain disruptions and labor shortages are tempering the pace of health care construction. The staffing, supply and hospital-bed shortages that health care providers and real estate developers hoped were temporary now appear to be longer-term challenges that will reshape hospital real estate and development projects well into 2022. The construction industry is not immune to labor disruptions triggered by ongoing COVID-19 challenges, which is resulting in delays for new hospital and development projects as contractors work to find qualified workers. By one estimate, contractors will need to hire 430,000 more employees in 2022 and 1 million more in the next two years to keep up with the increased project demand. If contractors do not meet those metrics, health systems should expect and plan for delays to their upcoming projects.

Construction industry supply chain challenges, like labor shortages, will continue to impact hospital projects heading into next year. Although demand for new projects continues to be strong, supply chain issues are causing health systems and developers to approach delivery timelines and project cost estimates with an added level of caution. Some of the major general contractors are shifting the risk of delays and cost overruns for supply chain issues to owners and developers. In response to ongoing supply chain challenges, some health systems have begun evaluating the use of a centralized service model using a Consolidated Service Center (“CSC”) to manage certain supply chain needs. Although typically evaluated in the context of operational supply chain needs, the CSC model could be evaluated in the context of facilities planning, as well.

Certificate Of Need Programs

In the wake of the COVID-19 pandemic, with many hospitals at or nearing capacity, many states have either relaxed or suspended certificate of need (“CON”) requirements, triggering significant new facility announcements. In Florida, for example, over $1 billion of new facilities have been announced in the last quarter of this year.

Telehealth

At the height of the pandemic, some experts claimed the physician office visit would be a thing of the past. Now, over a year later, we see telehealth stabilized nearly four times higher than pre-COVID, but not replacing the office visit. Telehealth visits appear to have stabilized at a range of 13% to 17% of visits across all specialties. The specialties experiencing the highest growth in telehealth usage include psychiatry and substance-use treatment. Consumer demand for virtual care solutions, however, continues to be strong. According to an AHA report, between 40% and 60% of consumers want more virtual care solutions, such as a “digital front door” or lower-cost virtual health plans. That said, the regulatory and reimbursement environment for telehealth remains uncertain, giving reason to temper growth predictions for the immediate future.

Hospital-Based Property Tax Exemptions And Government Intervention

Local government is continuing to take aim at nonprofit hospitals and health systems with respect to property tax exemptions and other real estate-related issues. In a widely watched case, a trial court decision in Pennsylvania ruled that three nonprofit hospitals were not tax‑exempt charities entitled to property tax exemption. The ruling has triggered local governments and school districts around the state to reconsider health care- and hospital-based property tax exemptions. In another closely watched governmental action, the State of New Jersey has proposed legislation that would require state approval for the termination of a hospital lease. The legislation, although aimed at one particular hospital, raises interesting issues of governmental authority, and legislation of this type could have far-reaching impacts.

Regulatory Matters

Qui Tam Lawsuits – Litigation under the False Claims Act has been on an uptick under the Biden Administration. The year 2020 saw the largest number of new matters initiated in a single year; and, although year-end numbers have not been released yet for fiscal year 2021, we expect to see that trend continue upwards. OIG self-disclosure settlement data indicates that remuneration and fair market value, together, represent nearly 70% of all cases. Settlement figures continue to be significant, ranging in recent years from $4 million for office leases not complying with the Stark Law up to $93.5 million for a hospital offering free office space to a physician group.

CMS Vaccine Mandate – On November 4, 2021, CMS released its Interim Final Rule (“IFR”) requiring COVID-19 vaccinations for individuals working in Medicare and Medicaid participating facilities, as well as individuals working in certain other settings involving face-to-face interactions with patients. The IFR effective date was December 5, 2021; however, legal challenges have enjoined enforcement in many states. Most recently, in an unprecedented move, the U.S. Supreme Court announced it will hear oral argument on an emergency application on January 7, 2022. The court’s order to hear oral argument on the issue demonstrates the perceived legal and practical importance of the federal government’s IFR.

Health Care Real Estate – Capital Trends

Historically low interest rates for taxable and tax-exempt debt continue to give hospitals and health systems flexibility in financing capital projects. Hospitals are seeing historically low rent factors and, increasingly, are taking more direct financial control of their real estate assets through direct placements and non-traditional financing mechanisms. Capital competition for core, quality, hospital-sponsored medical office buildings continues to be strong in light of supply-side shortages. On the other hand, skilled nursing and senior housing projects are facing a different set of challenges in terms of sourcing equity and debt. In a recent survey from Hilltop Securities, investors expressed the most concern with senior housing and skilled nursing sectors when compared to other industry sectors. This means investors and lenders will continue to take a more conservative approach to underwriting senior housing and skilled nursing projects heading into 2022.

Medical Office Buildings

The Medical Office Building (“MOB”) continues to demonstrate resiliency relative to other asset classes. Based on trading earlier this year, we expect final 2021 figures to show MOB sales volume having bounced back to pre-pandemic or near pre-pandemic levels, especially in sunbelt markets. As health care continues its shift away from inpatient care models, and as the traditional (non-medical) commercial office market continues to experience uncertainty, demand for MOB investment is predicted to remain strong.

Life Sciences

Over the last 18 months, governmental entities and private investors have pumped billions of dollars into the life sciences industry. A CBRE report found investments from venture capital into the life sciences industry last year totaled a record-breaking $17.8 billion through the second quarter of 2020 and anticipated funding from the National Institutes of Health to grow 6% from the prior year ($42 billion total). As a result, the demand for real estate to support that uptick in life sciences work also increased. The amount of laboratory space grew by 12% in 2020, with 95 million square feet of laboratory space in the United States and another 11 million under construction. It makes sense, therefore, that one recent market survey ranked life sciences and biotech as the best risk-adjusted health care real estate opportunity, significantly outperforming medical office buildings and senior housing. Because COVID-19 testing is widely available and vaccine availability is increasing, capital investment for research and development related to COVID-19 and other infectious diseases is likely to continue. As a result, the demand for real estate to support that research and development should also continue.

Medtail

Medtail — a relatively new term referring to the combination of medical and retail — has continued to gain traction this year. As health care consumers continue to seek convenience care options, expect the medtail trend to continue. In 2021, discount retailer Dollar General joined other retail giants like Walgreens and CVS when it announced the hiring of its first chief medical officer who will be tasked with expanding affordable health care services through Dollar General stores, especially those in rural communities.

Senior Housing

After a difficult two years, experts are predicting increased investment activity in this sector in 2022, even with forecasted occupancy levels not reaching pre-pandemic levels until late 2022. Senior Housing News estimates by 2029, there will be 14.4 million middle-income seniors. Providing affordable senior housing will continue to be one of the biggest opportunities and challenges, as 54% of the middle-income seniors will lack resources to pay market senior housing rates according to the same Senior Housing News report. Expect the post-pandemic changes to the senior housing industry to include:

• Hiring new clinical staff and bolstering on-site clinical services offered at senior housing locations;

• Expanding telehealth options for residents to reduce travel to off-site inpatient and outpatient facilities;

• Permanently installing and implementing disease and infection prevention policies and procedures to control future outbreaks; and

• Focusing on active living communities to better balance socialization and privacy, thereby avoiding the isolation many residents experienced during the pandemic.

The COVID-19 pandemic will not only affect the construction and operation of senior housing, but also the location of these facilities. During the pandemic, millions of people moved from large urban areas to less populated locations in middle and smaller markets around the nation. Many of these markets offer a lower cost of living and a warmer climate that may attract aging populations as compared to more densely populated areas. As a result, expect more development in those markets to align with the aging population’s migration trends.

Finally, a number of senior housing developers have started to offer “ultra luxury” senior housing products in certain markets. These facilities often include private chefs, personal butlers and premium design features and are targeting elite members with monthly fees up to $20,000 on top of entrance fees of $200,000.

Skilled Nursing Facilities

Despite a difficult two years and ongoing operational challenges, Skilled Nursing Facilities (“SNFs”) could see some modest relief in 2022; although, it is likely to remain a challenging environment for the near term. Earlier this year, it was announced that nursing homes would receive a 1.2% net Medicare increase for fiscal year 2022 under a proposal announced by CMS, which would result in an estimated $410 million much‑needed financial boost to SNF operators. According to the final rule, due to the ongoing public health emergency, CMS will also suppress the SNF 30-day all cause readmission measure for the FY 2022 value-based purchasing program year.

Social Determinants Of Health; Housing Is Health Care

Social Determinants of Health (“SDOH”) continue to gain traction with hospitals and health care providers. Last year, we reported on focus areas addressing homelessness and affordable housing, with some providers emphasizing “housing is health care.” We saw that momentum continue this year, with a number of major health care-anchored housing investments around the country. At this year’s HLTH 2021 Conference, executives from several major health systems highlighted affordable housing as a key health care intervention strategy. As a relatively flexible and tangible community benefits investment strategy, affordable housing is increasingly popular with hospitals and health systems. The early data on these programs show promising results. A March 2021 analysis of one hospital system’s affordable housing program, which includes over 800 affordable housing units, found a social return between $1.30 and $1.92 for every dollar spent operating those units. There is still a dearth of research about the social and economic returns of affordable housing and other social determinants programs, but expect more providers to invest in these types of programs if future data supports results like the March 2021 study. At the federal level, the Aligning for Health Consortium was successful introducing the Social Determinants Accelerator Act of 2021, a bipartisan bill designed to help states and communities develop strategies to better address SDOH and improve health outcomes.

 

Source: Lexology