Archive for the ‘Healthcare’ Category

D-Day For Obamacare Means Big Changes For Healthcare

Tuesday, May 27th, 2014

MOBs are getting ready to take center stage as healthcare moves into more of a localized, outpatient setting.

By John Driscoll, President, Alter+Care

The first of this year was to be Obamacare’s D-Day. Though some changes kicked in earlier — the right to keep kids on your health plan until they turn 26, for example — the big provisions like the individual mandate became law this year. The ramifications from a medical and economic standpoint have been written about amply. In regards to the healthcare real estate industry, there are two very large trends: the consolidation of providers and the move to outpatient as the new center of healthcare delivery.

THE CONSOLIDATION WAVE
Part of the Obamacare plan to improve outcomes is the concept of the Accountable Care Organization. ACOs are essentially consortiums promoted as bigger, better models that manage health at the population level across a broader swathe of the healthcare specialties.  An ACO might include a hospital, various specialty groups, a  surgery center, imaging, emergency department and even nursing homes, with all payments made to the head of the ACO – usually the hospital – and then distributed to the rest of the group.

It’s now all about the team. As a result, the ACO has caused the biggest wave of consolidation I’ve ever seen in the sector. Consider that a quarter of specialty physicians and 40 percent of primary care physicians are already employed by hospitals. This number is up from 5 percent and 20 percent, respectively, in 2000. Some larger specialty practices are combatting this trend by merging with other practices to avoid being purchased by healthcare systems or hospitals.

Some independent practices are moving out of condominium office buildings and joining together to acquire office buildings. The costs of maintaining small independent space can become burdensome, especially as the technological pressures on integration and connectivity are imposed. Chances are, information technology financing will become an ever-increasing part of medical office loan commitments. Some IT expenditures are in the $30,000 to $50,000 range, while multi-specialty groups have larger expenditures to fund.

THE NEW CENTER OF HEALTHCARE
In order to lower costs and operate more efficiently, hospitals have migrated services from expensive acute-care environments to technologically enabled outpatient facilities. The hospital-centric model of the past has already given way to a hub-and-spoke network in most markets, where outpatient centers provide convenient and accessible care to patients and refer volumes to affiliated inpatient facilities. So what’s next? As it develops, hub and spoke will become a distributed model of care. It will result in providers who are physically dispersed, yet highly integrated through technology. Electronic medical records and advances in medical information technology will allow discrete providers to operate as a team. Primary care doctors will act as gatekeepers, coordinating and overseeing care regimens across this broad network.

The presence of this “patient-centered medical home” model means large MOBs (rather than hospitals) will become the hubs, while smaller specialty sites have become the spokes.  Think of the last time you visited a hospital for a procedure as opposed to a medical office building located in your community. Some systems are even leasing space in retail malls. As a result, the MOB is the definitive center not only of care, but also of healthcare real estate.

Last year was a banner year for outpatient services, and the investment community jockeyed to scoop up prized MOBs. There was a total of $4.98 billion-worth of MOB sales through the third quarter of 2013. This is compared to MOB sales of $5.21 billion for all of 2012. This has resulted in an average sales price of $231 per square foot, which is very strong with cap rates in the 6 percent range. If you extend the numbers out to sales of all buildings leased by healthcare providers, including doctors’ offices, urgent care clinics, diagnostic labs, imaging centers, the total reached $6.67 billion last year.  This was the second-highest number we’ve experienced in 13 years with a sales price of $270 per square foot. When you consider that 90 percent of the $1 trillion of healthcare property overall is still owned by hospitals, it is certain we are only at the beginning of this shift toward third-party real estate ownership.

To meet the challenges of distributed care and cost reduction, developers and operators of healthcare assets will need to think about the particular mix of services and programming in every building. This will result in the consolidation of redundant and inefficient facilities, while in other cases it will mean extending into preventive health and wellness to achieve population health management goals.

This article first appeared in Western Real Estate Business.

The Consolidation Wave in Healthcare

Tuesday, February 4th, 2014

Remember the Telecommunications Act of 1996? This was one of the signature pieces of legislation by the Clinton administration. The 1996 Act was intended to transition our communications laws and regulations from the era of natural monopoly to an era of market competition by eliminating barriers to entry at the local level. At the signing ceremony, former President Clinton put it this way:

“This revolution has been held back by outdated laws, designed for a time when there was one phone company, three TV networks, no such thing as a personal computer. Today, with the stroke of a pen, our laws will catch up with our future. We will help to create an open marketplace where competition and innovation can move as quick as light.”

It did have positive outcomes for consumers — increasing competition in local and long distance phone service, for example – but others said it led to a much more consolidated landscape. Before passage of the Act, a company could not own more than 40 radio stations in the entire country. With the Act’s sweeping relaxation of ownership limits, a company like Clear Channel by 2002 was able to own 1225 radio stations in 300 cities.

Could something similar be happening in healthcare? Cleveland Clinic CEO Toby Cosgrove, MD, thinks that in time to come, consolidation will lead to a dozen or more integrated regional health systems dominating the marketplace.

The reason? Under this Act, providers are being reimbursed not for individual episodes (“fee-for-service”) but for outcomes (the long-term health of the patient population). This is real: last year for the first time, Medicare penalized more than 2,000 hospitals with excessive readmissions — one of the major red flags for poor performance. Part of the institutional change to improve outcomes is the concept of the Accountable Care Organization.  ACOs are essentially consortiums promoted as a bigger, better model that manages health at the population level across a broader swathe of the healthcare specialties. So, an ACO might include a hospital, various specialty groups, surgery center, imaging, Emergency Department, even nursing homes, with all payments made to the head of the ACO (usually the hospital or large physician multi-specialty group) which then disburses to the rest of the group. So providers can’t operate in a silo anymore or they won’t get paid. It’s now about the alignment of physicians and hospitals, working as a team.

As a result, the ACO has caused the biggest wave of consolidation that I’ve ever seen in the sector. What’s more, in 2015, Medicare reimbursements will be reduced for physicians who haven’t made inroads with electronic medical records, which can be expensive for small independent practices to install – resulting in more consolidation so providers can be compliant. Consider that a quarter of specialty physicians and 40% of primary care physicians are already employed by hospitals, up from 5% and 20%, respectively, in 2000. Some larger specialty practices are combatting this trend by merging with other practices to avoid being purchased by healthcare systems or hospitals. Nick Reed, Vice President of Professional Banking Services at Wells Fargo Bank, paints the picture: “Some independent practices are moving out of condominium office buildings and grouping together to buy office buildings. The costs of maintaining small independent space are becoming burdensome, particularly as the technological pressures on integration and connectivity are imposed.” Mr. Reed sees information technology financing as an ever increasing part of medical office loan commitments. “We see a lot of IT expenditures in the $30,000 to $50,000 range, while multi-specialty groups have larger expenditures to fund.”

Primary Care Gets a Break

Tuesday, July 30th, 2013

There’s no question that primary-care physicians have long been spurned by the fee-for-service model that doesn’t recognize or reimburse fully the time spent with patients. Well, internists had a pretty good summer. Firstly , the CMS “proposed creating new evaluation-and-management codes for non face-to-face activities relating to the coordination of care for patients with two or more chronic conditions”.  And, now a bipartisan draft bill from the House Energy and Commerce Committee’s health subcommittee extends that to care coordination between multiple physicians and other suppliers and providers of services.The number of chronic patients is expected to rise to 171m by 2030.
The CMS proposal solicited public comment on whether general third-party designation of a practice as a medical home could be considered evidence that the practice was up to the task of providing care-coordination services. But the draft of the House bill specifically mentions the National Committee for Quality Assurance’s (NCQA) medical home and patient-centered specialty practice recognition programs.

Part of the solution is to recognize practices as medical homes so they qualify under the new payment model.  Thus far, the NCQA program has designated 5,770 practices as medical homes.

“We are particularly pleased the draft includes expedited recognition of patient-centered medical homes as an approved alternative payment model for medical practices,” Dr. Jeffrey Cain, AAFP president of The American Academy of Family Physicians, said. That said, Cain did add that family doctors are “disappointed that the subcommittee’s draft does not include a provision to specify a higher base-payment rate for those services provided by primary-care physicians,” Cain said.

Primary care has long been affected by dwindling reimbursements — In the 20th annual Modern Healthcare Physician Compensation Survey, family physicians finished last among the 23 specialties tracked – and a consequent migration of family physicians towards hospital employment. Medical students are increasingly avoiding family medicine (the number of students selecting careers in primary care has declined by 41% in the last decade), leading to an expected shortage of 44,000 primary care physicians by 2025.

DOMA Bites the Dust

Monday, July 1st, 2013

The U.S. Supreme Court’s voted 5-4 to strike down the 1996 Defense of Marriage Act. Swing voter Anthony Kennedy joined the liberal wing of the court –Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor, and Elena Kagan. Dissenting were Chief Justice John Roberts and justices Antonin Scalia, Clarence Thomas, and Samuel Alito.. They also ruled that the plaintiffs in the case of Proposition 8, which banned same-sex marriage in California, did not have the legal standing to bring that lawsuit.

The decision is expected to have major consequences on health coverage for legally married same-sex partners of federal employees and members of the military, as well as on tax treatment for private health coverage (a 2007 report from left-leaning think tank Center for American Progress and the UCLA’s Williams Institute found that employees with partners pay over $1,000 more in taxes each year than their married peers).  The caveat is that the ruling applies on to states where same-sex marriage is legal. New Yorkers will benefit; Pennsylvanians will not.

The ruling seems to confirm a sea change in gay rights in this century. Take American corporations which have been far more progressive than the courts on these issues. Hundreds of U.S. employers, both large and small, signed on to an amicus brief against DOMA in February, arguing that treating same-sex couples differently hurt recruiting efforts, as well as employer-employee relations. Nike, Apple and Starbucks were among the nearly 300 firms that joined in filing the brief. According to the Human Rights Coalition, a group that advocates for gay rights, 62 percent of Fortune 500 companies offer domestic partner health benefits.

DOMA barred the government from treating same-sex partners as married, raising the cost of healthcare for same-sex couples and denying them eligibility for federally guaranteed rights such as medical and family leave, and, in some cases, Medicare. In all, it denied more than 1,100 benefits to married gay and lesbian couples.

Thirteen states have or are in the process of legalizing gay marriage.  They join thirteen countries around the world including Argentina, Belgium, Brazil, Canada, Denmark, France, Iceland, Netherlands, Norway, Portugal, Spain, South Africa, and Sweden.

“The principal purpose and the necessary effect of this law are to demean those persons who are in a lawful same-sex marriage,” Justice Anthony Kennedy wrote in the 5-4 decision. “This requires the Court to hold, as it now does, that DOMA is unconstitutional as a deprivation of the liberty of the person protected by the Fifth Amendment of the Constitution.” Kennedy’s 26-page opinion says Congress’ explicit purpose in passing DOMA was to expose same-sex couples in state-sanctioned marriages to “a disadvantage, a separate status, and so a stigma,” which violated the Fifth Amendment guarantee of rights to life, liberty and property.

The law also harmed these children financially, Kennedy wrote, because health benefits provided to same-sex spouses were not entitled to the same federal tax-exemptions as those of heterosexual families’, creating unequal costs for same-sex households. The law also denied survivorship benefits for spouses and children through Social Security.

Healthcare’s Early Hope?

Tuesday, June 25th, 2013

We have a couple of promising trends emerging from the recent reports. Consumers saved $3.9 billion in premiums last year, according to an analysis released today from the CMS. Why? Because Obamacare stipulates that insurers must spend at least 80% of their premium dollars on medical expenses.

Called the MLR provision or the “80/20” rule, it forces insurers to lower their rates or improve coverage to meet the standard.  And, if they don’t comply, a rebate is issued to the patients. This year, 8.5 million Americans will receive $500 million in rebates. On top of this, they saved more than $3.4 billion from lower premiums in 2012.

All of this comes a t a time when spending in general is trending down. PricewaterhouseCoopers’ Healthcare Research Institute (HRI) now predicts that U.S. medical costs in 2014 will spike by 6.5 percent, a full percentage point lower than the organization’s estimate of 7.5 percent for 2013. The net growth rate in healthcare costs, after accounting for benefit design changes such as higher deductibles, will be about 4.5 percent. The truth is that this is part of a longer-term trend. Between 2009 and 2011, total health spending grew at the lowest annual pace in the last five decades, at just 3.9 percent a year. In contrast, between 2000 and 2007, those annual growth figures ranged between 6.2 and 9.7 percent.

The reasons are familiar: the move to less costly outpatient settings to deliver care; the sluggish recovery which has tempered healthcare spending (the Kaiser Family Foundation thinks this is three-quarters of the reason for lower spending); new models for delivering care; and aspects of Obamacare (like the 80/20 rule for example). Then there’s all the waste that reform has gone after.  According to government data, hospital readmissions dropped by nearly 70,000 in 2012, and this trend is expected to accelerate through 2014.

Still, we have a long way to go and a few years of bending the cost curve don’t make up for decades of exorbitant increases. According to the Kaiser Family Foundation, the average American’s cost of care has gone up 140 percent over the past 10 years, while wages only went up 40 percent.  Still, the numbers offers hope that we are starting to gain some ground.

ObamaCare: Shambolic or Shining?

Thursday, May 2nd, 2013

The word of the week, courtesy of NY Times columnist, David Brooks, is "shambolic" which he uses to describe ObamaCare as it becomes implemented. As the overhaul of the US health system becomes a reality, the critics on both sides of the political aisle are joining Brooks to carp on what seems like a bureaucratic nightmare.

Even Max Baucaus, Democrat from Montana, has called the rollout of the healthcare exchanges a potential “train wreck” (the Obama team expects to spend $4 billion this year on setting up the 50 state-based exchanges and $1.5 billion next year running several of them).

Then there’s the application to apply for insurance from an exchange which started out as a 21 page booklet.  Following criticism, the Health and Human Services Department announced that they’ve cut the application from 21 pages down to three pages.

The issue seems to be that ObamaCare is creeping along without many of its details worked out or workable. While any sweeping institutional reform will have its shambolic elements, it’s useful to realize that Medicare did not arrive in 1965 as a fait accompli; It’s actually been a 48-year work in progress.  Today, beneficiaries get coverage through Original Medicare and the newer model, Medicare Advantage (also known as Parts A and B); then we had Disability and end-stage renal benefits in 1972; then the Medicare and Medicaid Program Protection Act of 1987 to fight all the fraud; then the prescription drug benefits for the Medicare population, which went into effect in 2006 (maybe the Bush Administration’s singular achievement if you listen to former administration official like Karen Hughes).

Lastly, people say that the administration is force feeding us a rewriting of healthcare law that the country doesn’t want. According to the Kaiser Health Tracking Poll for March 2013, only 37 percent of Americans like Obamacare. Looking at Medicare, we see the same parallels. In July of 1962 when President Kennedy first proposed it, a Gallup poll found 28% in favor, 24% viewing it unfavorably, and 33% with no opinion. A month later, 54% said it was a serious problem that “government medical insurance for the aged would be a big step toward socialized medicine.” After Lyndon Johnson was elected, a Harris poll found only a minority, 46%, supported a Federal plan to extend health care to the aged. Today, of course, Medicare is overwhelmingly popular.

Perhaps, the experience of Medicare counsels us to be aware that history has a way of confounding growing pains and poll numbers.

The Concierge Revolution: Bringing Back Marcus Welby

Thursday, February 21st, 2013

During  a historic time of change within the healthcare sector, most notably the passage of the $938 billion Affordable Care Act (ACA), which will reduce healthcare spending by $138 billion according to the independent Congressional Budget Office, doctors are feeling new pressures. As the Physician Administrator for Evanston Northwestern Healthcare (now NorthShore University HealthSystem Highland Park Hospital) for more than ten years, I saw this first hand. Just think, a single physician routinely sees 1,500 to 2,000 patients in one year’s time, and the average time spent with a patient is now reduced to about 7 minutes and dropping (that includes time spent with the nurse as they take vital signs). With reimbursements being slashed and the number of chronic patients at 145 million, doctors today are expected to do so much more in less time.  This is one of the main drivers for many primary care physicians and even some specialists to look for another way.  They want to practice medicine the way they believe it should be…as they imagined it would be when they first graduated from medical school.

Concierge/personalized care practices have continually been gaining traction over the past decade.  Personalized medicine means true consumer medicine —  for patients, it means little or no office waiting, more face-to-face time with their own doctor, prompt return of phone calls, important additional services not covered by their insurance and a renewed sense of personal connection between patient and doctor. For the physician, it means having more time and resources exclusively dedicated to patient care rather than to the “business” of modern medicine. Now more than ever, physicians are exploring their options as they navigate through new legislation and our country’s ever evolving healthcare system. They are not giving up on medicine. Rather they’ve given up on a broken system and created their own – one that that works for them, for their staff, and most importantly for their patients.

Roberta Greenspan is the Founder of Specialdocs Consultants, Inc., a medical practice consulting firm dedicated to converting traditional medical practices to “personalized care or concierge” models.

To hear Roberta Greenspan and Michael Friedlander on the Concierge Revolution, click here.

2012 Election To Be Pivotal for Healthcare

Thursday, November 15th, 2012

The 2012 presidential election will impact healthcare delivery in the United States. The question boils down to whether the electorate believes that the free market will control the cost of healthcare while delivering quality care.

According to The New Yorker’s James Surowiecki, “In most areas of the economy, free-market principles insure that products and services keep improving, and that consumers get better and better deals.”  Although the free market may be the optimal way to sell cars and refrigerators, it may not provide the same impetus for medical care.  Nearly half a century ago, Stanford economist Kenneth Arrow, in an article entitled “Uncertainty and the Welfare Economics of Medical Care”, suggested that healthcare is an outlier that limits the power of the marketplace.  Paraphrasing Arrow, Surowiecki writes that “Because people don’t have the expertise to evaluate doctors, hospitals or treatments, it’s hard for them to comparison shop.  Because they can’t pay for major care out of pocket, they must rely on insurance, often losing the final say in what to buy or how much to spend.  More fundamentally, markets work only when consumers have the power to say no if the price isn’t right.  Yet it’s very hard for people to say no in the case of things like end-of-life care or brain surgery.”

Surowiecki points out that, over the past four decades, Medicare has done a better job at holding down healthcare costs than the overall market.  He also notes that most developed nations – which have government-controlled healthcare –succeed at reining in costs while delivering first-rate outcomes.

Non-Profit Hospital Fundraising Soars in 2011

Monday, October 29th, 2012

More than $8.9 billion was donated to non-profit hospitals and healthcare systems in 2011 — an all-time high.   According to a report from the Association for Healthcare Philanthropy (AHP), that is an 8.2 percent increase over the previous year.  The recent numbers continue a trend that started in 2010 when non-profit hospitals saw an eight percent rise in donations compared with 2009 to more than $8 billion.  Individual donations totaled nearly 60 percent of that amount, according to the AHP.  That was a significant increase over 2009, when donations fell 11 percent or $944 million.

During 2011, the cost of fundraising rose to 31 cents per dollar collected, a two percent rise over the previous year.  Healthcare systems raised $3.24 for every dollar they spent.  University-connected hospitals were the most prolific, with $7.58 raised for each dollar spent.   Approximately 19 percent of donated funds supported community benefits and charity care; an additional 8.6 percent funded training and research.

Annual giving was the primary fundraising source, followed by capital campaigns and special events.  Approximately 70 percent of money raised was in the form of cash contributions, while the remainder was pledges primarily in the form of bequests and planned gifts.

Susan J. Doliner, chair of the AHP board of directors, notes that “It’s interesting to see that the funds raised continue to be predominantly in support of construction and renovations, equipment and program operations.  Stay tuned, as this finding shines a light on the future gap in resources healthcare organizations will face as we begin the implementation of new healthcare financing models.”  The uptick in donations is good news for hospitals and healthcare systems working to accommodate millions of new patients when the Patient Protection and Affordable Care Act (ACA) becomes fully effective in 2014.  At present, healthcare systems are relying on capital campaigns to finance new construction rather than bank loans or other debt.   Only 17 percent are using debt, a decline from the 20 percent reported in 2010.  Another 42 percent are financing new facilities with cash reserves.  The use of tax-free bonds is at its lowest level in six years, comprising just 21 percent of new construction financing.

Craig Wortmann on Creating Your Business Story

Monday, October 15th, 2012

According to Craig Wortmann, Clinical Associate Professor of Entrepreneurship at the University of Chicago Booth School of Business, people today tend to collect too much information – via Facebook, blogging, tweeting, reading other people’s blogs – information overload typically becomes a problem shared by humanity.  In a recent interview for the Alter+Care Inspire Podcasts, Wortmann said that while the technique of telling stories is the oldest form of communication — it’s also the one form that rises above the din of our information-saturated environment and delivers messages that connect with people, bringing ideas to life.

Wortmann is founder and CEO of The Sales Engine and the author of the book “What’s Your Story?”, which discusses how to use stories to ignite performance and be more successful.

Wortmann believes that we are reaching back to our earliest human ancestors whose cave drawings created a narrative structure – stories that remain compelling through the ages.  We still create stories to make daily experiences meaningful for people, to differentiate them from what Wortmann calls facts or data.  Stories do two things:  they create context and provide an emotional connection.  By “emotional”, Wortmann doesn’t mean fluffy or characterized by high drama.  Rather, it is emotional because we are all human beings who thrive on creating emotional connections.  This is why stories – when told persuasively – can be so powerful.

According to Wortmann, “One of the things we say in business school that drives our students crazy is that people will not work to understand your message.”  Instead, you have to work to be understood.  For example, a sales trailer is to a business as a movie trailer is to a feature film.  In both cases, we struggle to have our message understood because people have accumulated knowledge.

Wortmann helps entrepreneurs create their sales trailer, which acts as a hook that prompts the potential client to ask questions.  Whatever way you send the message – whether spoken, written, e-mailed, tweeted or otherwise transmitted – always err on the side of conciseness.  An e-mail, for example, should be three or four lines — maximum.

The same philosophy of brevity should apply to any presentation, which Wortmann believes in limiting to a single word per slide.  He shares that same affinity with Silicon Valley venture capitalist Guy Kawasaki and the late Steve Jobs.

To listen to Craig Wortmann’s full interview on the art of the sale, click here.