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H&HN Feature: Real Estate Planning + Population Health

January 06, 2016
David Rendina

The transition to population health management is having significant strategy implications for hospitals’ and health systems’ real estate holdings. Now, more than ever, health care organizations need a systematic approach to managing their inpatient and ambulatory real estate portfolios. The emphasis should be on providing high-quality care in the lowest-cost setting. Health Forum convened a panel of hospital executives to discuss the impact of population health on real estate planning.

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Cliff Robertson, M.D.

Senior Vice President of Operations and CEO of CHI Health

We are downsizing our acute care capacity in Omaha, moving all of our acute care services into Bergan Mercy Medical Center. The process will take a couple of years. We essentially had two hospitals that were underutilized from a physical plant capacity. In addition to that project, we’re spinning off two large ambulatory projects. One is a faculty practice clinic attached to Bergan Mercy Medical Center. We’re also building a 40,000-sq. ft. ambulatory center in north Omaha, which has an underserved population. It will have a freestanding emergency department, as well as a large ambulatory destination center. For the past several years, we’ve focused on developing family health centers throughout metropolitan Omaha. We want to have an ambulatory site that’s within a five-minute drive of the entire population, because we know the future will be about ambulatory care and about access points.

It’s very much a retail strategy. We identified specific parts of town where we wanted a presence and drew concentric circles to map out a five-minute drive around these points. That was planned a few years ago, and we’re two-thirds of the way through that development plan. Our strategy team drives the development of our facilities plan. We have a master facilities plan for our hospital campus and we’ve used that model to develop an MFP for population health.

Barry Ostrowsky

President & CEO of Barnabas Health

Our business development division is responsible for assessing our expansion and growth strategy. We are also migrating to a retail mentality. In our case, our retail strategy differs, depending on whether it’s an urban or suburban area. One size does not fit all, particularly in markets where public transportation is key. When we build a new access point, we want it to be built, designed and managed in a way that is meaningful to the population it will serve.

New Jersey continues to be a fee-for-service, open access state. Until we have risk, we’re trying to attract folks to new venues and integrating what we think will be helpful to their daily lives, without necessarily having any financial management of population requirement under any particular program.

Barry Ostrowsky

President & CEO of Barnabas Health

We have purchased a number of physician practices over the past couple of years and with them, we usually inherit a series of offices. We then have to determine if the market is better served by consolidating some of these practices. It’s a market-by-market analysis. In some areas, we are building new offices, and our expectation is that we expect the practices that we own, and practices that we don’t own, to relocate. In other areas, we are evaluating what the cost would be to effectively walk away from some lease premises if we want to consolidate physicians. Right now, we have about 1,200 employed physicians and we’re trying to optimize our real estate strategy around them. It’s going to take a long time to migrate those practices to better locations as we identify them.

Cliff Robertson, M.D.

Senior Vice President of Operations and CEO of CHI Health

Across Catholic Health Initiatives, we’ve accumulated an unbelievable amount of square footage that’s come along with physician practices that have teamed up with our various facilities. We have more than 100 acute care facilities, and we’re in 19 states. As a result, CHI has its own real estate department. Like every organization, we’re trying to figure out how to rationalize our asset footprint — whether it’s acute care assets or clinic or ambulatory assets. We’re trying to find the most cost-effective, efficient way to deliver care. Are primary care practices with five or six physicians big enough to support their own facility, or are we better off bringing about 20 providers together under one roof to maximize the efficiency of the operational support?

Barry Ostrowsky

President & CEO of Barnabas Health

We have a blend of owned and leased space, depending on the nature of use. Our physician practices typically are leased. Our big ambulatory sites are owned. We’re not in the real estate business and I don’t want to be in the real estate business. I’m happy to have real estate partners that own and manage the real estate and make it possible for us to deliver on our mission. If the cost of the real estate as a lease-back tenant makes sense, that’s great. We’re not driven by monetizing real estate with cash on the balance sheet. We’d rather start by knowing the location that we need, what has to be built there, or what has to be modified. We also look at what’s the best way to finance the business that will be housed within the facility.