cbre presents trends in healthcare design & construction · 50% of the healthcare expenditures1...

HEALTHCARE SERVICES

CBRE presents

Trends in Healthcare Design & Construction Prepared for: October 27, 2015

2 PREPARED FOR Associated General Contractors of America © 2015 CBRE | CONFIDENTIAL & PROPRIETARY

PREAMBLE

“The art of medicine consists of

amusing the patient while nature

cures the disease.”

Voltaire (1694-1778)

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© 2015 CBRE | CONFIDENTIAL & PROPRIETARY

BEFORE WE GET STARTED…


By the Numbers TIDBIT #1: HOSPITALS TODAY

In 2013, Hospitals treated 133 MILLION PEOPLE in their emergency d e p a r t m e n t s

Provided care for

544 M other outpatients

Admitted

33.6 M patients

Performed

26.6 M surgeries

Delivered nearly

3.7 M babies

Source: American Hospital Association

US Hospital Stats Total hospitals: 5,723 Total staffed beds: 800,566 Average Beds per Hospital: 140 Part of a Health System - 3,100 / 62% Part of a Network - 1,500 / 30%

Utilization Inpatient utilization rates are projected to

decrease by 15% over the next 10 years 65+ population uses inpatient healthcare 4.2

times that of under 65 population 13% of the population produces 39% of all

inpatient discharges


Excessive costs TIDBIT #2: US HEALTHCARE EXPENDITURES

Drive to reduce the cost of healthcare in the US • Highest per capita cost in the world at $7,500 per • Over 17.5% of GDP in ‘13 (’22 projection 19.9%)


It’s Not About “First Cost” TIDBIT #3: IMPORTANCE OF OPERATIONAL METRICS

Total Non-physician Provider Cost

3.58%

Total Physician Cost 39.56%

Total Support Staff Cost

32.92%

Other General Operating Cost

8.22%

Building & Occupancy Cost

6.36%

Medical & Surgical Supply Cost 5.68%

Ancillary Services Cost 3.67%

Labor expenditures typically outweigh facility related expenditures by more than 10 to 1, heightening the need to plan operationally efficient work environments.

Source: 2009 Medical Group Management Association Multispecialty practice expense categories as a percentage of total operating expenses


AGENDA Future of the Healthcare Industry in NY & how do contractors prepare

2. Defining the

Portfolio

3. Acute Care

Setting

4. Post-Acute Care

Setting

5. Community Care

Setting

6. Command &

Control

1. Healthcare

Trends


1. HEALTHCARE INDUSTRY TRENDS

1


Transforming the Model of Care

Margin Compression Industry Consolidation

Insurance Expansion & Reform

Provide higher quality care to an expanded patient base at a significantly lower overall cost

HEALTHCARE TRENDS PERSPECTIVE

IMPERATIVE


HEALTHCARE MARKET TRENDS



Shift from payment for procedures (activity) to payment for outcomes (performance) drives need for integrated care

Transition in healthcare portal for the newly insured from the ED to medical offices

Care will be directed to the most responsibly cost-effective environment within the network

Increase in the demand for 1. Collaborative work space

leveraged by technology 2. Multi-specialty “clinic”

environments Increase in the demand for clinic and

medical office space Rationing of care away from the

traditional inpatient environment to lower cost points of care





Transition from fragmented hospital centric care models to integrated and distributed operational ambulatory networks

Migration to larger, multi-specialty group practices and continued trend toward employment of physicians

Need to “leverage” caregivers to overcome staffing shortfalls

Heightened need for integrated network planning and increased demand for clinic and medical office space

Consolidation of physician practice environments into fewer facilities that are strategically dispersed

Clinic environments reflect leveraged staffing model and incorporate robust IT infrastructure



Margin Compression

Margin Compression

Constrained capital budgets Constrained operating budgets Competing demands for capital (ie.

EMR vs facilities investments)

Value maximization: First capital cost Lease rates

Ultra-efficient life-cycle cost and clinical staffing models

Leverage third party capital for real estate developments.



Industry Consolidation

Industry Consolidation

Merger of real estate assets as a result of both physician employment and health system mergers / affiliations

Merger of internal real estate staffs

Optimization and integration of consolidated real estate portfolios

Staffing realignment and standardization of policies and procedures

Centralized services

14 PREPARED FOR Healthcare Design Academy © 2015 CBRE | CONFIDENTIAL & PROPRIETARY

• Declining reimbursements • More patients to treat • Less overnight stays • Focus on cost savings • Consolidation of health systems • Changes in healthcare delivery

• Population Health Management • Accountable Care Organizations

WHAT DOES THIS MEAN?

Doesn’t add up to a profitable business model

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2. DEFINING THE HEALTHCARE PORTFOLIO

2


A DIVERSE PORTFOLIO – WHAT IS IT MADE UP OF? A Connected Continuum

Source: Sg2 Sg2 Source: Sg2

Command and Control

Corporate Office Pop Health Center Corporations


An Enterprise Strategy BUSINESS APPROACH

Enterprise Strategy

Off Campus Hospital Campus(es)

New Ambulatory

Sites

Existing Ambulatory

Sites Ambulatory Inpatient

Potential Criteria for New Ambulatory Sites

Demographics Physician Alignment Proximity to Main Campus for

IP Referrals Ability to Off-Load Ambulatory

Volume from Main Campus Availability / Cost of Real

Estate Debt Capacity Number of Sites to Develop /

Recommend Phasing Partnership Opportunities Location of Competition

Critical Impact of Population Health Strategy on Ambulatory Approach and Total

Covered Lives Connect Ambulatory, Existing Ambulatory Sites, and New Ambulatory Sites Understand How All Three Contribute to Total Enterprise Coverage


• Consolidation of health systems • Overnight, large health systems have been created

• Redefined Acute Care settings • Growing need for Post-Acute Care settings • Distribution of healthcare into the community

• Focus on cost savings • Need to start thinking and behaving like corporations to be more cost effective

• Reduce operational costs

• Excess Assets? • Monetization may be attractive short term solutions, however… • Reposition facilities as ambulatory care centers?



3. ACUTE CARE SETTING

3


The 800 Pound Gorilla TIDBIT #4: CURRENT STATE - HOSPITAL

Patient Type 2009 2014

Inpatient 62% 41%

Outpatient 38% 59%

What do you actually need in a hospital?” says Robert York, a senior

vice president at Skokie-based consultancy Kaufman Hall.

“It's meant something for the last 100 years. It means something else

going forward.”


So WHERE IS healthcare being provided and found? A SHIFT IN CARE

Shifting from Acute Settings to Communities Location Accessibility Services offered Other Services Outside of Medical Centers Wellness Centers Gyms Healthy food Community event space


• Opportunities to redefine the traditional hospital in context with its place in the portfolio

• Hospitals developed, redeveloped or repurposed will be smaller & result from: • Consolidations o More emphasis on outpatient o Centralized administration and services

– Re-use of existing real estate / monetization

• New markets due to shifting population centers • Replacement of aging infrastructure for safety net facilities

• Design and construction techniques to facilitate repurposing of space once deemed obsolete will be a game changer – Be creative!

Speak in portfolio language – these are assets and not projects!



4. POST ACUTE CARE SETTING

4


The Big Spenders TIDBIT #5: NOT GETTING ANY YOUNGER

1 Centers for Medicare and Medicaid Services 2 IMS Institute for Healthcare Informatics

• 5% of the US population accounts for

50% of the healthcare expenditures1

• 65+ US population costs of care are

5x higher than children and 3x

higher than working adults1

• Modeling costs at their current levels

and rising at GDP growth rates

generates an estimated impact in

2050 that would be 6.6 times

larger than costs in 20152


Today, there are over 75,000 Americans 100 years old or older.

By 2040, there are expected to be more than half a million Americans 100 years or older.

As a group, 100-year-olds aren’t 80-year-olds who have tacked on 20 years of decline.

Over 90% of 100-year-olds were physically and mentally healthy into their 90’s.

Scientists think only about 30% of longevity is rooted in genetics with the rest up to us.

Where do all the Baby Boomers go? THE AGING POPULATION

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Growing Variety of Solutions SENIOR LIVING TRENDS & CONSIDERATIONS

Health/wellness anchored community: • Residential, continuum of care, healthcare, education,

commercial, community services

Over 80% of Seniors Community Based More Seniors Chose to Remain at Home

Care setting is now more often community based and continuum oriented, urban solutions are being developed in partnership with healthcare providers

Technology is enabling them to stay as long as possible Digital monitoring Medication management Home care

Move to a senior living setting within 5 miles of their house

Wellness Communities


By 2050 over 20% of the North American population will be over 65!


Creative approaches including: Models like Green House

Project PACE projects

Opportunities for systems to evaluate their asset class and determine their future state o Modern long term care

facilities o Alternative solutions for

home care, hospice care, Adult day Care

Larger systems developing more robust capabilities to provide for this portion of their continuum of care o Assessments of portfolios

they wish to acquire o Niche market analysis to

develop new product o Repositioning older assets

to meet new care models


5. COMMUNITY CARE SETTING

5


Retailing of Healthcare TIDBIT #6: THE NEW ASSET CLASS

Source: PwC 2015 Health and Well-being Touchstone survey, Gallup Poll, and PwC HRI consumer surveys

Criteria 2009 2015

US Consumers Deferring Medical Care* 29% 40%

In Network Deductible $680 $1,200

* Due to the high cost of deductibles? Due to inconvenience? Due to quality of care?


APPLYING A RETAIL MODEL Portfolio Analytics

Drives better decisions on service mix, capital allocation, and geographic distribution

Procedure Demand Existing System Coverage Identification of Opportunities

Combines traditional healthcare planning with proven retail location analytics using multiple sources of

market data and demographics

Multiyear planning & optimization of network

Enables proactive, strategic approach to the management &

execution of client portfolios


Different Solutions OUTPATIENT MODELS

Traditional Urgent Care

Size: 200-500 sf Site: Strip Mall

Neighborhood Model

Size: 6,000-12,000 sf Distance: Up to 3 mi Site: 1-2 acres

Community Model

Size: 20,000 – 50,000 sf Distance: 5+ mi Site: 2-5 acres

Regional Model

Size: 60,000 – 250,000 sf Distance: 15+ mi Site: 5-25 acres


Retail Model AMBULATORY DELIVERY STRATEGY

• Visioning, goals and guiding principles

• Flow mapping and operational assessment

• Operational and design standards development

• Mock-ups and templates

• Typical suite layouts

• NYP branding and identity

• Cost model

• Cost sharing

• Infrastructure Standards

• Site section tools, priorities and standards

• Project rationale:

− Critical date driven

− Opportunistic recruitment /acquisition

− Strategic market plan

− Mission driven

• Provide preliminary project definition

• Conduct healthcare analytics (overall market area)

• Other market feasibility analysis and incorporation of NYP strategy

• Receive project initiation letter

• Define steering committee and project team

• Evaluate site and facility program requirements

• NYP to confirm/amend requirements

• Issue approved requirements brief

• Identify capital source and delivery solution

• Update cost model and real estate economics

• Develop and finalize business plan

• Issue project authorization request (PAR)

• Receive brokerage engagement letter

• Perform comprehensive market search

• Conduct healthcare analytics (site specific)

• Present matrix and rankings of findings

• Conduct site tours

• Determine preferred sites/buildings

• Issue RFP’s and determine preferred options

• Issue non-binding LOI for counter party execution

• Contract negotiations and execution

• Confirm development budget and timelines (speed to market)

• Establish shortlist of A/E and CM firms with negotiated fees

• Site due diligence

• Construction delivery method

• Incorporate ambulatory standards and branding

• Design oversight

• Regulatory approvals

• FF&E coordination

• Construction and occupancy

• Pre and post occupancy surveys

Development of NYP Ambulatory

Prototype & Standards

Initiation of

Market OpportunityProgram Development

& Approval

Market Search &

Site ExecutionAmbulatory Planning

& Implementation

TASK 1 TASK 2 TASK 3


• Investing in lower cost, lower risk care settings will continue • A Roll-out of programs that previously defined retail &

financial services will begin to define healthcare • New specialty products with focus include:

• Physician Assisted Care for the Elderly (PACE) • Integrated health and wellness centers • Ambulatory destination centers

• Solutions will include: • Bundling projects • Alternative financing • Prototyping • Flexibility


Can your firm learn from other verticals within it and apply to healthcare as a differentiator?

Smaller, multiple sites (like retail)


6. TAKING COMMAND AND CONTROL

6


The New Partner RETHINKING SUPPLY CHAIN MANAGEMENT

Source: Harvard Business Review The Employer-Led Health Care Revolution Patricia A. McDonald, Robert S. Mecklenburg, Lindsay A. Martin FROM THE JULY–AUGUST 2015 ISSUE

Intel created the

Healthcare Marketplace

Initiative in partnership with

healthcare organizations

In partnership with Virginia Mason one example of

success was

cutting 30 days from traditional

uncomplicated lower back pain treatment

Intel projected that expenditures for its 48,000 U.S. employees and their

80,000 dependents would hit

$1 billion by 2012

triple the amount it spent in 2004.

Large Corp’s are using their buying power to provide benefits by partnering w/ or becoming healthcare providers.


• 4 story, 125,000 SF center for Mercy Health in MO

• 300 physicians, nurses, specialists, researchers & support staff

• 24/7 care via audio, video & data connections

• Telemedicine hub for research & training

The growth of telemedicine * VIRTUAL CARE

*The use of telecommunication & information technologies to provide clinical health care at a distance.

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Facility Guidelines Institute (FGI) has decided to break out Outpatient into it’s own separate book

Responding to changing times of the industry and growing ambulatory / outpatient facilities

Will address facilities of all types and will consider CVS and Walmart clinics

FGI Guidelines Breaking Out Ambulatory RESPONDING TO THE TIMES


• Healthcare solutions & facilities may come from non-traditional providers • Corporations will continue to develop business arrangements with healthcare

providers or get into healthcare themselves

• Corporate centers for healthcare systems will continue to evolve allowing them to best leverage their assets. Examples: • Consolidated management • Centralized services

• Virtual Care Centers for population health data management and analysis and telehealth services will continue to develop

Hospitals are only one asset within a healthcare corporation’s portfolio!



7. IN CONCLUSION

7


Understand the real estate & facility implications of current healthcare trends and adapt by providing creative solutions.

IN SUMMARY


QUESTIONS

CBRE Healthcare

Charles Maggio Managing Director - Northeast

[email protected]

cbre presents trends in healthcare design & construction · 50% of the healthcare expenditures1...

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