Three Ways, “ObamaCare” Impacts Commercial Real Estate Development

Three Ways, “ObamaCare” Impacts Commercial Real Estate Development

The Patient Protection and Affordable Healthcare Act, commonly known as “ObamaCare” has made a significant impact on the business strategies of healthcare providers, payers, suppliers and others. Hundreds of Millions of dollars have already traded hands. In large part, because of the U.S. healthcare industries attempt to anticipate or take advantage of the healthcare environment, a result of ObamaCare. Almost every healthcare related industry is affected and commercial real estate is no exception. There are numerous ways the Patient Protection and Affordable Healthcare Act impacts commercial real estate development. This article will examine three areas; the increased number of insured mandated by universal coverage, the creation of the, accountable care organization as a vehicle for encouraging cost- effective, “coordinated” care and finally outcomes based reimbursement or reimbursement for results rather than for service.

The Patient Protection and Affordable Care Act is highly controversy but clearly the most controversial aspect of the Act is mandated universal coverage. While the number of actual uninsured individual’s in the United States remains in question, what remains a reality is there will be a large number of newly insured should ObamaCare remain law. Current estimates range anywhere from 25-50 million newly insured Americans. So how would a large influx of newly insured impact commercial real estate?

When you couple universal coverage under ObamaCare with the impact of the maturing baby boomer population many believe that there is not enough medical office space to deal with the anticipated need. Of course, not just any medical space will do. The Act encourages, the primary care physician to be the gatekeeper for the newly insured. With more primary care physicians there will be a need for more space to house their practice. However, primary care physicians are not reimbursed like specialist and cannot afford traditional, on campus, Class “A”, medical space. Building appropriate space for the primary care physician is one way commercial real estate is impacted by the legislation.

There are number of ideas set forth in the legislation to force efficiencies into the healthcare system. One of these is the appointment of the primary care physician as the gatekeeper mentioned above.

Another vehicle, proposed to bring efficiencies to the healthcare system is the, accountable care organization or ACO. The ACO is a mechanism by which the Act encourages various providers, suppliers, payers and others come together to accept a bundled payment for the total care required by a patient. The ACO would provide these “coordinated” services under a common Medicare provider number. However, each entity could remain autonomous and independent legal entities. The bundled care model will encourage consolidation, whether by acquisition or by joint venture and this will lead to commercial real estate opportunities. It will lead to commercial real estate opportunities because coordinated care providers will look for synergies and savings inherent in being at the same location and even under the same roof. Since coordinated care providers are typically caring for compromised or incapacitated patients they will need space that can accommodate overnight stay. Overnight, patient stay, medical facilities often incorporate specialized construction features and can be highly regulated.

Finally, ObamaCare clearly sets U.S. healthcare services on the path for outcomes based reimbursement or payment for success rather than fee for service. The legislation not only offers increased payment levels for success it proposes penalties to providers for patients who are readmitted. As you can imagine, this concept has not been received well by those the various care providers who would be impacted. Who is responsible for a patient who has been cared for and discharged but continues to smoke, eat poorly and or fails to take medication or follow advice?

Regardless of the arguments for either side the concept of payment for success is appealing and is likely to survive. So how does payment or reimbursement for success translate to opportunities for commercial real estate? In today’s world success often translates to efficiency and convenience. The explosion of certain patient centric services such as, urgent care clinics, ambulatory surgery centers and more recently free- standing emergency centers are good examples. Each of these examples, bring efficiency in construction, location and convenience. Additional real estate opportunities will be found building new patient centric services in the suburbs where services can be performed more conveniently, and efficiently.

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