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Healthcare Moves Out of Hospitals Into Communities, Say Industry Experts

By Nellie Day

LOS ANGELES — The days of large hospitals and medical campuses may be numbered, according to panelists at InterFace’s Healthcare Real Estate West 2015, which was held Feb. 25 at the Omni Hotel in downtown Los Angeles. The sixth-annual event drew more than 220 attendees.

The panel discussion topics ranged from the Affordable Care Act to cutting-edge technologies to the next big plays for healthcare REITs. While the topics were varied and expansive, all roads led to a central issue: the decentralization of patient care.

“The days of providers or healthcare systems thinking they can control patient movement are gone,” said Dr. Setul Patel, CEO of Texas-based Neighbors Health System and a “Hospital and Healthcare System Perspective” panelist. “It’s absurd. Patients nowadays can go where they get good care at a good price. The biggest frustration is how inefficient big healthcare systems are. They need to provide a better quality of care at a cheaper rate and in a better fashion.”

That’s what Patel and his healthcare system are attempting to do. Neighbors Health System is a regional emergency medicine healthcare delivery model that provides care through free-standing emergency facilities. Most of its centers are located in metropolitan areas near retail hubs. Dr. Patel believes these kinds of community-integrated outposts of care will be the future of healthcare services as we know it.

“Independently run physician centers are grossly outperforming their competitors,” he said. “They’re better staffed and they provide better outcomes. Companies like ours will do a better job. We’re a horizontal industry that’s very disruptive from a patient perspective, but it’s a good disruption. It keeps patients out of hospitals. If you go to the ER, you get a bigger bill. You get exposed to other viruses. We have to think outside the box when it comes to real estate. Different models can deliver the same quality of care.”

Crisis in the ER

One of the primary motivators for this new model of care in which healthcare providers move out of the hospital setting and into the community is the large backup in emergency rooms across the country, according to panelists.

According to a recent poll conducted by the American College of Emergency Physicians (ACEP), about 46 percent of the 1,845 ACEP members surveyed said they had observed an increase in the volume of patients in ERs since January 1 of last year.

The average amount of time patients spend in the ER — from the time they walk in until the time they leave — is about 133 minutes, according to ACEP. However, the length of the visit can be substantially longer in states like California where it’s more likely to eat up five hours of a person’s day. Unfortunately, about 86 percent of the survey’s ACEP respondents expected emergency visits to increase over the next three years.

Panelists said this trend was occurring because many patients use ERs as their first line of defense. This is particularly true with uninsured patients and persons who do not have a primary care physician – another population that has increased significantly.

“Non-life-threatening ‘emergencies’ are 90 percent of the diagnoses seen in the ER,” said Steven Stubbs, portfolio director and vice president of Roseville, Calif.-based Adventist Health and a participant in a special breakfast workshop that examined the changing face of healthcare real estate. “Those people are sent home. Most don’t need to be there in the first place, but they’re worried about their condition and whether they’ll need admission to the hospital.”

Stubbs said the solution is an alternative source of healthcare that can be found within a patient’s local community, where both convenience and a cheaper price point (compared to an ER visit) can reign supreme.

“We want to give people that level of intense healthcare service in their communities so they don’t have to sit in a hospital,” he continued. “If they need to be in a hospital, we can transfer them quickly. If you need that level of ER care, you’ll go to the ER and wait because there is no alternative. We want to design a system where we treat in collaboration with existing hospitals. We can do that where people run errands. While they’re eating at Chiptole. Going to Bed Bath & Beyond to shop. That’s the sweet spot for us.”

Landlords ‘Chase’ Healthcare Tenants

Adventist is a member of the Coalition of Community Health Clinics, which operates 14 clinics in metro Portland, Ore. Adventist’s Urgent Care Rockwood, for example, is situated in a retail corridor off Stark Street. Nearby tenants include Dutch Bros Coffee, Subway and Rapid Cash.

“Healthcare is the new retail,” said Bryan Lewitt, senior vice president of CBRE in downtown Los Angeles and the breakfast workshop’s moderator. “Everyone is starting to chase healthcare tenants right now because they’re good for centers, they pay well and they’re well financed.”

Technology and healthcare reform were two of the main reasons listed for this new system of care.

“We’re big believers in the transition to healthcare in the community, which is more convenient,” said fellow panelist Tim Delgado, president of Houston-based Read King Medical Development. “This platform also marries nicely with the transformation of healthcare in general. We have seen a decrease in inpatient care. We will see a continued uptick in outpatient procedures brought about by improvements in anesthesia and surgical techniques that a few years ago could never have been handled in that setting.”

Read King’s website noted that more than half of the firm’s development and leasing activity in its retail platform was generated by medical-related businesses in 2009.

“We observed a shift in the medical industry from the traditional on-campus buildings to doctors viewing their practices as a patient-centric retail business,” stated the website for Read King Medical Development, a full-service real estate partner of Read King Commercial Real Estate. “The shift to the retail storefront benefitted both the doctors and their clients through convenient access, ample parking, visibility, and street signage, all in a highly identifiable and synergistic location.”

Technology Proves Transformative

Not only has technology advanced to the point where many laboratory and diagnostic tests can now quickly be performed outside of a hospital, but as a result of the Affordable Care Act, many panelists felt consumers now had more choices than ever in terms of providers.

With consumers having a myriad of choices and increased competition in providers, hospital systems must now find a way to come to patients since patients no longer need to come to them.

“As consumers become more and more empowered, they’re going to look for those alternatives that don’t result in them sitting for four hours in a waiting room,” said Delgado. “It’s common sense for developers and owners to facilitate the medical uses in retail centers. There is a huge ability to serve people in the home or strip mall center. The growth is astronomical. We can do a blood test to screen for a heart attack in these centers and can get the results in four minutes, not four hours. Technology has caught up with the ability to serve.”

Though it may take some time for consumers to warm to the idea of receiving immediate care on urgent matters outside of a hospital ER, Patel said the new system, which favors transparency in terms of pricing and diagnoses and treatment options, was making progress.

“We are trained in patient stabilization and can provide a level of care an ER would provide in-house,” he said. “We can then transfer to a hospital and get a patient straight to the ICU or a bed. We don’t need specialists — we can bypass the ER. On top of that, an uninsured patient can say, ‘How much does a CAT scan cost?’ and our doctor can tell you. A patient can give us a laundry list of things and we can say, ‘Here’s your bill’ and they can pay right there.”

While the healthcare law requires Americans to carry health insurance or pay a fine, many of the 30 million uninsured qualify for exemptions.

The Hospital Association of Southern California (HASC) recently noted that demand for emergency room care within the state has increased by 26 percent over the past decade, while capacity has either remained flat or declined in most service areas during that time. This is why Patel believed the freestanding emergency department (FED) model will soon be one important component of a completely new way of thinking about — and receiving — quality healthcare.

“We’re here to stay, and we’re coming,” he said. “We’re going to change the way care is provided. We can do 24-hour-a-day clinics in communities. Our centers can be next to Macy’s. It’s true retail medicine and it’s consumer-driven. We get primary care doctors who say, ‘We want equity in your business. We’ll send patients to you.’ We say, ‘We’ll let the patients decide.’”

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