Ted Zangari, one of the panel’s moderators: “In the final analysis, it all comes down to real estate.” – (AARON HOUSTON)
All told, 20 panelists turned out last week for the Rutgers Center for Real Estate’s Future of Healthcare Real Estate Symposium in New Brunswick, from health care executives and consultants to developers and public officials.
They were asked to offer insights on a case study involving a potential acquisition by a fictional entity known as Halstead Healthcare System, a dominant provider that was weighing its growth options and considering the acquisition of an urban hospital and its real estate assets.
Below is a sampling of comments from speakers as they went through the case study and discussed broader trends in the health care and real estate industries:
Sills Cummis & Gross attorney Ted Zangari, who co-moderated the panel with George Jacobs, on the important ties between the two industries:
“We know that real estate is not the driving force behind the consolidation of health care systems or the unpackaging of health care services out into to the neighborhoods. But make no mistake: In the final analysis, it all comes down to real estate… This is one of the few areas, one of the few industries, where brick and mortar still will matter.”
Jeff LeBenger, chairman and CEO of Summit Health Management, on the decisions that hospitals face about where to locate their ancillary services and how that impacts their real estate footprint:
“With consumerism, people are now going to start looking at where to spend their health care dollar. And it’s going to be moving into the ambulatory setting. So in terms of the real estate, you’re going to have to (ask) ‘Do we put it into brick-and-mortar hospital space or do we move it more into ambulatory space.’”
Zayed Baker, chief pediatric officer for Riverside Medical Group, on the increasing demand for medical office spaces to be larger, more diversified and closer to residents:
“The reason for that is the market. Patients now come out and they want to know that they can get one-stop shopping. They don’t want to just come to the pediatrician’s office… This is the medical home concept. We don’t take care of a patient—we take care of the families—and this is where health care is going.
“Because of the market demand, because of the convenience patients are insisting on, we have responded by giving larger amounts of real estate and health care deeper into the communities.”
Bill Colgan, managing partner at Community Healthcare Associates LLC, on the shift from inpatient to outpatient care and the challenges and opportunities that come from trying to transition or repurpose a hospital:
“What we’ve also realized, if you take a look at the percentage of the GNP, health care is not going down—it’s going up. So, clearly, what that demonstrates to a group like ours is that there is a need for bricks and mortar, there is a need for health care facilities.
“Generally, when we look at facilities, what we like very much about hospital settings is that they are community-based. When you talk about providing services in a community, hospitals were built traditionally as community-based institutions. Everyone had family members that worked in the hospitals. Everyone, at the end of the year, no matter what your socioeconomic level, you wrote a check in support of your hospital. This is something we’ve known for generations.
“As we watch the outmigration, we do believe that there is a huge opportunity. I think New Jersey is just behind the curve in terms of trying to play catch up. There was no real plan on how we transition health care.”
Mary Beth Kuzmanovich, Colliers International’s national director for health care services, on the debate in New Jersey over how nonprofit hospitals will begin to pay for municipal services:
“States across the country are watching New Jersey to see how this plays out… Those systems that have enjoyed a not-for-profit tax status recognize that this wave is moving across the country, and they’re very anxious to see how New Jersey resolves it and use that to pattern opportunities to implement in other states.”
Francis Reiner, redevelopment consultant with DMR Architects, on how he would advise Halstead Healthcare System to redevelop 20 acres of excess land that would come with a potential acquisition:
“Our approach to this would be probably very similar to the developer side, which would be what is the maximum and best use for that particular property in terms of redevelopment, given its proximity to transit, given its proximity to being in an urban environment.”
Andrew Bush, vice president of real estate for Cooper University Health Care, on the difficulty and unpredictability of dealing with real estate in an acquisition:
“Real estate really has to be looked at case by case. There is an enormous amount of strategic thinking and financing that goes into these long-term real estate assets. And that encumbers them to a certain extent. Whatever the legacy issues are—it could be a lease that you can’t unwind, it could be an ownership position that is much more fractured and complicated than you envisioned going on. You may have deferred maintenance issues, legacy issues that have stretched out economic problems not envisioned, not underwritten in the initial deal… The list continues, and it’s our goal to try to figure how to solve that.
“Ultimately, that real estate asset—it’s not our core business. It’s the platform through which we deliver care. And if there’s a big transition in the way we envision delivering that care, it takes a long time for us to unwind and plan around that.”
This article originally appeared on NJBiz.