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Changing Healthcare Landscape Push NC Healthcare Pros to Explore New Competitive Options

  by Megan Headley | Mar 22, 2018
 

 

  A changing healthcare landscape and a focus on location were focal points of the discussion that occurred at the Southeast Hospital, Outpatient Facilities & MOB Summit 2018, organized by SquareFootage.net and co-hosted by the Health Care Institute. The event took place in Charlotte, N.C., in March.

As reported by Laura Williams-Tracy, mergers and acquisitions continue to shake up the healthcare landscape into 2018. Blair Childs, senior VP for Public Affairs, Premier Healthcare Alliance’s office in Washington, D.C., highlighted the latest shake-ups—including the CVS acquisition of Aetna; merging health systems, such as Aurora Health Care with Advocate Healthcare; and major technology disruptions to the industry from Amazon, Google Health and IBM Watson.

“We are overall changing the competitive structure of the healthcare system,” Childs noted. “These are big, big changes that are occurring that have a big impact on how people think and act.”

Providers continue to expand from single community markets to larger regional markets with more standardized care across the continuum. Yet as systems grow their reach, a focus on location becomes increasingly important as a competitive edge.

Yet the new retail competitors such as CVS and Walgreens understand site selection better, noted Andrew Lawler, partner - healthcare development with The Keith Corp.

Lawler explained during a presentation on the forces driving direction of healthcare real estate and acquisitions that healthcare providers can’t afford the retail locations that CVS and Walgreens already hold, so are focusing on prime locations that aren’t necessarily at the corner of Main Street. “We haven’t cracked that code yet. Retailers are more sophisticated in site selection,” he noted.

Location was the driving factor in Duke Health’s decision to purchase an old Macy’s department store with in Durham, N.C., for $4.5 million, explained Scott Selig, AVP Real Estate & Capital Assets, Duke University Health. The 90,000-square-foot building came with 900 parking spaces. Now the system is considering whether to renovate the building or tear it down and build a new, taller building.

“We bought the building for its location. We got a better location with visibility off I-85 for less money than we could have even built the parking spaces,” Selig explained.

Selig went on to share that these innovative repurposing projects have their challenges. Closing this deal brought challenges around restrictions and easement agreements. Ultimately Duke Health spent $150,000 on legal fees before it even closed the deal.

Tim Spence, National Healing Director, BSA LifeStructures, added his insight on repurposing in sharing a case study on how the firm converted a former grocery store into a medical office. That experience taught him that Interior upfits can be the expensive part of such projects.

Older buildings often have dated roofs, are energy inefficient, and lack insulation to meet code. Under-sized elevators and fire escapes can be expensive fixes. As such, Spence encouraged his audience to take time to complete due diligence before buying an older building—and be ready to walk away from the deal if needed.

Understanding these challenges will prove crucial for health systems, as medical real estate activity is only likely to increase in the near future.

To read the full event takeaways, visit http://www.squarefootage.net/2018_summit_CHTrecap.html.