Today, hospitals and health systems are faced with greater challenges than ever, which are driving them to reconsider how outpatient facilities fit into their strategies.
As a result, multi-specialty medical office buildings are being looked upon as a practical means to comply with the new regulations, enhance efficiency, reduce costs and provide improved, collaborative care management.
Multi-specialty MOBs: The business model
Multi-specialty MOBs are significantly different in terms of design, use and benefits from traditional multi-tenant MOBs.
Historically, most MOBs have been owned and managed by hospitals, health systems or third-party developers and investors who leased separate office suites to multiple independent physicians or medical practice groups with little or no shared space or interaction. In contrast, industry changes are compelling MOBs to house multiple physician practices owned by the same hospital, with a heightened emphasis on productivity, efficiency and physician integration and collaboration.
Multi-specialty MOBs can be designed to accommodate these needs. For example, employed physicians offering complementary specialties, such as OB-GYN and pediatrics, or orthopedics and physical therapy, can be clustered within one building or floor. These related specialties can share a centralized administrative space and electronic medical records system, enabling the physicians/partners to speak one language about each patient. This collaborative arrangement offers added exposure to each service and increases cross-referrals compared to independent practices housed in multi-tenant MOBs.
Multi-specialty MOBs can also be organized so physicians and medical practices can share space and services such as patient waiting rooms, labs, imaging, records, conference rooms and administrative support. This can benefit both staff and patients with enhanced efficiency, such as when test results and other diagnostics can be expedited quickly through labs and imaging services located in the same building. In addition, shared services can reduce square footage of the facility, thus reducing construction and operational costs.
Multi-specialty MOBs also support the increasing amount of care being delivered in an outpatient setting. Hospitals will find it advantageous to provide these lower-cost, higher-margin services in an efficient, cost-effective, convenient environment. Multi-specialty MOBs, on or near the hospital campus, or at satellite locations, can be a good solution.
A response to healthcare reform
Perhaps the most compelling argument favoring a move toward multi-specialty MOBs is the implementation of healthcare reform.
More than 100 million Americans are enrolled in Medicare, Medicaid and the Children’s Health Insurance Program, according to the CMS. As the federal agency that administers these programs, CMS recommends how providers should be reimbursed. It also influences the strategies of private insurers. Healthcare reform expands the already considerable power of CMS putting it in charge of several pilot programs intended to test new models of care and reimbursement.
One of those new models is the accountable care organization, which creates incentives for hospitals, physicians and other providers to better coordinate care for patients across care settings, providing more coordinated, higher-quality, lower-cost care. The performance providers will be measured against ACO benchmarks to determine if they qualify to receive shared savings — or if they should be held accountable for losses.
Healthcare reform also created a bundled payments initiative, which is exploring how to revamp reimbursement methods. Under payment “bundling,” hospitals, physicians and other providers will be paid a flat rate for an episode of care rather than the traditional “fee-for-service” system, in which each service or test is billed separately to Medicare.
But creating the infrastructure to support ACOs, bundled payments and other aspects of healthcare reform won’t come cheap. These new, higher levels of coordination and physician integration will require a great deal of capital investment in such areas as EMR and new facilities. To implement these new programs, health systems will be forced to cut costs in every way possible. Kaufman Strategic Advisors noted in a recent white paper that because of healthcare reform, most hospitals will need to reduce their current operating cost structures by 10 percent to 15 percent.
In this era of ACOs and bundled payments, multi-specialty MOBs will be an attractive alternative. Healthcare providers will find it easier to manage a patient’s multi-staged care in one physical setting specifically designed for collaboration. It will also be easier to implement a bundled payment program when all the providers are under one roof. And by removing many outpatient services from expensive hospital space, hospitals will see reduced overhead costs and an expected decrease in total square footage through increased efficiencies.
An idea whose time has come
Multi-specialty MOBs are not a new concept. Academic medical centers such as Loyola University and integrated health systems such as Kaiser Permanente have for some time employed their own physicians and owned most of their MOBs and other real estate. But what is changing is that, for strategic business reasons, other hospitals and healthcare systems are exploring similar models.
However, those institutions must determine their appropriate roles in financing, developing, owning, leasing and managing their new outpatient facilities. Many healthcare executives understand that real estate is not their core business. Developing and owning outpatient real estate also drains already scarce financial resources. That capital can more effectively further the organization’s mission if invested in new or enhanced inpatient facilities, physician integration, EMRs and new medical equipment and technology.
These institutions should discuss partnering with healthcare real estate development experts early in the facilities planning process. This will help the system determine what resources are needed and the most appropriate strategies to meet its needs. A developer can manage part of the project or all stages, including planning; financing; design; and ongoing consultations with the architect, general contractor and other partners.
A developer also can provide ongoing property management and leasing expertise, insulating the hospital from issues such as cost-effective facility performance, fair market rent valuation and property management expectations.
Multi-specialty MOBs will play a key role
As we have seen, a number of significant industry dynamics make the multi-specialty MOB model a particularly attractive business strategy. Multi-specialty MOBs can allow hospitals to meet an even greater array of new patient needs and provide increased access to a wide variety of health services that are delivered efficiently and conveniently in a patient-centric environment.
Multi-specialty MOBs will empower hospitals and health systems to form strategic partnerships with integrated physician groups with complementary expertise in one centralized, cost-effective location. These facilities will make it easier for them to achieve their ultimate objective: to deliver the highest-quality collaborative and accountable care.
John Marshall is vice president, healthcare strategy and development, for Duke Realty. The company’s healthcare experts offer 20 years of experience specializing in the development of medical office buildings, ambulatory surgery centers and other outpatient facilities. For more information, please visit the company’s website at www.dukerealty.com.
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