Traditional MOB is Becoming Obsolete
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(Save the date: RealShare Medical Office Buildings comes to the Four Seasons in Scottsdale, AZ, November 7 -8 )
LOS ANGELES-The experts agree: no matter what the outcome of the upcoming presidential election, healthcare reform is coming. With that reform will come a dramatic change in the way healthcare is delivered and to the medical-office environment, according to Gary McKitterick, a partner with local law firm Allen Matkins, who is moderating a panel titled “What Reform Means for Development, Design and Patient Care” during RealShare Medical Office Buildings on November 8. McKitterick tells GlobeSt.com that the traditional medical-office building will soon become a thing of the past as healthcare moves to a more patient-centric delivery system that stems from hospitals and branches out into the community.
“There’s a tremendous amount of change happening, causing everyone to evolve, and if you don’t innovate, you’ll fail,” says McKitterick. “The traditional MOB with solo practitioners needing offices with a reception area is something of the past that will be a dinosaur. Those who own old MOBs that are subdivided into 1,500-square-foot spaces are going to have a challenge on their hands as we evolve into our new healthcare delivery systems.”
No matter which side of the political aisle you’re on, the cost of delivering healthcare needs to be reduced. “Providers are reducing cost by pushing services out of the hospital—the highest cost point for delivery—into an outpatient setting,” says McKitterick. “From a real estate perspective, you need to understand what your local hospital is doing to push services out. It may be independent physicians or people affiliated with or on staff at the hospitals.”
One of the speakers on McKitterick’s panel, Sanford Smith, EVP of real estate and facilities at Hoag Memorial Hospital Presbyterian, says we need to deconstruct the hospital and take services out of hospitals that don’t belong there, moving them into the community. “So, from a real estate standpoint, this evolution and change actually creates opportunity to assist the providers—hospitals and physicians—in delivering care in a more cost-effective setting outside the hospital.”
One of the most innovative developments that McKitterick believes will catch on is a form of medical-office space “time-sharing.” Specialists in particular may find that they don’t need to rent and pay for an office 24/7, but instead rent it for a few days a week and allow other physicians to use the same space during different hours. “The tech industry did that. Instead of doing a five-year lease, they’ll do shorter-term leases for fewer hours. That’s not the repeatable income you’d want as an investor, so it’s causing a little bit of disruption to the MOB owner. The questions is, what are my users needing, and how can we meet those needs?”
McKitterick admits that time-sharing of medical-office space is an experiment and, “We’ll have to see how it works. Physicians will like it a lot, but the real estate industry won’t like it as much because it’s not predictable. Over time, it will evolve and we’ll figure out the best delivery system.”
Another model Hoag Hospital is designing that holds promise is the “medical pod,” an outpatient building for delivery of care to the outpatient. “The pod is designed to be more focused on the patient, and physicians will change how they see patients. The physicians will come to them instead of the patient going to see the doctor. All these physicians will come to see them in this pod and will be practicing on this day.”
Much of the change in healthcare delivery is being enabled by technology, which allows for efficient check-in, storage and delivery of medical records instead of paper records which are cumbersome and slow to transfer. “Technology allows physicians to speak to each other, and the patient has more control of information,” says McKitterick. “It’s also allowing smaller waiting rooms, smaller meeting spaces. You couldn’t have done this in the old model.”
Another shift will be acceptance of the retail setting for medical offices, particularly as space needs change. “Retailers need to adapt and realize that medical practices are good users within a retail setting,” says McKitterick. As GlobeSt.com reported last week, a move to fill recession-emptied retail space and a proliferation of in-store clinics will continue and could accelerate if a major retailer enters the game and more vacant retail properties are repositioned for medical use, according to Marcus & Millichap’s latest Medical Office Research Report. The report points to overall strong medical-office building performance, although specific asset performance diverges by age and quality.
He adds that hospitals will need private investors to help coordinate where healthcare is going to be delivered. Hospitals and healthcare systems will be driving the thought process of medical-office space, rather than developers.
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