Redefining Medical Office Building

RE+DEFINING THE MEDICAL OFFICE BUILDINGPRESENTED BY:

Scott Helmes AIARSP ArchitectsDirector of Health & Life Science

Mike Lyner AIA RSP i_SPACEPrincipal

STARTING POINT: DEFINING THE Medical Office Building

TO CONCLUDE: THE FUTURE OF THE Medical Office Building

Collaborative Creation of a New Medical Office Building (MOB) :TODAY’S GOAL & OVERVIEW

Collaborative Creation of a New Medical Office Building (MOB) :DISCUSSION POINTS

Location vs Destination

WHY: Growth By Market Demand

Practitioner’s vs Patience Convinience

TRENDS

Free Standing ERTechnology Collaboration Team Treatment

Non-traditional care facilities

Healthy Environment

HOW: ‘Healthy’ Building

Sustainable Economy Healing Energy

Structure

WHAT: Owner’s Issues

Data Real Estate

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"Medical Office Buildings; a very loosely defined entity in concept; may not be living up to their potential both as centers for health and as profitable investments. This may result in missed opportunities to serve an increasingly larger segment of the service-seeking public, which grows savvier as healthcare options abound. A solution to the possible hindrance in the growth of MOBs would be the understanding of the possibilities and the potential benefit to the care-seeking public as well as to owners

and operators of freestanding medical facilities."

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REDEFINING THE MEDICAL OFFICE BUILDING

A Medical Offi ce Building

+ An MOB usually has a number of different specialty practitioners in the same building along with pharmacy and other specialty services (radiology, physical therapy etc). Tenants in an MOB don’t necessarily compliment each other’s services.

A Medical Mall

+ A facility offering comprehensive ambulatory medical services (as primary and secondary care, diagnostic procedures, outpatient surgery and rehabilitation) and most services found in a hospital, excluding overnight beds.

+ + A complex of facilities offering medical services such as diagnostics, primary and outpatient care, therapy and pharmacy under the same roof as banks, dry cleaners, and restaurants for patients and their families.

A Retail Clinic

+ Convenient Care Clinics (CCCs) are health care clinics located in retail stores, supermarkets and pharmacies, that treat routine family illnesses and provide preventative health care services. They are sometimes referred to as “retail-based clinics” or “walk-in medical clinics.” They are usually staffed by nurse practitioners (NPs) or physician assistants (PAs). Some CCCs, however, are staffed by physicians.

DEFINITIONS

An Urgent Care Clinic

+ Similar to a Retail Clinic in that both provide extended hours, view patients as a customer, and are organized to provide unscheduled episodic care.An increasing number of Urgent Care Clinics are now also dispensing pre-packaged, point-of-care pharmacy products. Both benefi t from consumer backlash over long waits for primary care appointments.

Growth by Market DemandDemand for medical offi ce space continues to be driven by several factors, including the migration of more procedures from hospitals to an outpatient setting, the expansion of existing practices and the increasing obsolescence of aging assets. Additionally, the growing trend of hospitals expanding to offer medical services at off-campus satellite facilities is expected to accelerate in the future as medical practitioners and hospitals continue to seek out methods to reduce cost structures. The principal force, however, remains the shift of baby boomers into later stages in life, as the number of those ages 55 and older is forecast to expand by nearly 11 million individuals through 2012. More importantly, as the population in general is physically active longer, the number of physicians’ offi ce visits among this key cohort is rising, necessitating the demand for more doctors, and consequently more offi ce space.- Marcus & Millichap Medical Offi ce Research Report - Midyear 2008MEDICAL OFFICE ASSETS RESISTANT TO AILING ECONOMY

The Headlines....

“Medical Offi ce Building buck trend of oversupply in market”Sacramento Business Journal - September 2008

“In a Sickly Market, a Healthier Asset”NY Times - November 2, 2008

“Medical properties hold up amid offi ce weakness”Financial Week - November 9, 2008

“Healthy Prognosis For Medical Buildings Market”NuWire Investor - November 17, 2008

“Medical Offi ce Sector Bucks The Cycle”National Real Estate Investor - November 20, 2008

TRADITIONAL Medical Offi ce Building:A Location

NEW Medical Offi ce BuildingA Destination

NEW MedicalOffi ceBuilding:A Destination

The MN VersionA Destination

From strip mall shops to health care centerHow does a Location become a Destination?

CONVENIENCEPractitioner’s vs Patient’s








TRENDS



Healthy Environment



Structure


Data Real Estate

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‘Healthy’ Environment vs. Infection Control

2 million Americans acquire an infection while they are in the hospital. 90,000 die of that infection.- U.S Center for Disease Control

What are the differences between a hospital (recovery) and a clinic (diagnosis/maintenance)?

Healthy EnvironmentSignage & Wayfi nding

How do we set the tone?

Healing Energy - Transition SpaceEvidence-based & LEAN Design

Healing Energy - Support & FamilyEvidence-based & LEAN Design

Healing Energy - Stress ReductionThe Infamous “Healing Garden”Air, Water, Natural light, Living elements (fi sh, fi re, foliage) Climate & maintenance consideration?How do you measure success?








TRENDS



Healthy Environment



Structure


Data Real Estate+

Structure:Construction

Structure:Maintenance

DataSecurity & Privacy

New information technologies allow for a system that is:

Integrated• Accessible • Safe• Limitless•

How secure is our data?

MOB: Doctor- Owned

Direct cash equity • Contributions during planning or after construction • Risk is limited to the amount of the doctor(s) investment• More investment=more risks/ more gain Rent-amortization • Doctor(s) equity increases over the term of the doctor(s) lease

No equity ownership • Doctors participate in cash fl ow without any contribution • Often a fi xed percentage of the MOB in return for a long term lease *

MOB: Third Party Developed/Owned

Third party owners of an MOB can often manage the property with greater effi ciency and success. This can free up the hospital to concentrate on their acute-care services while maintaining an ownership interest.

Other benefi ts: • Financing resources • Design and construction expertise • Effi cient leasing and management EXAMPLE: ASCs (Ambulatory Surgery Centers) • Hospitals in partnerhips with doctors and/or a third party • More common as outpatient surgery becomes prevalent • Often the anchor tenant in many MOBs *

* Source: Joseph Malone (Southern Maine Commercial Real Estate)

Real Estate - MOB Ownership

Real Estate - Net Present Value Strategy

Due to the current credit crunch, health organizations cannot rely on complex plans that require the cooperation of the market

THEREFORE....

Project Prioritization has to be based on investments with greater infl ows than outfl ows (NPV)

OR...

Analyse, Strategize, Optimize.

for example:If you are from a hospital and thinking of expanding your MOB...

What are you doing to also expand the core vision, culture, and communicate those to your new MOB users?What needs are you addressing and how/when is that going to evolve?

Are your resources better spent optimizing and improving current assets to provide better (quality, not quantity) care?

Which resources could be better used and how could you determine that?(Buxton customer analytics/ Map Info)

That being said....

Even though:

MOBs require oversized plumbing infrastructure, more •

sophisticated building control systems and often require

extra sanitary capibility.

MOB design-builds cost an average of $80 per square foot •

compared to $60 for an average class A offi ce building

MOBs should have a ratio of 5 parking spots-to-1,000 •

rentable square feet

Why?

A concurrent Hospital construction boom ($23.7 billion in 2005)•

Overall, new buildings average an 80 percent vacancy, MOBs average 13.7•

MOBs have long-term tenants with a renewal rate of close to 100% •

More and more procedures are migrating out of the hospital and into an outpatient setting•

The U.S. is in the middle of a MOB building boom.








TRENDS



Healthy Environment



Structure


Data Real Estate

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TrendsBy 2015, acute care facilities will no longer try to be all things to all patients. They will specialize and build their competencies around targeted conditions and treatments. And, non-urgent acute conditions, such as strep throat, sinusitis, and otitis media, will be treated from home, via the use of telemedicine or at retail settings that provide low cost, good quality, and convenience, for example.

- IBM Global Business Services 2006

Non-traditional Care FacilitiesMinuteClinic (Minneapolis-St Paul 2000)Small retail health care clinics (200-500sqf), open 7 days a week with evening and holiday hours and available to patients on a walk-in basis.

There were approximately 1000 clinics in 2006.

Pre-fab Downtown Minneapolis Skyway Clinic

Express Care Center

Non-traditional Care FacilitiesRetail Clinics

Immature & risky marketPrivate-equity backers experiencing longer start-up periods Closures due to lack of capital to sustain operations: SmartCare - 15 Early Solution Clinics - 6 InstaClinic - 2 ReadyCare - 1

Technology & Remote Virtual Collaboration“The Future of Healthcare in Virtual Worlds”Moderator: Dave Taylor, Imperial College London

Hybrid Ambulatory Center








TRENDS



Healthy Environment



Structure


Data Real Estate

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Discussion Points 1

What are some issues or concerns about these fundamentals that fi t into our new defi nition of what a Medical Offi ce Building should be?

“In medicine, our task is to cope with illness and to enable every human being to lead a life as long and free of frailty as science will allow. The steps are often uncertain. The knowledge to be mastered is both vast

and incomplete.”

Three core requirements for success in medicine - or any endevour that involves risk and responsibility:

1. DILIGENCEThe necessity of giving suffi cient attention to detail to avoid error and

prevail against obstacles.

2. TO DO RIGHTMedicine is fundamentally human profession. It is therefore forever

troubled by human failings, failings like avarice, arrogance, insecurity, misunderstanding.

3. INGENUITYThinking anew. It’s not a matter of superior intelligence but of character.

It demands more than anything a willingness to recognize failure. It arises from deliberate, even obsessive, refl ection on failure and a

constant searching for new solutions.

-Atul Gawande -“Better”

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Discussion Points 2

Turning some of your Real Estate Portfolio into a medical/healthcare purpose, what are the pros and cons?

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CONSIDERATIONS:

Market demand Appropriate operating business model

Physicians feedbackAvailable fi nancial resources

Design and construction requirementsTechnical coordinations

Time period Services needed

Community served

THANK YOU!

Redefining Medical Office Building

Real Estate

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