1 CLIENT NAME | PRESENTATION TITLECBRE

APRIL 24,2019

WELCOME

THE FUTURE OF MEDICAL

OFFICE

INSTITUTE OF MEDICINE AIMS

SAFE

EFFECTIVE

PATIENT-CENTERED

TIMELY

EFFICIENT

EQUITABLE

CBRE R.I.S.E. VALUES

RESPECT

INTEGRITY

SERVICE

EXCELLENCE

3 CLIENT NAME | PRESENTATION TITLECBRE

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4 CLIENT NAME | PRESENTATION TITLECBRE

APRIL 24ND, 2019

OFFICE ENVIRONMENT STRATEGIES

LOCATIONAL

• NEW MARKETS

-Rooftop growth trends

• MATURE MARKETS

-Infill with strategic services lines not currently provided

• UNDERSTANDING THE DEMOGRAPHICS

-Older populations - less mobile

-Younger population - adolescent care

OFFICE ENVIRONMENT STRATEGIES

TYPES OF MEDICAL OFFICE SPACE

• HEALTHCARE CAMPUS WITH DIRECT ACCESS TO HOSPITAL SERVICES

• OFF CAMPUS MOB’S THAT ARE CLOSER TO THE PATIENT BASE

• OUTPATIENT CLINIC/URGENT CARE

-Free standing single user buildings

-Strip Center

-Hybrid

EG: malls and grocery stores

OFFICE ENVIRONMENT STRATEGIES

VISIBILITY AND ACCESSIBILITY

• HOW EASY IS IT FOR THE NEW PATIENT TO FIND THE DOCTOR’S

OFFICE?

-Signage/Exterior tenant identification

-Line of sight for the patient

-Branding for the practice

OFFICE ENVIRONMENT STRATEGIES

VISIBILITY AND ACCESSIBILITY CONTINUED

• HOW EASY IS IT FOR THE PATIENTS, PHYSICIANS AND STAFF TO

ACCESS THE PROPERTY?

-Ingress/egress in the parking areas

-Parking ratio and occupancy level of the building

-Travel distance from the parking lot to the building

-Proximity of handicap parking to the building

-Drop-off covered portico

-Reserved parking spaces for patients

OFFICE ENVIRONMENT STRATEGIES

VISIBILITY AND ACCESSIBILITY CONTINUED

• HOW EASY IS IT FOR THE PATIENTS, PHYSICIANS AND STAFF TO

ACCESS THE PROPERTY?

-Dedicated physician’s parking

-Number of access points into the building

-Building’s hours of operation

OFFICE ENVIRONMENT STRATEGIES

LEASE STRUCTURE

• WHO OWNS THE PROPERTY AND WHAT ARE THEIR MOTIVATIONS?

-Local investor

-Non-local private equity

-Healthcare system

-REIT

OFFICE ENVIRONMENT STRATEGIES

LEASE STRUCTURE CONTINUED

• NEGOTIATE LEASE TERMS

What is most important for both tenant and landlord if it’s a lease or

buyer and seller if it’s a property sale/acquisition

-What is the performance goal for the property?

-Duration of occupancy

-Growth requirements

-Practice’s access to capital

OFFICE ENVIRONMENT STRATEGIES

SUMMARY

You can see from the list above that being proactive rather than

reactive in the most efficient and productive way to plan your office

space environment. Whether sourcing new medical office space or

renewing your existing lease in place, planning and evaluating your

options will always result in a better path to how the space performs,

operationally and financially.

We welcome the opportunity to become a strategic partner of

yours.

Thank you!

OFFICE ENVIRONMENT STRATEGIES

13 CLIENT NAME | PRESENTATION TITLECBRE

APRIL 24, 2019

HEALTHCARE TENANT FINISH

TENANT FINISH PROJECT STRATEGY

• MARKET TI ALLOWANCE

• WANT VS NEED

• WHO IS DRIVING THE PROCESS? PHYSICIANS?

• EXAM ROOM DESIGN LEADS TO SAVINGS

• Size of exam room doors affect size of exam room

• Evaluate the need and number of cabinets, especially upper

• New design strategy for sinks in exam rooms

HCA MOB INITIATIVES

CLINIC BRANDING

• IDENTICAL LOOK AT EACH CLINIC LOCATION

• Similar patient experience at each clinic no matter the practice

specialty

• SCALABLE BASED ON SIZE OF THE CLINIC

• Framework of the reception area can be increased based on the

number of FTEs required at the desk

• Design includes private consult area that is connected to one

side of the reception area. This allows patient privacy, but also

quick access to clinic employees

HCA MOB INITIATIVES

HCA MOB INITIATIVES

RECONFIGURING/UPDATING CURRENT MOBS

• RELOCATING OWNED PRACTICES TO ONE BUILDING

• One check in area on the main floor – this maximizes employee

efficiency and creates a seamless experience for the patient to

check in, check out, and schedule new appointments.

• Consolidation of specialties, typically one per floor if applicable

• REBRANDING/UPDATING MOB LOBBIES

• Similar to practices, create an identical lobby look for each of the

MOBs

• Hospital buy in for these projects

• Strategic plan to include funding and timing

HCA MOB INITIATIVES

Burns & McDonnell Healthcare

Inflation, tariffs, code changes and an improving economy…what does it all mean to future MOB costs?

Our crystal ball is a little fuzzy these days

Cost are increasing

Recommend locking in pricing as early as possible with a GMP

How long should it take to build or remodel a

facility?

Owning vs. leasing a facility - pros and cons

The Pros of Buying Office Space •Fixed Costs: Locking in your commercial mortgage long-term can give your business clear, fixed costs.•Tax Deductions: The associated costs of owning and running a commercial space can provide tax deductions in the form of mortgage interest, property taxes, and other items.•Additional Income: Owning your office can offer the advantage of renting out extra office space, adding another source of income.•Retirement Savings: The prospect of owning commercial space and having the property appreciate over time, allows the owner to sell out and fund their retirement.

The Cons of Buying Office Space •Lack of Flexibility: A new or growing business may

experience unexpected needs in the future. If your business continues growing, your owned office space may become inadequate, forcing a sale of the property.•Upfront Costs: Buying commercial space will initially cost far more upfront. There are property, appraisal, and maintenance costs along with a large down payment and possible property improvement costs.

The Pros of Leasing Office Space •Prime Property: A leasing office space option provides a business

with the chance to rent in an area with a good location and high image. If your small business is dependent on location and image, such as retail or restaurants, the leasing option is much more affordable.•Free Up Working Capital: With your money not tied up in real estate your business can respond to opportunities in the market. In addition, your ability to borrow funds will not be as limited as with buying office space.•More Time: Any type of ownership comes with headaches. A leasing option affords the time to focus solely on running your business.

The Cons of Leasing Office Space •Variable Costs: With a leasing option you may be subject to annual

rent increases and higher costs at the time when your lease expires.•No Equity: While leasing you will be funding someone else's retirement with your lease payments. However, owning requires you to get involved in the property management business.

Traditional design-bid-build vs. integrated design and construction – what are your options?

Non-Acute

Healthcare Trends

Jason Andrews

President

GroupSource

Physician Practice Consolidation

Procedure Migration

Supply Chain Impact

Macro Trends Impacting Non-Acute

Migration of Healthcare into the Non-Acute Environment

What’s happening?

What are the causes?

Why is it important/relevant to you?

How are these trends impacting what/how people buy?

Physician Consolidation

General Trends

Majority of physicians do not have an ownership stake in their practice

47.1% in 2016, down from 53.2% in 2012

What’s Driving Consolidation/Acquisition

Hospitals—focus on surgical specialties and high-revenue stream interventionalists

Formation of “Super Groups”—defined as groups of 20 or more physicians

Private Equity—vertical strategy in Dermatology, GI, Ophthalmology

Additional Drivers: Physician Consolidation

Changing reimbursement and regulatory

landscape

Economies of Scale for Payer Rates, RCM,

Employee Benefits, etc.

Access to Technology – EHR and data sharing

Lifestyle desires of younger physicians

Procedure Migration to Non-Acute Setting

BCBS projections

2% decline in inpatient discharges over next decade

15% growth in outpatient volumes over that same time

80% of gall bladder surgery already outpatient

Hysterectomy projected to15 increase from 36% to 64% outpatient

Why?

Stakeholder alignment—Patients, Providers, Payers

Minimally-invasive options

Autonomy and additional revenue streams for Physicians

In Office Procedures

Many practices adding dedicated procedure rooms

Additional revenue streams

Convenient for patients—easier and faster

In a 2016 Accenture study, 61% of patients would be willing to switch providers to get appointment sooner and 52% would do the same to access more convenient locations

Non-Acute Care Supply Chain

Trends in Procurement

40% of GPO discounts practices are eligible for are not being accessed correctly

20% of supplies purchased by avg medical practice change every year

Increase in non-traditional purchasing channels—direct from manufacturer, Amazon, etc.

Challenges

How and what to acquire

Negotiation, standardization, and, obsolescence

Buy vs lease on capital expenditures

“Control the controllables”

Best Practice Suggestions

Align on set of initiatives with your distributor(s)—cost containment, standardization, etc.

Schedule regular meetings with your GPO partner

Best Practices

Ownership within the Practice of Key Areas—medical, office, vaccines, etc.

Alignment with your Distributor

Schedule Regular meetings with your GPO

Linear vs Collaborative Approach

Traditional Model Optimized Model

Distributor

Customer

GPOGPOGPO

Customer

GPODistributor

Summary

Consolidation is not slowing down or going away

Procedures will continue to move into lower-acuity environments

Alignment on Supply Chain goals will dramatically increase efficiency and decrease

costs/frustration

33 CLIENT NAME | PRESENTATION TITLECBRE

APRIL 24ND, 2019

CBRE DIMENSION

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APRIL 24ND, 2019

QUESTIONS