Tag Archives: medicare

Medical Office Performance Update

Posted on by
Reply

Understanding the advantages of a medical office property can provide stability to an otherwise risky real estate investment portfolio. The uniqueness of this commercial property type makes it a favorable investment, especially throughout ‘down’ economic cycles when stability, rather than overexposure, is sought to balance a portfolio. This, as evidenced by investments in 2008 and 2009, a few of the strongest years for medical office investment in decades and, notably, the worst for other commercial sectors happens to be the most recent phenomenon.

As for today, when greater threats appear to loom on the horizon and political strife sits at its highest plateau, and as office and industrial properties attract greater attention due to an improved economic position in the U.S., the healthcare sector’s investment has seen a moderate decline in volume of transactions. Most experts suggest that early-to-mid 2013 will see a resurgence of capital into the medical office property as hospitals seek to monetize real estate to offset costs associated with administrative growth, a precursor to healthcare reform.

So, depending on the current status of the property, and given a 12-month window with which to lease, redevelop or stabilize the property, the direction chosen today will likely determine if the property has the potential of resale during the next cycle.

What should you be familiar?

It starts with our research. Keen insight begins with dedicated research resources that provide for the persistent investigation into changes in physical relocation and current and future regulatory implementation. Our employed fact-finding & intelligence unit corroborates their mined data with paid, less reliable online resources and government data. While the cost of obtaining information remains high when paired to its return on investment, the overall collaboration of multiple data channels remains essential for the specialist whose clients require the most candid data for appurtenant decision-making.  So, investigation into your premises is a first step to understanding potential referral patterns and tenant mix to maximize valuation.

Second, and of greater importance to sale of the asset, the medical office opportunity should have a hospital nearby that demonstrates economic strength mainly through specialized services that provide for in-house referrals, physician growth and collaboration. Orthopedic, Cardiology, Women’s Services and Gamma Knife procedures have been lucrative hospital services and, in turn, have provided for higher effective rental structures throughout these medical office buildings. While a property will fluctuate in transacted sales price, such services attract higher capital investment because of hospital’s strength from physician services and specialties. Thus, you can see where healthcare reform, and its proposed focus on volume, rather than profitability, has the potential to water down hospital revenues and, ultimately, potential sales prices.

Another factor to consider is the area’s residential growth of the 3-mile radius. What is the rent to own ratio? Younger or older demographics? Household income? Over the past few years, investment has sought properties that provide for economic stability through employment and demographic growth. This trend will continue until it is known whether healthcare reform provides to be a viable investment alternative or an epic failure in a time of the state’s and nation’s budgetary complications. Remember, older and wealthier populations still utilize the majority of healthcare services and are more likely to see a physician out of want, rather than need, which will continue to guide investment.

When analyzing how a medical office property will/can perform, it is essential to seek guidance from a qualified professional team dedicated to the industry.  Our associates maintain years of exceptional, professional service to the Texas medical communities and with an expansive proprietary database, widely recognized as the best in the business, we hope you will seek out our firm for your medical office building needs.

This post was written by Robert S. “Bob” Lowery, Managing Partner of MREA | Medical Real Estate Advisors.

About these ads

Medicare and Medicaid (With Some Alarming Statistics)

Posted on by
Reply

Medicare:

  • One of the top 10 Medicare billings, by dollar amount, is for the transport of a patient deemed not to be in a non-emergency situation.
  • One of the top 5 Medicare billings, by dollar amount, is for cataract surgery.
  • The #1 Medicare bill, by dollar amount, is for office visits by patients with medical problems that are considered low to moderate in severity.

Medicare is a federally funded and administered program that provides health insurance for older Americans and those who are disabled. Individuals contribute to Medicare during their working years, just as they do to Social Security. Since Medicare is a federal program, eligibility guidelines and services are much the same all over the country.

People eligible for the program include:

  • most persons over the age of 65,
  • persons with disability status, or
  • persons with irreversible kidney failure.

There are a number of Medicare plan choices. Two of the most widely available plans are Original Medicare and Medicare Advantage.

Medicaid:

Harris County is by far the worst abuser of the Medicaid system in Texas.  And, it does not appear like this will stop soon unless drastic changes take effect.  As of December 2010, more than 80% of those on Medicaid were under the age of 19.  Worse yet, of those children under the age of 19, approximately 50% were 5 years old or less.  So, essentially, of every $1.00 that is allocated toward Medicaid reimbursements, $.40 is for a child not yet enrolled in school.

Medicaid is a health insurance program financed and run jointly by the federal and state governments for low-income people of all ages who do not have the money or insurance to pay for health care. The goal of the program is to provide medical and other health care services to eligible individuals so that they are able to remain as self-sufficient as possible. Medicaid is a state administered program. Each state sets its own guidelines, subject to federal rules and guidelines. Certain services must be covered by the states in order to receive federal funds. Other services are optional and are elected by states.

Services that are often provided are:

  • health screening and services for children,
  • hospital and physician services,
  • laboratory services and X-rays,
  • care in nursing homes or
  • home health care services.

Medicaid eligibility in nearly every state is limited to:

  • low-income children,
  • pregnant women,
  • families with dependent children,
  • persons who are blind or disabled, and
  • persons 65 or older.

Other eligibility requirements must also be met.

Effect on Real Estate

As you hear from so many real estate practitioners, no one is entirely too sure.  It certainly appears both legislative bodies are colliding on the issue, which is where any uncertainty in the sector resides.

The Different Types of Ambulatory Surgery Centers

Posted on by
Reply

As commercial real estate professionals, with a strong, unique focus in the medical arena, we are involved in communication with several types of medical real estate owners and operators in the Greater Houston area on a routine basis.  Through our network of partners, vendors, physicians and hospital systems, we have had the privilege of a thorough comprehension of how the Ambulatory Surgery Center functions, thus creating significant value upon acquisition, disposition, and JV opportunities. We would like to dedicate this post to those that would like to increase their basic understanding of the Ambulatory Surgery Center (ASC).

First, the the ASC Safe Harbor regulations identify four different types of Ambulatory Surgery Center entities that may meet safe harbor protection.  These four types of ASC’s include Surgeon-Owned ASC’s, Single-Specialty ASC’s, Multi-Specialty ASC’s and Hospital-Physician ASC’s.  Each category has separate requirements that must be met in addition to the threshold requirements that are applicable to all ASC’s to meet the safe harbor.

Surgeon-Owned ASC’s

Owners of a surgeon-owned ASC may only include general surgeons or surgeons in the same surgical specialty.  The surgeons must be in a position to make referrals to the ASC and to perform surgical procedures on the patients that they refer.  Each surgeon owner must meet a variety of criteria, one of which is an income test for the previous fiscal year or 12-month period.  Each surgeon must derive at least one-third of their total medical practice income from performing surgical procedures that require an ASC or Hospital surgical setting, not location.  This structure does not require all procedures to be performed in the ASC in which they are an investor.  However, when a surgeon’s annual revenues are calculated, at least one-third of the physicians medical practice revenues, must come from the surgeon’s performance of procedures that are listed, as Medicare covered services in an ASC.  The surgical services may be performed in an ASC or in a hospital outpatient department and are not limited to the procedures actually performed in the surgeon-owned ASC.

Single-Specialty ASC’s

This safe harbor allows physicians within the same specialty, whether or not they are surgeons, to invest in an ASC to which they refer their patients and perform surgical procedures on patients in the ASC.  Group practices composed of a single-specialty may also own as well as refer to their own ASC.

Multi-Specialty ASC’s

This safe harbor permits physicians, who are in a variety of specialties, to form an ASC and make referrals to the ASC.  Physician investors in multi-specialty ASC must meet the one-third practice revenue test described above in relation to surgeon-owned ASC’s.  However, unlike surgeon-owned ASC’s, physicians in multi-specialty ASCs must actually perform one-third of their ASC procedures in the ASC in which they hold an financial interest.  This is commonly referred to as the “one-third/one-third” test.  The reasoning behind this requirement is that in this category of ASC, the physicians are actually using the ASC as an extension of their medical office and this does not create significant incentives to generate referral revenues for other investors.  Group practices, composed exclusively of physicians who meet the one-third/one-third test, may also invest in multi-specialty ASC’s.

Hospital/Physician ASCs

Under this safe harbor, a hospital, or several hospitals, must be an investor in the Ambulatory Surgery Center.  The remainder of the investors must be physicians, or group practices, who meet the requirements for a surgeon-owned ASC. There are a number of additional requirements that must be met by physician/hospital ASCs.

If you are an investor or owner, operator or interested party, please provide a call to Robert S. “Bob” Lowery for assistance for Greater Houston Ambulatory Surgery Centers.

The Stark Law and Healthcare Real Estate

Posted on by
Reply

Everyone working in the healthcare real estate sector should have some basic knowledge of the Physician Self-Referral Act, otherwise known as the Stark Law. In a nutshell, the Stark Law prohibits a healthcare service provider, such as a hospital or outpatient facility, from submitting claims for Medicare/Medicaid reimbursement for services rendered to a patient referred by a doctor with whom the service provider has a financial relationship unless the relationship fits within certain exceptions. The public policy rationale was to discourage physicians from allowing financial considerations to influence their professional judgment.

How does Stark impact medical office building leasing and development? When a physician leases office space from a hospital to which he refers patients or when a hospital leases space in a building owned by a referring doctor, the lease is considered a financial arrangement subject to Stark restrictions. As long as a specific lease transaction between a hospital and a physician continues to satisfy a few conditions, no Stark violation will result. These lease exception criteria include: a written lease that is signed by both parties that adequately describes the leased premises; a term of at least 1 year; premises that are commercially reasonable for the intended purpose (the intended purpose must be legitimate from a business standpoint).

Unfortunately under Stark there is no such thing as a permissible “technical violation,” that is, any violation, however insignificant or inadvertent, is a violation of a federal statute that carries stout sanctions imposed by the Centers for Medicare/Medicaid Services. These Stark sanctions include civil monetary penalties (up to $15,000 per claim submitted to CMS while the violation existed), exclusion from the federal Medicare/Medicaid programs, and exposure to whistleblower lawsuits. The reality is that most hospitals and hospital systems that own physician office space likely have dozens if not hundreds of technical, inadvertent violations of the Stark Law related to their leases with physicians or other referral sources. Until now, hospitals have dealt with this potentially serious situation by correcting any violations and moving on. The correction might take the form of executing a lease amendment extending a term, obtaining a missing signature or attempting to collect back rent.

The impact from the new Stark self-disclosure rules could be significant. From the perspective of a hospital buyer, there may be a dampened enthusiasm for new transactions involving the purchase of MOBs, especially where the seller is an asset-challenged, not-for-profit system whose offer of  indemnification against Stark liability is not exactly gold plated. It is not unusual for Stark violations, both technical and substantive in nature, to be discovered during the due diligence phase of such transactions.  Potential hospital buyers will be less willing than ever to pull the trigger. From the hospitals’ standpoint, however, the changes could enhance the motivation to monetize their MOB portfolios. Monetization could accelerate in an effort by these service providers to shield themselves from the perceived arbitrary nature of CMS-enforced settlements following the now mandatory self-disclosure laws and the obligation to refund payments to CMS.

Time will tell with regard to the approach CMS decides to take, but in the interim, the name of the game should be reducing exposure to risk. This desire to reduce risk will have ripple effects through the healthcare real estate sector of the market.