November 6, 2017
Adam Matar is a co-founder of Inception Property Group, a real estate development company specializing in healthcare campuses and communities, with offices in Los Angeles and in Portland, OR. Prior to Inception, he ran the real estate department for Kaiser Permanente’s Hawaii Region, and supported the organization’s Northwest Region’s real estate strategies. Matar serves on the Planning Commission of Beaverton, OR.
He will be on Connect Media’s Design & Technology: The Promise of Wellness panel at the Connect Healthcare commercial real estate conference this week in Scottsdale, AZ. He will be sharing insights on roles the healthcare sector can have as a community stakeholder in preventative care and in wellness, as well as opportunities opening up due to new technologies and compensation models. Here are a few insights:
Q: What are some of the larger issues and considerations shaping reimagined approaches to outpatient care today?
A: Payment models drive everything. Where reimbursements are declining, we’re still seeing consolidation. This means more single-occupant medical office buildings. We’re also seeing more of the ‘patient-centered care’ model, where ever-larger systems are pursuing ever-narrower lucrative commercially insured segments of the population. Providers are using outpatient facilities to compete by designing in higher end finishes and delivering a multi-touch experience. More people spending more time in these new facilities translates into larger outpatient facilities. That can be attractive as an investor in the instances the systems elect not to own the asset themselves, however this drives up the cost of healthcare, and that’s precisely what most of America does not need right now. I think if the concept of patient-centeredness were taken farther, where local communities were granted more freedom in defining what qualifies for reimbursements, we may start to see true disruptive innovation in healthcare.
Q: Where do real estate facilities fit into the shifting healthcare delivery model today?
A: Healthcare is not the outcome of a logical process. It’s easier to state what the future of healthcare should be than to speculate what it will be. Without question, this sector has its share of influential organizations resistant to change, and investors can still make returns supporting the status quo. For Inception, real estate opportunities need to justify their relevancy now more than ever under value-based compensation models, which have shown, contrary to popular perception, even primary care practitioners and capital-intensive imaging centers serving Medicaid patients can be financially viable. Providers are in the exploratory stage of redefining what qualifies as a healthcare facility to achieve this objective, and some of the reimagining is radical. Real estate which contributes to those objectives through lower cost and increased access have a blue ocean of opportunities. I’ll give you an example: our Downtown West Medical campus currently under construction in Los Angeles is in one of the densest neighborhoods west of the Mississippi, and one I would qualify as a healthcare desert prior to our project. This is a project we proceeded with speculatively because it was the responsible thing to do for the community and because we knew the most sophisticated healthcare providers are already developing business models for serving economically disadvantaged communities, and in fact now all but 50,000 square feet out of over 400,000 square feet is all that remains available for lease.
Q: What are you seeing being created from a facility standpoint that works and what isn’t working? Why?
A: General acute hospitals don’t work. They’ve pursued efficiencies of scale and ended up with inefficiencies of scope. I cannot think of a single form of care which cannot achieve better outcomes more cost effectively in a general acute hospital than what can be achieved in an outpatient setting, a freestanding department, or a specialty hospital. General hospitals have comingled inherently different overhead and revenue models, and this has led to bloat, inefficient processes, and bad communication. The public is rewarded with astronomical costs and hundreds of thousands of avoidable deaths a year. Healthcare needs someone like Elon Musk, who has proven time and again business models for capital-intensive industries can be redefined. Through his Boring Company and SpaceX, Elon Musk has shown the world how a $1 billion tunnel can be built for $25 million, and how a $400 million rocket launch could be achieved for around $60 million. It’s not difficult to identify how to apply Elon Musk’s approach to healthcare. We know how care can be 300% cheaper with the same or even better outcomes than we have today on average at traditional general acute hospitals.
Q: What are the big trends you’re tracking from a healthcare design and technology perspective? i.e. what’s driving the market today?
A: I’ll address these from a macro perspective. Design and technology can be both a savior and the undoing of quality affordable healthcare in America. The implementation of technology is a primary contributing factor, if not the factor, to why the healthcare sector experiences substantial cost escalations in competitive markets. It’s an arms race. Here’s an open secret: a significant portion of the cutting-edge technology providers acquire have no measurable better outcome on patient health than incumbent technologies. The interesting technologies introduce the potential for models which expand access to care to people who previously did not have access or significantly reduces the cost of care by delivering it through different means. What’s controversial about that, is those types of technologies are typically viewed as inferior in quality to the status quo, although for many patients, the status quo can be excessive and harmful itself. In design, the going trend is to build care facilities to hotel/spa levels of finishes. This makes for both a more expensive care experience and a more expensive hotel experience without necessarily providing either service better.
Q: How does design and technology impact wellness? Does it really make a difference? How?
A: Absolutely, but not necessarily in the way one would think. The fountain of youth and the secret to longevity are common knowledge: Eat well, move around, exercise the mind, have an active and supportive tribe, live in a safe environment, and minimize engaging in risky behaviors. For most people, only about 20% of wellbeing is influenced by the healthcare sector, the rest is all ‘upstream’ in the realm of prevention. I think it’s more appropriate to think about the job of the healthcare sector as returning people to their communities where wellness resides. It’s missing a big opportunity to improve lives to believe the healthcare sector should bear the burden of, or is equipped to take on, the responsibility of the broader communities for delivering wellness. What healthcare leaders can do is utilize early warning technologies to inform and reform communities that pose risks to their populations.
Q: What are the primary considerations for facility owners, operators or investors toward improving the facility design and technology from a cost, timing, market demand, and patient experience perspective?
A: First and foremost, the highest value facility owners, operators or investors can create is in proactively connecting healthcare providers and underserved patient populations to one another through thorough site selection processes. When it comes to design, understand queuing starts with transportation and parking. Don’t underestimate the impact parking lots and alternative modes of transportation have on patient satisfaction, as well as the provider’s ability to maintain scheduled appointment times. For example, fleets of fully autonomous electric vehicles are not yet part of our reality, nor fully understood by cities in how they will impact land use and design requirements, so make sure facilities are adequately parked for people to make their appointments on time, but when this technology is implemented, and it will be very soon, expect two things: 1) a complete redesign of facility standards and 2) a dramatic expansion in the geographic area a facility will serve.
For comments, questions or concerns, please contact Dennis Kaiser