Pinnacle Blog

  • PHC November 2020 Real Estate Practice Newsletter">

    PHC November 2020 Real Estate Practice Newsletter

    Pinnacle Healthcare Consulting (PHC) has access to a wide amount of data and has provided commercial real estate appraisals confirming Fair Market Value on healthcare properties across the country. We are expanding Pinnacle’s real estate services to include consulting for lease restructuring, development projects, and consulting for real estate transactions within the healthcare industry.  Our November 2020 newsletter provides an update and information on the real estate market and recent transactions.

    PHC November 2020 Real Estate Practice Newsletter

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  • CMS Expands Value-Based Home Health Services">

    CMS Expands Value-Based Home Health Services

    In previous years, discussion around value-based reimbursement programs typically included questions like “Will they continue to be proposed?” and “Will they be adopted and implemented?”. These questions are answered by reviewing the 2022 Centers for Medicare and Medicaid Services (CMS) proposed rules. Value-Based Purchasing (VBP) programs are being expanded, and in the case of Home Healthcare (HH), accelerated.

     

    In the recent Federal Registry, CMS is proposing an early end to the current HH VBP (limited to certain States), and an expansion of the program nation-wide starting January 2022. The initial trial program, in the latest review, demonstrated a 4.6 percent improvement in quality scores, with a potential CMS annual savings of $141 million.

     

    This expansion of HH VBP holds the potential for expansion of HH providers as HH is under-utilized in the Medicare Advantage population.  In a recent study by Skopec et al., (2020), they demonstrated that:

     

    “MA enrollees are less likely to receive post-acute care, including home health care, than traditional Medicare enrollees discharged from the same hospital with the same condition. These results suggest that MA plans are not substituting home health care for institutional post-acute care but are providing less care than traditional Medicare does overall.” (pg.842). Home Health and Post-acute Care Use In Medicare Advantage And Traditional Medicare | Health Affairs

     

    Organizations and providers, who understand the value of HH and the potential growth of demand, stand to benefit from this expansion and rapid acceleration of the HH VBP from CMS.

     

    Organizations wishing to expand their VBP program and market should follow a plan to evaluate and establish their program.

     

    The plan should include:

     

    • The current utilization rates of HH
    • Current case mix and potential for additional volume
    • Proforma development to verify financial viability
    • Analysis of clinical processes and access to HH
    • Development of clinical protocols and guidelines
    • Establishing metrics for program accountability, goals, and implementation timeline
    • Educational materials and training programs for staff and potential beneficiaries

     

    Pinnacle Healthcare Consulting offers professional expertise and extensive knowledge to support an organization seeking to develop or expand Value Based Care.  Pinnacle can provide insights and assistance through the evaluation, development, and implementation allowing providers and team members to focus on their day-to-day roles, while providing valuable local insights and historical perspective.

     

    Skopec, L., Huckfeldt, P. J., Wissoker, D., Aarons, J., Dey, J., Oliveira, L., & Zuckerman, S. (2020). Home health and postacute care use in medicare advantage and traditional medicare. Health Affairs, 39(5), 837-842,842A-842G. http://dx.doi.org/10.1377/hlthaff.2019.00844

     

    Kelly A. Conroy

    Director

    Fort Lauderdale, Florida Office

    Pinnacle Healthcare Consulting

    9085 East Mineral Circle, Suite 110

    Centennial, CO 80112

    Office: 720-640-7349

    Mobile: 561-385-7566

    Email: Kconroy@AskPHC.com

     

    Arthur (Skip) Leavitt

    Pinnacle Healthcare Consulting

    9085 East Mineral Circle

    Centennial, CO  80112

    Office:     720-640-7349

    Mobile:    434-944-4870

    Email:    SLeavitt@AskPHC.com

     

    Paul Bruning, DHA

    Pinnacle Healthcare Consulting

    9085 East Mineral Circle

    Centennial, CO  80112

    Office: 720-370-9800

    Mobile: 561-545-2054

    Email:  PBruning@AskPHC.com

     

    Jeannie Kelly RN CCDS BA MHA 

    Nurse Executive

    Pinnacle Healthcare Consulting

    9085 East Mineral Circle, Suite 110

    Centennial, Colorado 80112

    Mobile: 561-704-3935

    Email: JKelly@AskPHC.com

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  • Final Rules to the Stark Law & Anti-Kickback Statute Released">

    Final Rules to the Stark Law & Anti-Kickback Statute Released

    Final Rules to the Stark Law & Anti-Kickback Statute Released

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  • Women’s Network – Women in Finance and Valuation: Where Are the Numbers?">

    Women’s Network – Women in Finance and Valuation: Where Are the Numbers?

    By Allison Carty, JD, MBA

    In collaboration with AHLA’s Women’s Council, we take a look at how to engage talented women leaders within the healthcare valuation industry.

    AHLA_Connections_April 2021_Allison Carty

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  • COVID-19 ICD-10-CM Diagnosis Coding">

    COVID-19 ICD-10-CM Diagnosis Coding

  • 2021 Provider Benchmark Surveys – What’s the Covid Impact?">

    2021 Provider Benchmark Surveys – What’s the Covid Impact?

    Background

    The year 2020 was one characterized as an upheaval across the globe given the impact of Covid-19.  The effect of the pandemic on the healthcare industry was particularly notable.  Part of the reason is of course the industry’s close proximity to the virus; however, the closures of many office-based businesses (including medical operations) and cancellations on elective procedures during the apex of the crisis resulted in a further impact amongst the healthcare world.  While states imposed various mandates across the country, patient reticence also played a role in the decline in healthcare volumes.  With tele-health still in its early stages (pre-pandemic), many practices and facilities were ill-equipped to quickly pivot E&M visits to a remote model.  Likewise, particularly with medical and surgical specialties, a large volume drop occurred given the temporary ban(s) on elective procedures.

    Reacting to the pandemic and the impact on patient volumes, many entities froze compensation for providers during Covid.  Particularly for those providers on a production-based compensation model, organizations aimed to mitigate the impact of the pandemic.  The simultaneous freezing of compensation to hold providers at pre-pandemic levels along with falling production due to declining patient demand and bans on elective procedures caused a skewed impact on resulting metrics for the year.  Specifically, annual metrics for compensation remained relatively steady while annual metrics for production (e.g., work RVUs and collections) declined.  The result of these circumstances is a distortion between provider compensation and production data.  Of note, when using both compensation and production data for benchmarking purposes, a material change to one of these “input (i.e., annual) metrics” particularly affects the resultant “relational metrics”.  For example, in the instance of Covid, when compensation remains level but production declines, the resulting compensation per work RVU shows a notable spike.  In addition, other benchmarks such as physician losses may be unduly impacted as a result of Covid due to the same freezes in compensation and a decline in volume and revenue.

    As a result of these collective facts, care must be taken in reviewing and utilizing 2021 provider benchmarks for fair market value review, performance evaluation, or other purposes, as they are based on 2020 (i.e., very likely skewed) data.  While year over year changes can exist within the surveys, the unprecedented closures and societal impact of Covid-19 created a unique “force-majeure-like” effect on typically reliable benchmark metrics.  To-date, MGMA remains the only provider benchmark survey that has released its 2021 survey.  While we expect the effect across the 2020 data for other industry surveys to be similar, a high-level review of the MGMA data highlights some preliminary insights.  Outlined below is an overview of MGMA’s observations as well as Pinnacle’s initial recommendations and guidance as related to the review and use of the 2021 provider compensation surveys.

    Insights from MGMA

    As previously mentioned, MGMA remains the only provider benchmark survey that has released its 2021 survey.  In conjunction with that release, MGMA published a summary aimed to address the impact of Covid, entitled “Quantifying Covid-19 – Measuring the Pandemic’s Impact on Medical Practices.”  The overview summarized MGMA’s collection of monthly data during calendar year (“CY”) 2020 to quantify the impact of Covid.  Respondent sample varied from month to month and while there are some interesting observations related to the respondent pool, some overarching themes underscore what the industry recognized from a high-level standpoint.  In particular, MGMA highlighted some specific statistics related to declining volume, including the fact that 71% of practices reported a drop in patient volume of 50% or more (by early April 2020) and that work RVUs hit their lowest level in April 2020.  MGMA further reports that by June 2020, volumes began to rebound, with nonsurgical specialists reporting the largest decrease and increase, respectively.

    In addition to commentary on decreased volume, MGMA’s summary also references the fact that providers’ type of compensation model affected the impact on overall compensation levels (i.e., guaranteed salary vs. production-based models).  In addition to the freezes on provider compensation referenced herein (i.e., for practices affiliated with health systems), MGMA also highlights that fact that some provider compensation within medical practices was paid through Paycheck Protection Program (“PPP”) loans, Health and Human Services (“HHS”) stimulus funds, or other government relief efforts.  Further, MGMA emphasizes the expense side of the equation, pointing out that the demand for cleaning supplies and personal protective equipment (“PPE”) spiked in 2020, resulting in increased costs during a time when revenue/patient volume was on the decline.  This fact further exacerbated the impact on declining resultant collections (i.e., increased operating costs).

    Interestingly, MGMA points out that not all the news with medical practices was negative.  They report that while PPE costs increased, some practices curtailed spending in other areas and decreased in-person visits to mitigate the impact on rising operating expenses.  In addition, MGMA highlighted the fact that many practices addressed declining patient volumes with initiatives that included pivoting to telehealth, revisiting payment and collections policies, and enhancing patient communication through practice website and social media tools.  One issue, however, whose impact is yet to be seen in changes to survey data is that MGMA indirectly stresses the overall influence on an already-strained physician supply.  Specifically, they report that 28% of healthcare leaders reported unexpected physician retirement in the past year.  While that fact may not have a direct influence on 2020 data, the effects of Covid could continue to influence data in years to come.

    With regard to its 2021 survey, MGMA has commented that it has not made any adjustments to the 2020 data to account for the pandemic.  MGMA specifically stated that it collected and reported on the 2021 surveys (based on 2020 data) in the same manner as previous years.  MGMA does, however, state that it recommends referring to both the 2020 MGMA survey and the 2021 MGMA survey for data review purposes.

    Pinnacle Guidance & Preliminary Recommendations

    While the industry has known there would be some measure of impact to 2020 provider compensation and production data, the issue becomes how to adjust or normalize the information to support compliant arrangements and leadership decision-making.  Further complicating matters in addition to the pandemic, changes in the 2021 Medicare Physician Fee Schedule (“MPFS”) on both work RVU values and reimbursement has added additional complexities on go-forward performance projections, contract language, physician expectations, and sustainable arrangements (also refer to https://askphc.com/medicare-physician-fee-schedule-changes-what-now/).

    In addition to MGMA’s commentary on the matter, Pinnacle performed a preliminary review of the data to assess year over year and multi-year trends on compensation, production, and resulting relational metrics.  This analysis indicates findings consistent with the trends described herein – consistent total/annual compensation with a notable decline in production on both work RVU and collections bases.  The result of these dynamics is the predictable outcome on relational metrics – an inordinate spike on the data, such as compensation per work RVU and compensation as a percent of collections.  These results reflect the emergency-like status of 2020 given the effects of Covid – while patient volume decline, total compensation was favorably supported (through both health system affiliations and government relief efforts) to promote provider retention and long-term continuity of patient care.

    Given the unique status of 2020 as a societal health crisis, the effect on provider data reflects somewhat artificial results.  Unless reviewed in isolation (i.e., comparing 2020 production amongst like providers), reliance on 2021 surveys – particularly for relational metrics such as compensation per work RVU – could pose an area of risk.  Many health systems are already discussing ways to best address these factors within their organizations.  In fact, Pinnacle’s FMV Consulting Guide advisory committee recently discussed the impact to benchmark data, with the advisory committee members largely agreeing that their organizations recognize the impact in methodology review and the need for adjustments in data use and physician discussions.  In addition to these and other client discussions, Pinnacle is performing a survey in order to assess the reaction and planning amongst healthcare organizations.  Please follow a link to participate in the survey here.

    In the interim, Pinnacle would advise prudence in utilizing 2021 provider benchmark surveys.  Given the unique circumstances, these resources may not provide adequate stand-alone decision support for application to compensation agreements.  Organizations must understand the magnitude of the pandemic and MPFS changes and their impact on physician arrangements.  We would advise continued thoughtfulness in communication strategies with physician groups, including rationale for any adjustments, as well as the impact on the industry and efforts to evaluate ongoing compliance.  While many factors have changed over the last year, the approach to provider arrangements must continue to be supported by fair market value and commercial reasonableness.

    Pinnacle will continue to monitor additional survey resources as they become available and will publish additional insights on an ongoing basis.  We will also be publishing the results of the above-mentioned survey and will conduct a webinar as related to the results and the impact to healthcare organizations.  Please check back as updates are ongoing in this area of healthcare compliance.

    For additional information on this blog, please contact Allison Carty at ACarty@AskPHC.com.

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  • PHC June 2020 COVID-19 Real Estate Practice Newsletter">

    PHC June 2020 COVID-19 Real Estate Practice Newsletter

    PHC June 2020 COVID-19 Real Estate Practice Newsletter

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  • May 2021 Real Estate Newsletter">

    May 2021 Real Estate Newsletter

    Healthcare Real Estate Transactions and New Construction 

    Welltower Announces Completion of Two Generation Medical Office Buildings Leased to Atrium Health.

    The two (2) recently developed medical buildings in Charlotte, NC total over 280,000 square feet. The properties were completed in March 2021 and leased to Atrium Health under a 15-year lease. Pappas Properties, LLC is a Charlotte-based developer and strategic partner with Welltower on the planned 9-acre healthcare anchored, mixed-use campus.

    BMO Harris Healthcare Real Estate Finance provides a $28.6 Million Credit for Kanye Anderson Real Estate and Remedy Medical Properties. 

    The portfolio consists of 4 facilities in New Mexico totaling 115,000 square feet and are currently 100% occupied to HealthCare Services, Inc. Kayne and Remedy have acquired 22.7 million square feet of medical office space, containing 571 buildings in 41 states. Together, they are the largest privately held, non-hospital affiliated owners of medical office buildings in the country.

    Cincinnati Children’s Hospital Breaks Ground on New College Hill Facility.

    The academic acute care children’s hospital has broken ground on a new behavioral health facility. The $99 million building will replace the current inpatient facility and total 160,000 square feet over five (5) stories, which is 68% larger than the current building and will feature private rooms for all patients. The new hospital is scheduled to open late 2023, though it is still $36 million short of its goal.

    Healthcare Real Estate Trends – Transactions and Employment are Trending Upward

    Montecito Acquires Surgical Facility in Suburban Cleveland. 

    The facility was an outpatient-oriented surgical medical building in the Cleveland suburb of Beachwood, Ohio. The two-story, 69,800 square foot medical center was built in 2019 and is 100% leased to an operating entity owned predominantly by two market-dominant health systems, Lake Health and University Hospitals. The facility specializes in orthopedics, spine, urology, general surgery, and pain management. The layout includes 8 operating rooms, 2 procedure rooms, and 25 patient beds. The hospital has a staff of more than 200 with 56 operating physicians.

    Pinnacle Real Estate Group Assessment

    The Healthcare Real Estate Market Continues Adjusting.

    Healthcare employment has rebounded noticeably better than the broader job market. Medical offices were much more insulated from the declines in demand compared to that of other property types. Healthcare employment fell as much as 6.4% in 2020, but stable growth is to be expected over the next 5 years. The continuing implementation of telehealth will lead to a greater role in the healthcare sector, but the overall impact on medical office buildings most likely remains negligible. Medical properties are expected to see a rebound in demand this year as the COVID-19 virus subsides. Medical office investors are expecting good growth opportunities due to the levels of transactions and pricing being more flexible than other property types.

    Christopher Louis, ASA, MAI
    Director
    720-598-1439
    CLouis@AskPHC.com

    Mike Vandaveer
    Director
    720-599-7883
    MVandaveer@AskPHC.com

    Tony Price
    Analyst
    720-386-3540
    TPrice@AskPHC.com

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  • PHC April 2020 COVID-19 Real Estate Practice Newsletter">

    PHC April 2020 COVID-19 Real Estate Practice Newsletter

    PHC April 2020 COVID-19 Real Estate Practice Newsletter

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  • June 2021 Real Estate Newsletter">

    June 2021 Real Estate Newsletter

    Healthcare Real Estate Transactions and New Construction 

    Medical Properties Trust To Buy 18 Springstone Hospital Facilities for $760 Million

    Medical Properties Trust has agreed to acquire 18 Springstone inpatient behavioral health hospitals in a $760 million sale-leaseback deal. The transaction also involves acquiring an interest in Springstone’s operations for $190 million. The seller of the properties is San Francisco-based private equity firm Welsh, Carson, Anderson & Stowe. Louisville, Kentucky-based Springstone provides behavioral health services in its purpose-built, inpatient facilities in nine states, with five in Texas, four in Ohio, two in Arizona and Indiana, and one each in Washington, Colorado, Kansas, Oklahoma and North Carolina.

    Steward Health Care to Build New $227 Million Wadley Regional Medical Center

    The company is to break ground on a new state-of-the-art hospital just northwest of its current location in Texarkana. The project includes a medical office building while offering full range of hospital services such as orthopedics, cardiovascular, 24/7 emergency room, neurosurgery, maternity care, and other outpatient services. The new hospital will have 123 beds with an option to expand to as many as 291. The project is supposed to be completed around May of 2024. Construction is slated to begin in September of 2021 and take 32 months following. Wadley’s current location will be fully operational as construction takes place.

    Renovated Richmond Building Sees Nearly $30 Million Jump in Price

    A medical office building in Richmond, Virginia, that sold for $3 million five years ago has traded hands in a $32.5 million deal following a full-scale renovation. Montecito Medical paid about $359 per square foot to acquire Brookfield Commons, a 90,598-square-foot, three-story building located at 6600 W. Broad St. in Midtown. The sale price is a significant jump for a 1977-vintage property that once housed the headquarters of the Virginia Department of Transportation before going into foreclosure in 2014.

     

    Healthcare Real Estate Trends

    Medical Office Buildings Make Up Over One-Third of Orange County Office Sales in 2021 

    Sales volume for medical office properties in 2020 reached nearly $480 million locally, compared to the market’s five-year average of $360 million, annually. Investment in medical office this year is around $180 million, roughly halfway through the year. Nashville-based Healthcare Realty Trust purchased two properties accounting for nearly $60 million in volume in the second quarter. This brings the REIT to around $200 million in acquisitions in Orange County since early 2020. In April, it paid $31 million, or around $544 per square foot, for The Laguna Building in Laguna Hills, California. The property was around 80% leased at the time of sale by a wide range of medical tenants including SimonMed Imaging, Pacific Cardiovascular Associates and Nvision Eye Centers. The seller, Bay Area-based Meridian Property Company, acquired the asset for $19.9 million in 2017. A month later, Healthcare Realty Trust bought the adjacent Saddleback Professional Center for $24.6 million, or roughly $337 per square foot. The property was around 82% leased at the time of sale and is home to a California Bank & Trust office, as well as multiple medical tenants. The property was previously acquired for $15.9 million in 2017.

     

    Pinnacle Real Estate Group Assessment

    Premium Prices for Healthcare Real Estate Properties Are Being Realized

    What we have noticed over the past few months is that commercial real estate properties within the healthcare industry are receiving premium prices in recent transaction in multiple markets across the country.  We believe that the current trend for these higher prices is directly connected to the perception and reality that healthcare entities and their real estate are inherently more stable than other industries and types of properties, especially during the pandemic and the reaction to it that occurred the past sixteen (16) plus months. A collaborative factor that has also contributed to the trend is that a good portion of wealthy entities have experienced unprecedented wealth expansion in the past year and seem anxious to deploy those recent increases into new investment opportunities. We believe this trend will continue through the end of the year or until the expected pending inflation begins to become a reality.

    Christopher Louis, ASA, MAI
    Director
    720-598-1439
    CLouis@AskPHC.com

    Mike Vandaveer
    Director
    720-599-7883
    MVandaveer@AskPHC.com

    Tony Price
    Analyst
    720-386-3540
    TPrice@AskPHC.com

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