Register For Recentric Investor Series Webinar – The Impact of COVID-19 on Pediatric Care

Register For Recentric Investor Series Webinar – The Impact of COVID-19 on Pediatric Care

Recentric_Webinar Impace of covid-19 on pediatric care

Please join us and register for our next webinar on Thursday, August 13th at 4 PM.

I will be interviewing Bill Repichowskyj, Partner at E4H Environments for Health Architecture and Jennifer Arbuckle, Author at E4H, a health care architect firm based in Dallas, TX.

We will cover topics like:

  • What are the unintended consequences impacting pediatric care as it relates to their physical space compared to delivering care pre-COVID-19?
  • Are we seeing discussions of consolidation of smaller lease spaces, and going with one larger space to streamline operations?
  • As it related to tele-health, are practices needing more lease space to accommodate individual doctors needing their own recording space?

Be sure to register. If you cannot make the scheduled time, you will receive a link to watch a recording at your convenience.

 

How is COVID-19 Affecting the Business of Pediatric Care?

How is COVID-19 Affecting the Business of Pediatric Care?

pediatrician

If you have taken your child to the doctor in the past few weeks, you have probably noticed a few changes to your pediatric care experience. Of course, everyone is wearing a mask, entering patient information onto their phone and staying 6 feet apart. These are obvious and necessary precautions to keep everyone safe. 

But did you notice that the HVAC filters have been upgraded utilizing a HEPA filtration and Air Purification System? Or that UV light technology has been installed at each of the entrances to the building? Or perhaps you didn’t experience a waiting room at all.  You simply received a text on your phone with instructions to head directly to a specific exam room.  

Nationwide, there are about 60,000 general pediatricians and 30,000 pediatric subspecialties, according to the American Medical Association. The success of these practices is driven largely by demographics. The profitability of each pediatric practice is based on efficient operations and reimbursement rates.

The business of pediatric care is facing some headwinds with COVID-19 and more direct competition, but appears to be weathering the storm and continuing to grow. 

Here are some of the trends affecting these practices: 

Medical Innovations Within Pediatric Care

COVID-19 has dramatically accelerated medical innovations for treating children.  The telemedicine industry is a prime example of a technology fast track which helps to reduce unnecessary hospital visits, keep children patients from spreading disease and allow the pediatric clinics to stay under capacity as a result.

Not all states currently allow telehealth treatments for children; however, the American Academy of Pediatrics is working hard at the Federal level with Medicaid/Children’s Health Insurance Programs (CHIP) to reduce the barriers and increase health insurance coverage. Children will at some time still need to physically go see their doctor, and technology is coming to the rescue. 

To encourage innovation in this area, the Nation Capital Consortium for Pediatric Device Innovation has created a competition focused on COVI-19 related pediatric medical devices to improve the diagnosing and treatment of children during a pandemic. The winners receive a grant of up to $50,000 and will be announced July 20th, 2020.    

Pediatric Planning and Design Considerations

Pediatricians diagnose and treat illnesses and injuries, provide immunizations and monitor patient’s growth to adulthood. Some subspecialties include pediatric cardiology, pediatric critical care, pediatric gastroenterology, pediatric hematology/oncology and neonatology.

The Planning and Design considerations for pediatric care include waiting areas, patient throughput, staff workflows and overall infection control. Distracting children with games that control touching are quickly being implemented in children’s waiting rooms. Virtual games allow kids to stay busy during their wait without spreading germs. COVID-19 driven innovations such as thermal temperature screening cameras, enhanced filtrations systems and ultraviolet light strategy are all being deployed to kill germs and provide a safer environment for children. 

The Future of Pediatric Care

Pediatricians are facing more direct competition with nearby walk in clinics, which include chain pharmacies and mass merchandisers, such as Walmart. The retail clinics offer limited serviced such as immunizations and basic treatment, which is causing pediatricians to stay open on weekends and evenings.  

However, the outlook for pediatric growth is strong.  According to Dunn & Bradstreet, US consumer prices for medical services, an indicator of profitability for pediatric offices, rose 5.1% in November 2019 compared to the same month in 2018. And total US revenue for physicians’ offices, including pediatrics, rose 3.1% in the third quarter of 2019 compared to the previous year. The business of treating children is facing some headwinds with COVID-19 and more direct competition, but appears to be weathering the storm and continuing to grow. 

Recentric continues to look for development and acquisition opportunities to meet the growing demand for larger, out-patient medical facilities. This strategy allows us to take advantage of the growing need for these facilities and offer new and exciting opportunities to our current and future investors.

 

Is Healthcare Real Estate Pandemic Proof?

Is Healthcare Real Estate Pandemic Proof?

medical real estate investment

If you happened to acquire a new real estate asset in late 2019, (which Recentric did), you may be wishing you could turn back the clock and change that decision. The proforma and in particular, the sensitivity matrix that you prepared to justify your acquisition did not have a check box for “Pandemic”. As a result, seeing your newly adjusted projections for 2020 and 2021 will now likely be a “brace for impact” moment.

Unless of course, you invested in health care real estate. History proved during the 2008/2009 global financial crisis that health care real estate performed the best out of all product types in commercial real estate with total returns decreasing by only 5%, vs. the second worst product type, hotels decreasing by 41%. (NAREIT)

The business of running practices

When it was clear the government would start to shut down the economy, Recentric quickly implemented a rent deferral protocol in late March and early April to handle the influx of rent deferral requests from our tenants. A standardized response was necessary to objectively respond to those tenants who were legitimately looking for relief.

This brought to light those tenants who prepared for a downturn by having existing lines of credit, a strong connection with their patients, and solid lender relationships. All of Recentric’s tenants across our portfolio are current on rent through May 2020 with the exception of one practice, who ultimately did not receive any PPP funds. These shocks to any business expose the business’ inherent flaws, and it appears that the large majority of health care practices are run well.

Debt deferment flexibility

The ability for a lender to provide relief to a property owner largely depends on their type of loan structure and source of funds. Of the total $8 trillion commercial real estate market, commercial banks represent 49% of the debt market. (CBRE, 2018). These are typically portfolio lenders who can internally defer the interest portion of the loan for 3-6 months. Regional Colorado banks have proven to be very responsive and accommodating to this crisis.

Life insurance companies which represent roughly 10% of the debt market, lend their massive cash reserves to commercial real estate to boost their bond returns. When it comes to debt deferment and the government shutdown, these types of lenders show no flexibility on the interest portion, and only consider deferring the principal portion of the loans.

Pent up demand for health care

As an unfortunate result of the government shutdown, massive amounts of patient harm are occurring due to missed routine health care. According to a recent letter sent to the White House by 600 concerned physicians, doctors have seen increases in the number of patients missing routine checkups that could detect issues like heart problems or cancer, increased substance and alcohol abuse, and greater financial instability that could lead to “poverty and financial uncertainty,” which “is closely linked to poor health.”

This demand will eventually overwhelm the health care system with patients looking to make up those missed appointments and procedures.  As a result, net revenue for health care systems and practices will return to normal over the next 6-12 months.

While we are still only a few months into the government induced coma on our economy as a result of the COVID-19 global pandemic, the preliminary evidence we are seeing in the health care marketplace is that health care real estate will once again, be just fine.

Recentric Realty Capital: Recentric continues to look for development and acquisition opportunities to meet the growing demand for larger, out-patient medical facilities. This strategy allows us to take advantage of the growing need for these facilities and offer new and exciting opportunities to our current and future investors.